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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 its sales. Anzor Kokoladze, founder of the company, was cited as saying that it had to close 4 stores.
Central bank president Koba Gvenetadze said in parliament on February 27 that it was too early to evaluate the impact of the regulations.
"The statistical information that we have today does not provide the basis for a profound analysis of this issue. We think that it is too early to talk about this issue until the first quarter figures will be presented,” he said.
The regulations, on the upside, were consolidating the country’s financial stability, Gvenetadze argued.
On February 22, Fitch upgraded Georgia's credit rating. Its press release mentioned the regulations as boosting financial stability.
Negotiations between Swiss global giant Nestle and the IDS Borjomi International mineral water producer and bottler that operates in Georgia, Ukraine and Russia, have failed after half a year of talks with the parties unable to agree on a price, BusinssPressNews has reported . At this stage, IDS Borjomi carries no negotiations.
Information about the possible sale of IDS Borjomi first emerged last October. Russian daily Kommersant wrote that Alfa Group, held by Mikhail Fridman and
42 GEORGIA Country Report March 2019 www.intellinews.com