Caspian Energy (CE): Mr. Vice-Mayor, we would like to ask why exactly Yokneam was chosen as a place for creation of a high-tech zone.  Were geographic, climate and other conditions taken into account when making this decision?

Roman Peres, First Vice-Mayor of the city of Yokneam: What happened to Yokneam over the last 30 years? It is an unusual phenomenon which stays unclear to many people even in Israel. Many countries are studying our experience. Yokneam was founded by immigrants  from African and West European countries. By mid of 80s Yokneam was a small and unknown dwelling settlement with a population of around 4,500 people. There were two enterprises operating there. One of them was Osem enterprise engaged in food industry.  Nowadays, it is a part of Nestle firm. The second enterprise was Soltam. It was a part of a well known Israeli military-industrial enterprise which basic customer used to be Iran. At that time, every mother living in Yokneam dreamt to have her child working for Soltam Company. The thing is that a plain worker’s salary was much higher than that of a bank governor in Yokneam. All this lasted until the revolution happened in Iran, which caused cessation of all relations with Israel. 

The unemployment rate in Yokneam reached 45% in 1988-89. A massive outflow of young people from Yokneam began. A few years ago a document, issued at that period by the commission created by the government of Israel, fell into our hands. The document stated that Yokneam does not have a future and in order to prevent its disappearance it has to be linked to one of the neighboring successful cities. There were hard times at that period...

Repatriation from the USSR began in 1989 after the fall of the “iron curtain”. Simon Alfasi was elected as the mayor of Yokneam and since then he has been fulfilling his duties (30 years). Mayor elections take place every 5 years. I would like to note that the first three families which arrived in Yokneam were from Baku. The difference between Yokneam of 1990 and the present city is big. Now it is called a silicon valley and a high-tech center. We have about 150 enterprises operating and 80% of them account for high technologies. Last year, the turnover of the industrial zone totaled $7billion. Yokneam enterprise was sold to the American company two months ago for $6.9billion. The startup of that enterprise was launched in our city. Yokneam is a very young city. You may ask “how Yokneam managed to gain such big success”. We attach importance to the three main points. The first point is the development of industry. We managed to persuade the government to grant Yokneam priority privileges to develop industry. We managed to convince private enterprises to work in Yokneam. Most of these enterprises came here with their employees, skilled engineers, specialists and explorers. The second one is an education. When a young family considers any certain city for settlement, education for children is the first thing that the family pays attention to. We have created the best and successful educational system in Yokneam. Over the last 5-6 years we received a state award twice for developing an education sector in the city. The third point is a comfortable housing. Yokneam is a green city and 35% of it is occupied by housing facilities. We do not build skyscrapers, we want Yokneam to remain a small city. All these three points were the key to successful development of Yokneam.

Owing to industrial enterprises which pay a city tax, the municipalities got an opportunity to invest money into development of Yokneam. Besides, about 50% of the current budget is spent on education which is the key to our success. 

CE:  What is the difference between the tax regime of Yokneam and other cities?

Roman Peres:  Yokneam received the most-favoured-nation status from the state. Every company which came to work here received subsidies from the state. As a municipality, we decided to let companies enjoy city tax discounts during the first three years of their operation in the city. It lasted several years, but early in the 2000s the legislation changed in Israel, so we were prohibited to make such concessions. Yokneam is located close both to the center of the country and to the north.

CE:  What could you say about cooperation with the European and Caspian countries? What are your plans in regard to cooperation with Azerbaijan?

Roman Peres: We maintain contact with the European countries. Our delegations make mutual visits. They would do well to learn from us and we would do well to learn from them. Mellanox, Given imaging and others are our enterprises. They are the empires of enterprises. All startups of these companies were launched in Yokneam when they were not even able to rent an office and start their business. They were given small offices at the mayor’s request, where they managed to start their operation. After that, rapid development of companies began. Azerbaijan and Israel have very warm relations which are getting stronger year by year. The goods turnover totaled about $1.5 billion in 2018. The bulk of the goods turnover falls to the share of the military industry, oil, medical tourism, infrastructure and others. If the embassy of Azerbaijan opens in Israel in the near future, it will give even larger momentum to the relations between our countries and our peoples. The absence of the embassy hampers the work of Israeli companies at Azerbaijan’s market.  As there is no body which they can apply to, companies apply to embassies of Kazakhstan, Uzbekistan. About 100,000 persons of Azerbaijani descent live in Israel. We have much in common with Azerbaijan. We will always remember how the Jewish people fled from massacres occurred in the pre-war years in other countries and how Azerbaijan opened its doors for us. At present, representatives of the Baku Diaspora are mayors and vice-mayors of cities in Israel. They obtained a certain status in public agencies of Israel.

A year and a half ago Yokneam and Gabala signed a memorandum on cooperation. Ambassador Extraordinary and Plenipotentiary of the state of Israel to Azerbaijan Mr. Dan Stav played a big role in development of this cooperation. The Head of the Executive Power of Gabala district Sabuhi Abdullayev invited the mayor and me to make an official visit to Gabala. He is a remarkable person, perfect executive and makes huge efforts to develop Gabala in all fields. We became real friends and I am proud of this friendship.  Gabala is an unusual district which is developing rapidly…

CE: Are there plans to create the similar Silicon Valley in Gabala?

Roman Peres: Gabala is a paradise for tourism, which has beautiful hotels, mountain ski resorts and splendid clean air. Many residents of Yokneam have been to Gabala. I think there are other cities where it is preferable to develop a high-tech field.

Agriculture is rapidly developing in Azerbaijan. Irrigation system technologies bought from Israel are used here. The relationship between the two states and the two nations is very strong.

CE: Is it planned to attract ecologically clean technologies into Azerbaijan, as well as open representative offices of Israeli companies?

Roman Peres: We are ready to apply our technologies in Azerbaijan if there is a relevant demand for them. In particular, I would like to note prospects of cooperation in the field of water resources and desalination of sea water.  No such problem exists in Yoknam today. The fresh water problem in Israel is very pressing in Yokneam, but the problem had been more pressing until seawater desalination plants were built at the initiative of the current Minister of Defense of Israel and former Minister of Infrastructure Avigdor Liberman. One of our agricultural startups has developed a drop irrigation technology making it possible to save water.

Today, there are very many specialists from Israel working in Azerbaijan and Azerbaijani specialists are working as interns at enterprises in Israel.

Thank you for the interview

Caspian Energy (CE): Implementation of the national waste management strategy of Georgia 2030 is ongoing. According to new regulations, plastic bags should be replaced by biodegradable bags. Use of plastic bags in Europe was restricted years ago. What are the goals and plans you have for the nearest future?

Levan Davitashvili, Minister of Environment Protection and Agriculture of Georgia: On September 14, 2018, the Government of Georgia adopted the Decree # 472 on “Technical Regulations and Rules of Application on Plastic and Biodegradable bags”. According to this decree, import, manufacturing and sale of plastic bags of less than 15 microns, and manufacturing, import and selling of any “Oxo degradable bags” was prohibited since October 1, 2018.

The ban was imposed on import, manufacturing and sale of any plastic bag from April 1, 2019. Accordingly, from this stage it is only accepted to import, produce and sell biodegradable and compost (according to standard EN 13432: 2000) plastic bags.

CE: In order to deepen partnership between Georgia and Azerbaijan, the Presidents of both countries have focused on the implementation of joint projects on regional and international level. What kinds of projects have been implemented so far? Are there any new initiatives offered by Georgia?

Levan Davitashvili: Transboundary projects in Georgia are carried out in different directions. Today most of them are being implemented in the field of water resources protection, biodiversity conservation, environmental management and sustainable management of forest resources.

One of such projects is the EU Water Initiative for the Eastern Partnership countries (EUWI +) [2016-2020]. The aim of the project is to support promotion of water resources management in the Eastern Partnership countries, especially on trans-boundary rivers.

The specific goal of the project is to ensure the convergence of national policies and strategies of the policy on water resources with the EU Framework Directive, Integrated Water Management and relevant multilateral environmental treaties.

The “Integrated Biodiversity Management in the South Caucasus (IBiS)” [2015-2019] project is also of great importance and aims to create better coordination between different sectors, based on reliable data on biodiversity and ecosystem services management.

Another project is the management of natural resources and ecosystem services in rural areas for sustainable development in South Caucasus (Eco serve) [2018-2021]. The objective of the project is to improve the conditions for use of natural resources in terms of sustainable development as well as efficient use of resources to achieve biodiversity goals in South Caucasus. Special attention is paid to energy security for rural population.

The Transboundary Joint Secretariat in the South Caucasus (TJS) (Phase III) (2015-2012) is the Eco-Regional Program for the Protection of the South Caucasus, funded by the Federal Ministry of Economic Cooperation and Development (BMZ), with help from German and Development Bank (KfW).TJS provides assistance to the Ministries of Caucasus Region in the development of regional cooperation and development and harmonization of the nature conservation sector.

Since 2013, the project of Restoration of Gazelle has been implemented in Vashlovani National Park. 75 Gazelles were brought from Azerbaijan (Shirvani National Park) within the scope of this project. Cooperation in this field is particularly remarkable.

Eco-Corridors Fund for the Caucasus (ECF) is a long-term financial instrument that ensures biodiversity conservation through long-term conservation agreements on landscapes in the South Caucasus. The program aims to integrate environmental measures at landscape level and create eco-corridors connecting different Protected Areas of the Caucasus, in parallel with sustainable economic and social development.

The main goal of the program is to conserve biodiversity, as well as protection of important species and their habitats. The program envisages the maintenance and development of live landscapes, by active involvement of local population, as well as conservation of sustainable populations and the habitats.

CE: Environmental protection is one of the most important aspects for many countries around the world, which means regional cooperation and collective efforts are needed to achieve environmental goals. What kinds of joint projects can be implemented in our region and are there any international organizations committed to implement these projects?

Levan Davitashvili: Taking into consideration the global threat of climate change, cooperation within the Caucasus region is important for minimizing damages caused by climate change disasters. This task can be achieved more efficiently through joint efforts, as we are facing similar challenges.

We are actively cooperating with Azerbaijan in the framework of the UN Climate Change Framework Convention, for example, at the meetings of the Eastern European and Asian Regional Group we discuss the challenges in our countries that emerge during the implementation of Climate Change Policy. In 2018, Georgia hosted a Regional Dialogue on issues related to the preparation of the contribution on national level.

We had several Green Climate Fund training Courses (this year also) for the Caucasus and Central Asian countries. Within the Caucasus region, we have a cooperation platform where we implemented the “Climate Change Impact on Agrobiodiversity in the Caucasus” project, (EU fund, budget of 1.5 million Euros).  The vulnerability assessment, as well as harmonization of the existing methodologies in our country and analyzes of the legislative base was conducted within the framework of the project.

Additionally, it is worth mentioning, the possibility of cooperation with innovative (climate efficient) technologies and green economy, which will enable us to fulfill the obligations under the Paris agreement.

As for the protection of atmospheric air, Georgia and Azerbaijan are member states of the Convention of Long Range Transboundary Pollution (CLRTAP) and are participating in virtually all the events held by the Secretariat of the Convention on Eastern Europe. Trainings, legislation reviews, preparation of action plans and road maps are being conducted to strengthen the capacities of the Caucasus and Central Asian Region countries. Because atmospheric air pollution is without boundaries, it can be said that this is not only regional but also a global problem. Of course, there is a huge potential to implement joint projects in this direction, but at this stage, no specific project is planned.

CE: Time to time, rational use of water resources is a topic of discussion for Georgia and South Caucasus. In general, what types of measures are being implemented in this direction?

Levan Davitashvili: Currently, as various economic sectors are developing rapidly in Georgia as well as in neighbor countries, the demand for water increases. It is very important to establish effective system for water resources management that will contribute to the rational usage and protection of water by various sectors (industry, energy, agriculture).

This is one of the top priority issues for the country. Based on the significance of the issue, the Ministry has developed a bill on “Water Resources Management” which aims to establish sustainable water resources management system and reflects European principles and internationally recognized requirements for river basins management.  The bill will be presented to the Parliament of Georgia for the final approval during this year.

It is obvious that we should not discuss the topic of water resources usage only on the national level; therefore, the cooperation with neighboring countries holds big importance. Thus, the Ministry encourages the implementation of international projects in the field of transboundary water resources usage and protection. With support of the European Union and other international organizations, many projects have been implemented in South Caucasus recently. I would like to highlight the Georgia-Azerbaijan successful cooperation in the field of water resources management. For instance, with support of the UN European Commission and along with Azerbaijan, the study / assessment of water-food-energy-ecosystem in riv. Alazani basin was conducted in 2013-2014.

“Integrated Water Resources Management Strategy Action Programme (Azerbaijan-Georgia)” has been developed with support of GEF-UNDP project “Transboundary Degradation Reduction in Kura-Arax basin”. In 2014, the document was approved by the Minister of Environment and Natural Resources Protection of Georgia and the Minister of Ecology and Natural Resources of Azerbaijan as a roadmap for the establishment of integrated water management system in riv. Kura.

In order to facilitate the implementation of the above mentioned program, GEF-UNDP project “Kura II” was launched in 2016.

We believe that such cooperation is the cornerstone of the sustainable development of our countries.

CE: Experts argue that if Georgia does not respond appropriately to overcome the challenges related to climate change, losses will reach $ 12 billion over the next ten years. What measures is Georgia undertaking?

Levan Davitashvili: In accordance with the document on “Georgia’s National Designated Contributions”, it is assessed that the disaster caused by climate change in the next decade could cost 10-12 billion dollars to the country. Among the natural disasters, the unequal distribution of precipitation and the intensified melting of glaciers are particularly noticeable.

As a result, the number of cases of flooding and mudflows in Georgia has increased significantly over the last few years. On June 13, 2015 flooding in the Vere Valley resulted in landslide processes and overflooded the significant part of the city. In addition, the flood of Glacier Lake, which was caused by the glacier meltdown, has become the reason for flooding, invoked serious damage to the population of Svaneti.

In order to avoid such cataclysms and to minimize damages, last year Georgia received funding from Green Climate Fund and Swiss Government to implement a relevant adaptation project.

Within the framework of the project, adaptation infrastructure will be constructed in 11 river basins, early warning systems will be introduced, modern meteorological and hydrological stations will be installed and high accuracy forecasting capabilities will be provided.

In addition to this, the Government of Georgia is in process to elaborate the state adaptation strategy, which will be launched with support of Green Climate Fund this year. It is really important for us to make the rational evaluation to the expected impact of climate change on our natural resources and based on this determine the climate resistant and sustainable development of the economic sectors.

Thank you for the interview

Caspian Energy (CE): Azerbaijan and Georgia are actively cooperating within the framework of international organizations, including implementation of large investment and transit projects.  Which projects are the most demanded and will be important in coming years?

Ivane Matchavariani, Minister of Finance of Georgia: Georgia and Azerbaijan have very successful history in implementing large investment projects aiming at creation of important transit corridor. Oil pipeline project Baku-Supsa, Baku-Tbilisi-Ceyhan were first very important energy projects, followed by Baku-Tbilisi Kars railway project which has been finished recently. I am sure this corridor in South Caucasus can become a transit route of a global importance.

CE: Georgia is ranked 6 in the ease of doing business, according to the World Bank’s latest report.  How do you assess the ease of performing an entrepreneurial activity in Georgia?

Ivane Matchavariani: Georgia ranks number 6 in World Bank Doing Business.  This is a remarkable achievement for us.  This is on the one hand the acknowledgment of the reforms undertaken by different Governments, on the other hand it is a big motivation for us to follow the path of the transformation of the country. Improvement of the business environment has always been the priority to the Georgian government and the driver of our future reforms.

We have recently implemented new quite innovative corporate income tax reform, which not only reduced the tax burden for the country but also significantly simplified tax compliance process. We started automated VAT refund system in this year. Ease of doing business is our primary focus and in this direction we have other important reforms which will further advance the investment climate in the country further forward.

CE: In 2018, the Ministry of Finance of Georgia stated that it was important to mobilize financial resources and broaden economic relations within the framework of the One Belt, One Road trade corridor initiated by China. What is the size of funds needed, and which projects are in need of funds first of all?

Ivane Matchavariani: One Belt One Road initiative is the essential part of the strategy of Government of Georgia to capitalize on country’s huge transit potential, develop logistics hub and enhance regional connectivity. We have implemented a very important fiscal reform which, by enhancing fiscal space, allowed us to significantly increase the capital investments.

This increase goes to investment projects in spinal road network of the country – these are East-West highway and South-North corridors. Another important initiative is the railway modernization project. The financing is ensured for these projects and they have either already started or are on the final stage of procurement. The expected finish time is 2022-2023.

CE: The depositors of the TBC Bank, the biggest bank in Georgia, are concerned about the future of the Bank and invested assets. Which measures have been taken and still will be undertaken? In your opinion, what can earn much broader trust of clients in the Georgian banks?

Ivane Matchavariani: Well, they should not be worried. Banking sector in Georgia is very strong and it demonstrated high robustness during past years. TBC Bank is a leading financial institution listed in LSE prime listing. The strength of the banking sector in Georgia, in my view, should be attributed to strong and independent National Bank. National bank and TBC Bank expressed themselves, that there are no more outstanding issues. I am sure that the Banking sector and TBC Bank will continue strengthening and contributing to the economic development of the Country.

CE: Georgia is the only country of the Black Sea basin, which does not have a deep-water port. Anaklia port can be a transit point for Azerbaijan and Central Asia.  When is it planned to launch the construction of the port and how much investments will the public sector make?

Ivane Matchavariani: Anaklia deep see port is of strategic importance not only for Georgia but for the region as well. All leading International Financial institutions acknowledge that and support this project. This project is a private sector initiative. However, the Government of Georgia supports this project. I think that strong support from many different parties is a very good ground for the success of the project. I am very optimistic about the project and I hope construction will come soon

CE: Since 2017 the European Union has applied a visa-free system for Georgia. Which positive and negative impacts did Georgia’s entry into a free visa regime cause for the operation of banks? 

Ivane Matchavariani: On March 28 it is two years already since the Georgians are allowed to enter EU visa free. This is only two years, however, it is already our livelihood. The Georgians, especially young people, travel to EU much more frequently, for short visits, for weekends, to meet friends there and the European lifestyle.

Visa-free system brought a lot for Georgians but, I am sure, there is more benefits are to come. I am very much confident, very soon it will be reflected in more intensive business ties between the European countries and Georgia.

CE: The process of reducing of loans to zero ran from December 2018 to January 2019 in Georgia? What have been the results of this process? 

Ivane Matchavariani: Responsible lending is a very important initiative of the government of Georgia, and it is critical for countries’ development. Responsible lending reform was mentioned by credit rating agencies as a rating friendly initiative. Existing lending practices were a quite impeding factor for economic growth. We introduced fair rules of game in this sector based on best international practices.

CE: What potential do you see for foreign, including Azeri investors, in Georgia? Which sectors of economy are the most important for the today’s cooperation?

Ivane Matchavariani: According to preliminary data of 2018, Azerbaijan is number one among the top three foreign direct investor countries.  According to Geostat, investments from Azerbaijan amounted to USD 240 million in 2018. Economic cooperation between Azerbaijan and Georgia is focused on developing the transport corridors as well as trade and tourism. Investment climate has improved significantly in recent years in Georgia as a result of current economic reforms. This has positively reflected on business activities and the increase in business interests of Azerbaijan toward Georgia is an illustration of this fact. We have all the possibilities to deepen the partnership in all fields such as tourism, financial sector, construction, agriculture etc. 

CE: What are the main tasks facing the Ministry of Finance of Georgia in coming years?

Ivane Matchavariani: Georgia is quite an outlier in terms of high and robust economic growth prospects. This is also supported by the forecasts of IMF. Higher Increased fiscal strength lowers external vulnerabilities where identified by rating agencies in as a main reasons for improving Georgia’s credit rating. During last year Moody’s and Fitch upgraded our rating by a notch and S&P improved the outlook.

We have many important reforms ahead, which should bring country forward and successful implementation of which will increase the strength of our economy.

I thing Georgia’s precious reform has materialized in outstanding business climate and high Government efficiency, documented by 6th place in WB doing business, 5th place in Open Budget Index, and improved position in WB Governance indicators.

Despite all this success, education reform is becoming a key reform for the Government of Georgia. I think that in medium term human capital may become main constraint for development. We in the Government of Georgia think that education reform is critical for the country to overcome middle income country trap.

Thank you for the interview

On June 27, 2024, President Serdar Berdimuhamedov received the head of «Daewoo Engineering & Construction Co., Ltd.» Baek Jung-Wan.

Caspian Energy Media reports with reference to Turkmenistan State News Agency.

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27 июня Президент Сердар Бердымухамедов принял руководителя компании «Daewoo Engineering & Construction Co., Ltd.» Бек Джунг-Вана.

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