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contractual terms, compensation and political force majeure stipulations. Another requirement concerned road and railway links to be connected to the port, with banks reportedly demanding that the government build the vital infrastructure along specific routes—a detail that was not included in the PPP agreement.
“At this stage we have a deal which means that if the contract was terminated due to a government or investor failure, the port would be returned to state ownership and the process of searching for a new investor will be started. Liabilities the previous investor had with the banks would go to the new investor as well. Right now the banks are demanding the state guarantee the loans,” added Tskitishvili.
9.1.6 TMT sector news
The World Bank, in collaboration with the Georgian economy ministry, will develop a National Innovation Ecosystem in the country in order to foster the digital economy and innovative start-ups. The World Bank will finance the project, which is estimated to cost $40mn. Countries in the South Caucasus, including Georgia, have been seeking to develop their value-added sectors, such as information technology, in recent years. Armenia is a leader in this sector in the region, with IT and technology accounting for 5% of GDP, and a sizable qualified workforce that has attracted the likes of Microsoft to open up innovation centres in the country. Meanwhile, Azerbaijan has been working on digitising its public services and installing fibre-optic Internet connections across the country. Following in their footsteps, Georgia is also working on Internet connectivity and promoting tech start-ups. The project will comprise four parts, namely the development of an innovation infrastructure through the creation of a network of innovation hubs in selected cities and town; the provision of innovation services; ensuring financing through technical assistance and matching grants; and project implementation support.
9.1.7 Retail sector news
New bank regulations enacted in Georgia since January 1 have substantially cut durable consumer goods sales in the country, two large retailers have estimated, bpn.ge reported .
Turkish-owned brand Beko has reportedly cut prices and the Techno Boom retailer has closed some outlets in the regions in the wake of the sales downturn. Retailers are seeking a solution, but the National Bank of Georgia is yet to properly assess the impact of its new regulations.
Under the regulations, lenders must estimate each customer’s capacity to repay a loan.
The instant impact of the changes have pushed Beko brand sales down by 50% in Georgia, with its general director telling bpn.ge that the decline is steeper outside the capital Tbilisi.
"Most of the population in the regions [outside Tbilisi] is self-employed and therefore it is very difficult to show a document confirming any income to the financial institution. Because of this, most of them will not be extended loans," noted Mehmed Melek.
"The banking regulations are quite strict, and our work was stopped immediately. We were forced to reduce prices to make products available to consumers. Of course, it is at the expense of reducing our profit margin," Melek added.
The Techno Boom retailer also said the regulations were behind a 50% drop in
40 GEORGIA Country Report April 2019 www.intellinews.com