NEWSLETTER

July – September 2015

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 1

CONTENT EUGBC Events

EUGBC SG meeting with the State Minister of Georgia for Diaspora Issues 2 EUGBC organized Site Visit to HeidelbergCement 2 EaP Civil Society Forum discussed implementation one year after Association Agreements Signed 3 EUGBC Board Members informal meeting 4 First preparatory meeting of Georgia Investors Council 4 EUGBC Members meeting with the newly appointed Head of Secretariat of the Investor’s Council Ms. Mariam Megvinetukhutsesi

5

EUGBC took part at Ambassadorial 2015 6 Cooperation between European Union and Georgia

EUGBC meeting with newly appointed Ambassador of Germany to Georgia 7

EUGBC meeting with Ambassador of Lithuania to Georgia 7 EUGBC meeting with Ambassador of Georgia to the Kingdom of the Netherlands 8

EUGBC Member’s News

EUGBC member Rustavi Metallurgical Plant launches production of seamless pipes

9 Four new members joined EUGBC 9 KPMG 10 HeidelbergCementTbilisiMarathon 12 ORIFLAME GEORGIA OFFICIAL COSMETICS OF TBILISI FASHION WEEK S/S 2016 14 INVESTMENT FORUM BATUMI 2015 15 BDO AUSTRIA ADDS GRANT THORNTON EXPERTS 17

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 2

EUGBC Events

EUGBC SG meeting with the State Minister of Georgia for Diaspora Issues

On September 28, Gela Dumbadze, the State Minister of Georgia for Diaspora Issues met with Zviad Chumburidze,

the Secretary-General of the EU-Georgia Business Council. The meeting was attended by Nina Matiashvili, Chief

Adviser to State Minister.

The State Minister presented activities of the Office to Zviad Chumburidze. Special attention was paid to economic

trends, investment and to promote the active involvement of Diaspora into the ongoing processes. Discussions

focused the Economic Forum on October 13 and the participation of the Secretary General of the EU-Georgia

Business Council. Gela Dumbadze, and Zviad Chumburidze discussed the cooperation prospects and scheduled

signing of the Memorandum between the two institutions.

EUGBC organized Site Visit to HeidelbergCement

EUGBC organized Site Visit to its member company HeidelbergCement on September 23rd. The visit was attended by

foreign Diplomats and Journalists.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 3

The purpose of the visit was to inform high level visitors about HeidelbergCement activities and its planned projects.

The presentation was delivered by HeidelbergCement management, after which the guests were offered excursion at

the plant in Rustavi to monitor the production process and interact with the personnel.

EUGBC regularly conducts similar visits to its member companies in which are involved Ambassadors and Economic

Officers of the embassies as well as Georgian media representatives.

The visits aim at spreading information about activities of the member companies through diplomatic networks and

raising the companies’ awareness in the Georgian Society.

EaP Civil Society Forum discussed implementation one year after Association Agreements

signed

On 23-25 September, 2015 EUGBC Projects Director, Giorgi Kacharava took part at the Eastern Partnership Civil

Society Forum (EaP CSF), which gathered in Tbilisi over 60 representatives of civil society/BSOs, EaP governments

and EU institutions in order to discuss progress and share experience on implementing Association Agreements and

creating a Deep and Comprehensive Free Trade Area (DCFTA).

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 4

Successful implementation of the AA/DCFTA has been identified as a key success factor of the Eastern Partnership.

Much of the EaP CSF activities focus on different aspects of the implementation action plans.

The seminar offered participants the opportunity to compare the situations in different countries in terms of structure,

strategies and lessons learned.

Within the framework of the event EUGBC took part at the workshop proposing solution to current challenges the three

countries face in implementation DCFTA and, where relevant, in sectoral policy approximation.

EUGBC Board Members informal meeting

On September 18th, EUGBC Board Members informal meeting was held in Tbilisi. At the meeting was provided

detailed information about EUGBC activities and plans for 2015-2016.

Board Members welcomed EUGBC management efforts to promote Georgian-European business relations through

using different tools. At the meeting was discussed projects which are planned to be held in the coming months in the

EU member states.

First preparatory meeting of Georgia Investors Council

On September 19th was held preparatory session for the First meeting of Georgia Investors Council. The Investors

Council is chaired by the Prime Minister of Georgia.

The aim of the session was to articulate the issues to be put on the agenda of the First meeting of the Council which is

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 5

planned in October.

The meeting was hosted and attended by EBRD representatives as well as Heads of Business Associations. On behalf

of EUGBC, Secretary General Zviad Chumburidze participated at the meeting.

EUGBC Members meeting with the newly appointed Head of Secretariat of the Investor’s

Council Ms. Mariam Megvinetukhutsesi

On September 8, 2015 EUGBC members’ meeting with the newly appointed Head of Secretariat of the Investor’s

Council Ms. Mariam Megvinetukhutsesi was held at EUGBC office.

On September 8, 2015 EUGBC members’ meeting with the newly appointed Head of Secretariat of the Investor’s

Council Ms. Mariam Megvinetukhutsesi was held at EUGBC office.

EUGBC SG Mr. Zviad Chumburidze welcomed Ms. Mariam Megvinetukhutsesi and introduced her EUGBC member

companies.

During the meeting Ms. Mariam Megvinetukhutsesi spoke about the mission and aims of the Investor’s Council. The

meeting was followed by Q/A.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 6

EUGBC took part at Ambassadorial 2015

EUGBC Secretary General Zviad Chumburidze participated at the Ambassadorial 2015 which was held on September

3rd in Tbilisi. Mr. Chumburidze addressed Ambassadors and members of the Government from the panel dedicated to

Georgia’s Economic Priorities and Economic Diplomacy. EUGBC Secretary General informed audience on EUGBC

activities and plans for 2015-2016.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 7

Cooperation between European Union and Georgia

EUGBC meeting with newly appointed Ambassador of Germany to Georgia

On September 30th EUGBC Secretary General Mr. Zviad Chumburidze held introductory meeting with Ms. Bettina Cadenbach, newly appointed Ambassador of Germany to Georgia. The meeting was attended by Mr. Joachim Hecker, Head of Economic, Legal and Consular Section of the Embassy, Mr. Giorgi Kacharava, EUGBC Projects Director and Mr. Valerian Gvalia, EUGBC Senior Adviser. At the meeting Mr. Chumburidze informed German Ambassador on EUGBC action plan from 2015-2016. He announced possibility to organize Business Forum in Germany. Both sides agreed to continue close cooperation.

EUGBC meeting with Ambassador of Lithuania to Georgia

On September 9, EUGBC hosted meeting with H.E. Giedrius Puodziunas, newly appointed Ambassador of Lithuania to Georgia and Ms. Jurate Ramoskiene, Deputy Ambassador of Lithuania. EUGBC Secretary General Zviad Chumburidze informed Ambassador on EUGBC activities and its action plan for 2015-2016. Lithuanian Ambassador discussed about priorities of Lithuania in Georgia.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 8

The meeting was attended by EUGBC Senior Adviser Valerian Gvalia and EUGBC Projects Director, Giorgi Kacharava.

EUGBC meeting with Ambassador Extraordinary and Plenipotentiary of Georgia to the Kingdom of the Netherlands

On September 7, 2015 EUGBC SG Zviad Chumburidze met Ambassador Extraordinary

and Plenipotentiary of Georgia to the Kingdom of the Netherlands, H.E. Mr. Konstantine

Surguladze.

The meeting was held at EUGBC office, Tbilisi and was attended by EUGBC staff. During

the meeting issues related to EUGBC Business forum to be held in the Hague in

November, 2015 were discussed.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 9

EUGBC Members’ News

EUGBC member Rustavi Metallurgical Plant launches production of seamless pipes

EUGBC member Rustavi Metallurgical Plant (RMP) after a long interval launched production of seamless pipes under its

own brand.

The Seamless pipes is intended for export to Kazakhstan, Azerbaijan, the EU and the US markets. The product has no

analogue in the region, which is a competitive advantage of RMP.

The presentation was attended by representatives of the Government of Georgia, EUGBC Secretary General, EUGBC

management and business leaders from different industries.

Four new members joined EUGBC

EUGBC is pleased to announce, that following four companies joined

EUGBC as Corporate Members since August 2015: HeidelbergCement,

ISO Consulting, Center for Reproductive Medicine “Universe” and Prime

Marine Ltd.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 10

K P M G Following the signing of the Deep and Comprehensive Free Trade Agreement with the European Union, the Georgian Government is looking for opportunities to develop the country’s export potential, as well as constantly aiming at bringing more foreign direct investment to the country.

To this end, the Georgian National Investment Agency commissioned KPMG to study the Investment potential of the Chemicals sector in Georgia and to identify the most investment-attractive segments of the chemical industry where production and export of the chemicals to the neighboring countries, CIS and/or Europe has a good potential.

The study took about four months and a combined effort from multi-disciplinary teams across different KPMG firms, including chemical experts. We analysed areas such as demand and supply in Georgia, neighboring countries and Europe, availability and proximity of raw materials, upcoming chemical projects in the region, availability and complexity of required technology, availability of experienced resource on the Georgian market, tax and regulatory environment and other factors. The study identified 8 sub-sectors with a higher potential for success in Georgia listed below:

1. Paint and Varnish

2. Glaziers putty, grafting putty, resin cements, painters fillings

3. Printing, writing or drawing inks and inks

4. Pigments, opacifiers (to make material opaque), colors; enamels and glazes; engobes (slips); liquid lustre

5. Washing and cleaning preparations

6. Hair preparations

7. Beauty, make-up and skin care preparations, sunscreens, manicure and pedicure

8. Nitrogen fertilizers

Investment proposals were prepared for each of the above selected sub-sectors, which include identification of optimal capacity of the relevant production in Georgia, required level of investment, a limited SWOT analysis and financial calculations. These investment proposals are available on the website of the Georgian National Investment Agency.

All financial calculations showed a positive NPV, an IRR in the range of 15-35% depending on the sector and a payback period of around 4-8 years.

The financial feasibility showed that there is a new sector for investment in Georgia which has a good potential and is

highly feasible. Moreover, the required investment proved to be different per sector (ranging from USD 4 million to USD

140 million) meaning that there is a room for both large and small scale investors to start production in Georgia.

Apart from Nitrogen fertilizers, the construction timeline for which is expected to be around 3 years, all other sub-sectors

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 11

are expected to take around a year to complete the construction and start production.

The main advantage that an investor would get setting up a chemicals plant in Georgia is the combination of a relatively stable macroeconomic environment, favorable taxation regime (including free industrial zones in Poti and Kutaisi, in which businesses are exempted from all tax charges, except personal income tax) and other Government incentives coupled with access to not only Georgian and Caucasian but also European markets.

Georgia’s strategic location is an asset to any investor. As a bridge between Europe and Asia, Georgia offers direct access to European, Gulf Cooperation Council and CIS markets. Its three major oil and gas pipelines, Black Sea ports, well-developed railway systems, together with its airports are playing an increasingly important role in linking the East and West. In addition Georgia has low tariffs and streamlined border clearance procedures. With a range of Free Trade Agreements, Georgia has access to a 900 million market that is not subject to customs tax, including Turkey, CIS and EU countries.

Low labor and electricity costs are also a significant benefit of setting up a chemicals plant in Georgia. The highest tariff for industrial consumers of one KWh energy in Georgia in 2014 was around USD 0.045 which is lower than in neighbor countries (35% lower than in Armenia, 52% lower than in Turkey and 21% lower than in Azerbaijan. Labor cost in manufacturing industry is low amounting to 410 USD monthly on average.

4

5

6

7

8

9

10

10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%

Payback p

erio

d,

years

IRR

Financial analysis, chemical sub-sectors in Georgia

Paint and Varnish

Glaziers putty, grafting putty, resincements, painters fillings

Printing, writing or drawing inks andinks

Pigments, opacifiers, colors;enamels/glazes; engobes; liquid lustre

Washing and cleaning preparations

Hair preparations

Beauty, make-up and skin carepreparations, sunscreens,manicure/pedicureNitrogen fertilizers

Note: the size of the bubbles represent the size of the investment

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 12

Although most of the raw materials for the production of chemical products are not available in Georgia, they can be easily reached in the neighboring countries. The most common raw material for a chemical plant is natural gas which is used for production of fertilizers, industrial gases and organic chemicals. Georgia mainly relies on Azerbaijan for its gas supply which, of course, presents a challenge for the investors. Another challenge is the lack of experienced resources. Although around 5000 people are registered as being employed in the chemicals sector, few of them have narrow specialization, e.g. experience in the production of paints and varnishes.

Despite the above challenges, chemical production in the identified sub-sectors is feasible and definitely worth the investor’s attention.

TbilisiMarathon 2015

The Social event TbilisiMarathon, organized by HeidelbergCement will

be held for fourth time on October 25th

2015. This year TbilisiMarathon will be held with many innovations, using new format. Instead of the Tbilisi Sea, track will be set in Tbilisi city center.

Exclusively for this event the traffic roads leading to the central streets will be blocked for the race. Another novelty is that for the first time TbilisiMarathon offers races for the Kids - 500 m. run for 6-11 year old children and 1000 m. run for minors aged 12-15. Aged over 16 can compete, at Half Marathon, as well as at 10km run. The Half Marathon and 10km run will be held fairly, with full compliance to international standards, since results of TbilisiMarathon races will be counted by the traditional partner - German Company “Mika timing” international recognized “Official Timekeeping and Data Processing” system.

TbilisiMarathon is held with the assistance of Tbilisi City Hall, Embassy of Germany in Georgia and Ministry of Sport and Youth Affairs of Georgia. The project is promoted internationally, by Austrian company Sporturlaub, which provides the wide range of touristic services to the overseas guests for the Half Marathon.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 13

The objective is to promote and establish healthy lifestyle to share and to encourage the social responsibility among people and companies. The fund raised by TbilisiMarathon 2014 through the registration process were doubled by HeidelbergCement and in total of 31 260 GEL was used for “Bediani Children’s Center” renovation and Improvement project, therefore, by tradition, HeidelbergCement will double money gathered from registration process for TbilisiMarathon 2015 and will implement it for Expansion and further development of the existing conditions of “the center for persons with limited abilities” located in city of Rustavi. Besides, TbilisiMarathon was listed as an official member of The Association of International Marathons and Distance

races (AIMS), this year. As a result, TbilisiMarathon is the first in Caucasus, to hold the international status.

TbilisiMarathon success was reached by the assistance of Mr. Peter Gotwald, professional runner and trainer, who possesses wide range of experience with organizing international marathons and is a director at sport organization, Smartrunning.

TbilisiMarathon, the social project organized by HeidelbergCement, is increasingly gaining popularity by the every year, among the participants there are visitors from more than 30 countries, embassy representatives, and government and business officials. Up to 3000 participants are expected to visit TbilisiMarathon, which is important, not just for the healthy lifestyle, but also for the tourism development. Registration process for TbilisiMarathon 2015 has already started! To register please visit, www.tbilisimarathon.ge

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 14

ORIFLAME GEORGIA OFFICIAL COSMETICS OF

TBILISI FASHION WEEK S/S 2016

Oriflame is again partnering with Tbilisi Fashion Week.

12th season of Tbilisi Fashion Week will be held from 8 to 11 October. The venue unites showrooms of designers and the 28-meter podium, surrounded by more than 400 guests. As an official partner and cosmetics of this event, Oriflame will provide the visual side of the models. Oriflame colour cosmetics, and its biggest line - The ONE - will provide a make-up for the models acting on a podium. This brand stands a large range and is very popular among women all over the world. In 2015 an official face of the brand The ONE became a well-known TV presenter - Gvanca Daraselia, she presents The ONE products in Oriflame catalogues.

Guests coming to the event venue will be able to see Oriflame exhibition location and try the first novelties of decorative cosmetics, and the guests who came to the fashion shows Oriflame is preparing special gifts.

Johan Rosenberg - SVP & Head of CIS, Commercial Marketing and Brand and Communication "We are glad to cooperation with fashion industry and fashion weeks in Stockholm, in Moscow and in Tbilisi and in many other countries. This partnership will inspire clients and consultants of Oriflame to fulfill their dreams in beauty and fashion.” Oriflame is confident that collaboration with the world of high fashion - it's a big step ahead towards the realization of the desires of every girl on the bright and spectacular images that can be created with little effort. By becoming an official sponsor and official cosmetics of Tbilisi Fashion Week, Swedish cosmetics brand has opened for itself and its customers new opportunities, as well as proved that fashion can be affordable.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 15

About Oriflame Founded in 1967, Oriflame is a beauty company selling direct in more than 60 countries. Its wide portfolio of Swedish, nature-inspired, innovative beauty products is marketed through over 3 million independent Oriflame Consultants, generating annual sales of around €1.5 billion. Respect for people and nature underlies Oriflame’s operating principles and is reflected in its social and environmental policies. Oriflame supports numerous charities worldwide and is a Co-founder of the World Childhood Foundation. Oriflame is a Luxembourg company group with corporate offices in Luxembourg and Switzerland. Oriflame Cosmetics is listed on the Nasdaq OMX Nordic Exchange.

INVESTMENT FORUM BATUMI 2015

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 16

We inform you that by organization of Government of Autonomous Republic of Ajara and National Investment Agency, on 18-19

th of September Investment Forum Batumi 2015 is held in the hotel Hilton, Batumi. The event provides

a unique opportunity to establish important business contacts and get information useful for the private sector to discover current investment ready projects in real Estate and Tourism sectors in the Autonomous Republic of Ajara.

The event is supported by BDO.

Investment Forum hosts the Prime Minister and the Director for the South Caucasus, Moldova and Belarus of European Bank for Reconstruction and Development (EBRD) - Bruno Balvanera.

საინვესტიციო ფორუმი ბათუმი 2015

აჭარის ავტონომიური რესპუბლიკის მთავრობისა და ეროვნული საინვესტიციო სააგენტოს ორგანიზებით, 18–19 სექტემბერს

სასტუმრო ჰილტონში, ბათუმში, გაიმართებასაინვესტიციო ფორუმი ბათუმი 2015.

ღონისძიების სპონსორი და მხარდამჭერია აუდიტორული და ბიზნეს საკონსულტაციო კომპანია BDO.

ფორუმი იძლევა უნიკალურ შესაძლებლობას, რომ დამყარდეს მნიშვნელოვანი საქმიანი კონტაქტები და მიიღოთ კერძო

სექტორისთვის სასარგებლო ინფორმაცია აჭარის რეგიონში საინტერესო პერსპექტივების მქონე საინვესტიციო პროექტების

შესახებ ტურიზმისა და უძრავი ქონების სექტორში.

საინვესტიციო ფორუმში მონაწილეობას იღებენ საქართველოს პრემიერ მინისტრი ირაკლი ღარიბაშვილი და ევროპის

რეკონსტრუქციისა და განვითარების ბანკის (EBRD) დირექტორი სამხრეთ კავკასიაში, მოლდოვასა და ბელარუსში - ბრუნო

ბალვანერა.

GRANT THORNTON-ის წამყვანი პროფესიონალები BDO ავსტრიის ოფისს შეუერთდნენ

სექტემბერში ბიდიო ავსტრიის ოფისი 65 თანამშრომლით გაიზარდა. ეს ზრდა გამოიწვია აუდიტორული კომპანია Grant

Thornton-დან პროფესიული კადრების და 10 პარტნიორის გადასვლამ ბიდიოს ავსტრიის ოფისში.

აღსანიშნავია, რომ ყველა მათგანი მაღალკვალიფიციური კადრია და ბიდიო კი სწორედ ის ადგილია, სადაც აფასებენ

პროფესიონალებს და ხელს უწყობენ მათ განვითარებას.

“ეს არის მნიშვნელოვანი ნაბიჯი, რომელიც კიდევ უფრო აძლიერებს ჩვენს იმიჯსა და პოზიციებს ავსტრიის ბაზარზე.

ვამაყობთ, რომ ამ ტიპის ზრდით ავსტრიის ბაზრის მოწინავე პოზიციებს დავიკავებთ. ამჟამად ავსტრიის ბიდიოს ჰყავს 40

პარტნიორი და 500-ზე მეტი თანამშრომელი. ჩვენ მუდამ მზად ვართ მივაწოდოთ კლიენტებს გამორჩეული მომსახურება და

შევინარჩუნოთ მჭიდრო ურთიერთობები ჩვენს პარტნიორებთან.“ განაცხადა პიტერ ჰოფმანმა, ბიდიო ავსტრიის მმართველმა

პარტნიორმა.

E U – G E O R G I A B U S I N E S S C O U N C I L ( E U G B C ) 17

BDO AUSTRIA ADDS GRANT THORNTON EXPERTS

BDO Austria announced earlier this week that their firm had substantially expanded its national presence through the addition of 65 professionals from Grant Thornton, including 10 partners. These partners and their teams of experts offer a wide range of accounting and consulting services to national and international clients within the trade and commerce, construction, not for profit, real estate and technology industries. "I want to welcome the former Grant Thornton partners and staff to BDO Austria,” said Hans Peter Hoffmann, Managing Partner of BDO Austria. “This is a major step that enhances our service offerings in the Austrian market. This expansion means that our firm is gaining not only leading industry experts with a strong reputation across the region for excellence, but also a number of prominent clients nationwide. With a new headcount of 500 staff and 40 partners, BDO is well placed to provide exceptional client service to family-owned businesses and leading middle market companies throughout Austria.” “Our clients will continue to receive the local, hands-on service they value, but will now have access to the wider array of services and resources that BDO's extensive global network provides,” adds Dr. Andreas Bernhart, a former Grant Thornton partner. “BDO's workplace culture also fits well with our emphasis on work/life balance and our people will now have access to many more opportunities to pursue career growth." Anders Heede, CEO Europe, Middle East and Africa at BDO, added his congratulations to BDO Austria: “This step further cements our Austrian firm’s standing in the marketplace and will build on their already impressive performance in recent years. This is further testament to BDO’s successful commitment to consolidation in the audit marketplace.”

------------------------------------------------ CORE MEMBERS ----------------------------------------------------