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20 I Companies & Markets bne June 2017
embracing blockchain technology, the governments of Ukraine and Georgia are making clear that they are ahead of the curve when it comes to meeting demand for gov- ernments that can be trusted to act in their best interest, addressing those concerns and building that trust.”
Vavilov praises the “smart, responsible leaders” in Ukraine, Georgia and other countries that his company is currently
in talks with for looking at such technological methods like blockchain to ensure their country’s success “While we aren’t ready to name any specifically, I can say that Ukraine and
bne:Funds
EBRD's lari- denominated bonds to boost Georgian
capital markets
Carmen Valache in Nicosia
Georgia, the small South Caucasus country of 3.9mn, has been the beneficiary of not one, but two lari- denominated bonds issued by the EBRD in the last year. On April 25, the bank issued the first lari-denominated Eurobond, worth GEL120mn (€46.7mn), on the London Stock Exchange. The move came after a GEL107mn public bond issu- ance on the Georgian Stock Exchange (GSE) in June.
Part of the bank's drive to develop local capital markets,
the bond issuances are bound to spur investor confidence
in the Georgian economy, George Paresishvili, GSE's CEO, told bne IntelliNews in a telephone interview. The privately- owned Georgian bourse has seen activity on it dwindle in the aftermath of the Russian invasion of 2008 and the economic crisis of 2009. While before 2008, the volume of trading on the stock exchange exceeded $100mn per year, it almost came to a halt in 2009 and has never fully recovered.
As such, the EBRD's bond issuances are particularly timely and necessary. Firstly, the domestic market issuance boosted trading on the bourse, which stood at a mere GEL50mn in 2016, by offering local investors the opportunity to buy bonds issued by a trustworthy, AAA-rated, entity. Secondly, the Eurobond issuance provides a solution to investors with an appetite for lari-denominated securities, but reservations about buying local bonds, Paresishvili believes.
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Georgia are not alone in their desire to implement this tech- nology to improve the lives of their citizens,” said Vavilov.
Such a dramatic and radical overhaul in the way that governments operate might be expected to take five, 10 years – Jamie Smith, Bitfury’s chief of global communications, says most early investors in the original internet predict that for blockchain we are in the equivalent of 1991-92, at the most – yet Bitfury stresses that one of the great misperceptions about blockchain technology is that it is enormously complicated. “In truth, it is actually quite simple,” says Vavilov.
The Georgian lari has had a chequered performance since 2014.
"The EBRD's presence has been very important for the local capital market and private sector in general. The bank acts as a benchmark for the local market. Furthermore, the revenues from the Eurobond will be used to reinvest in the local market through loans to local companies that normally have long maturity periods; so the Eurobond will likely increase the liquidity in the domestic private sector as well as peaking the interest of foreign investors," he explains.
That said, the EBRD's bond issuances are no silver bullet,
for barriers remain to the development of capital markets
in Georgia. By and large, Georgians do not yet have the culture to invest in stocks, preferring instead material investments like real estate or large consumer goods. The Georgian middle class, while growing, does not have the sufficient investment capital yet to become a sizeable financier of the private sector.
Furthermore, the Georgian currency has had a chequered performance since 2014. Between 2014 and 2015, it depreci- ated by 40% against the dollar. Although it has somewhat recovered since, more recent but short-lived waves of depre- ciation have continued to concern investors.
As a result, GSE does not yet offer sufficient financing poten- tial to incentivise large Georgian corporations, such as TBC Bank or Bank of Georgia, to issue equity on it; the two lend-