Journal number 2 ∘ Elguja Mekvabishvili ∘

Contradictions in Globalizatin of Economics and Prospects for the Development of the Georgian Economy

The artcle reviews economic motives for two major events taken place in the world at the end of the last year – “Brexit" and election of the known billionaire D. Trump as the 45th President of the US. It is found that contradictions and problems characteristic of economic globalization spawn protest moods in a great part of population which later on emerge in incomprehensible and unacceptable decisions for the political-economic establishment. It is noted that a rapidly changing global environment has a great impact on the Georgian economy and makes it more vulnerable to shocks from outside. In order to weaken this impact, the author believes that it is necessary to develop correct and adequate economic policies by the Government of Georgia, the main direcƟ ons of which are the expedited development of importsubstituting and export-oriented production; regulation of financial flows from the speculative field in terms of their redistribution in the field of real prod

Journal number 2 ∘ Revaz Kakulia ∘

The Global Economy as a Phenomenon of Modernity

Global economy is the main phenomenon at the present stage of societal development. While many today discuss the globalization of economy, the views of the scientific community are substantially different. If in the global economy a sharp outcome of the development achieved through international trade and investment, this is one aspect of the case. But if the model of global neo-liberal globalization of world development was built under the modern global economy, public opinion will be in a difficult situation. The development of trade relations between countries in the modern era promotes the overall improvement of economic relations between them, which in turn is a result of globalization. Keywords: Global Economy, Transnaonal Capital, Transnational Corporations, International Management. JEL Codes: F15, F21, F23 საზოგადოებრივი განვითარების დღევანდელ ეტაპზე გლობალური ეკონ

Journal number 2 ∘ Teimuraz Shengelia ∘

Methodology for Establishment of Relation between Social Capital and Motivation

Conception of the Social Capital is used by many scientists. It established its wide place in economic, social, politological and other sciences. Along with natural and human capital the social capital essentially influences the growth of effi iency of the transnational companies and promotes their development. The social capital is not the property of individual persons, it is established in the social networks and differs from other forms of capital by the fact that it is reflected not in objects and subjects, but in the human relations that form a social network. In general, conception of the social capital is in homogenous and contradictory. Despite this, it still establishes a worthy place in economic and social science. Conception of the social capital is based on the phenomenon of confience. On the basis of ethical and philosophical analysis of the category of confidence it can be convincingly said that without this category development of the society is impossible only by

Journal number 2 ∘ Maya Gonashvili ∘ Nino Togoshvili ∘

International Financial Institutuons Activities in the Conditions of Economic Globalization

The fragility of the global financial institutions and their functions’ ineffectiveness are clearly revealed by the current world financial crisis. It is primarily manifested in the loss of public confidence towards them and their inability to respond adequately to the world’s new challenges. It turned out, that the International Monetary Foundation (IMF) and the World Bank are incapable to prevent, not only global but also the financial and economic crisis developed in various countries. It is noteworthy that the current world crisis cast doubt not only the economic and financial theories developed nowadays but also revealed the weakness of the practical anti -crisis leverages during the seƩttement of the situation. In globalization conditions the main direction of the world economic order is necessary to have a purpose the existing differences between the development levels of the countries and therefore, to change the uniform approach by diffrentiated from the internati

Journal number 2 ∘ Giorgi Gaganidze ∘

Services Export – An Important Factor for Economic Growth

In the article the author discusses the formation of the service export strategies and their management. Special interest is paid to the analysis of the export potential of service exports from Georgia. The author has also analyzed the contributing measures taken by the leaders in service export. There is also presented the most priority directions for the development of services export from Georgia. Keywords: Service Export, Priority Directions of the Development of Service Export, Logistics Hub, Educational Service. JEL Codes: O14, F10, F14 სტატიაში განხილულია მომსახურების საექსპორტო სტრატეგიების ფორმირებისა და მათი მენეჯმენტის საკითხები. განხილულია სხვადასხვა ბაზარზე საქართველოდან მომსახურების ს

Journal number 2 ∘ David Kadagidze ∘

Assessment of Georgian Hidroelectricity Market Concentration and Issues for Its Further Improvement

Development of energy sector in Georgia is one of the key points of countries economic development. Despite the fact that Georgia has big capacity to produce hydro energy, nowadays small porƟ on from estimated production possibility is utilized / realized. Because of it, concentration in hydro energy market is high. In the article there are developed measures of the competition for electricity market in Georgia. The author tries to explain advantages of competition in energy sector and provides recommendations how to increase the level of competition based on estimated results. Keywords: Hydro power energy; competition; index; electricity generation; concentration; Enguri HPP. JEL Codes: E24, J60, J64, J65 საქართველოს ეკონომიკური განვითარების თანამედროვე ეტაპის აქტუალური ამოცანებიდან უმნიშვნელოვანესია ე

Journal number 2 ∘ Zhana Tolordava ∘

Business Education and Factor Formation of Knowledge Economics

Contemporary times are characterized by transition to the new innovative stage of development, which implies formation of the “society of knowledge". It’s main feature is an increased interest towards knowledge so far as it is knowledge that represents the main driving force for general increase in productive efficiency. In this regard especially interesting is opinion of the number of scholars about the innovative economics (A. Toffl er, F. Fukuyama, D. Bell, J. NaisbiƩ ), who consider that the majority of the developed countries ensure their global economic supremacy specifically through knowledge and innovative economics. Notably, Georgia is not in possession of such natural resources that could enable its competitiveness globally but it is in possession of the significant workforce potenal, where the knowledge economics represent the best model of their efficient utilization. Knowledge economics based on human resources, on human knowledge and skills makes the country

Journal number 2 ∘ Ekaterine Gulua ∘

Modern Challenges of Higher Education (Part 1)

This Part of the present article is dedicated to assessing the challenges of higher education system, as the main factor in determining human potential development. The following is a list of the challenges that can be perceived to be main in determining the basis of negative aƫ tude of society, administrative and academic staff and students on system functioning: 1. The challenges of teaching quality management; 2. Staff qualification challenges; 3. Staff development challenges; 4. Organizational culture challenges; 5. Process administraƟ on challenges; 6. The latest technology implementation challenges; 7. Financial challenges. We have distinguished 25 main problems from these seven challenges and analyzed them. Identification of the existing challenges has been accomplished according to the study of international advanced experience and TSU management mechanism based on qualitative analysis. It should also be mentioned, that these challenges can be observed with different intens

Journal number 2 ∘ Khatuna Berishvili ∘

The Issues of the Development of Business Ethics

Sustainable process of business ethics institutionalization, both in theory and real economy, is deepening. It is established as scientific discipline and management demand. Within last two decades, despite impressive development, business ethics seems to us as not yet established “academic discipline", especially in Europe, with its sustainable traditions. As soon as a new millennium came, both in academic and business environment, grows minimum requirement for specialists trained in “business ethics", which possess an ability to elaborate and use new analytical approaches to settle actual problems of internaonal and naonal level; the problems, which are characteristic for our global unification. Within companies and consciousness of separate managers, institutionalization of such decision-making is necessary, which can contribute to development of really “ethical" policy of organizations, processes and practices. Finally, “business ethics" can be considere

Journal number 2 ∘ Anna Tandilashvili ∘

The Role of City Branding in Competitive Advantages of City’s Market Positioning

City branding is a relatively new approach of marketing research and aims analyzing modern city positioning on global markets and evolving strategies for its development. A brand is a characteristic of city’s competitive identity and demonstrates and promotes its political, socialeconomic and cultural potential as the object of branding is identifying the strengths for their elevation. Thus, city branding is an important subject for scientific researchers, governing bodies and other interesting parties. The article analyses the main criteria and indexes for city competitiveness evaluation. It examines the role of branding in the process of city positioning on global markets based on recent scientific literature and empirical examples of city branding strategies. Keywords: City Branding; City Competitiveness; City positioning; Strategic Development; Brandcampaign; Creative City. JEL Codes: M30, M31, O18 ბრენდინგის როლი ქალაქის ს�

Journal number 2 ∘ Merab Jikia ∘

The Issues of Financial Risks Analysis

The article analyzes the types of financial risks and focuses on the interrelation and conditions of profit (income) and risk in the process of financial decisions. At the conceptual level, the risk is shown as the key component of the investment value. In this aspect, the risk category is characterized as a highly complex and multi-aspect category whose reasonable use in the process of business is the prerequisite of business eﬃciency. Keywords: Risks; Investment; Financial Instruments; Credit Risk; Currency Risk; Economic Risk; Purchasing Power Parity; Exchange Rate; Interest Risk. ფინანსური რისკების ანალიზის აქტუალური საკითხი „კაცმა დღეში ერთხელ მაინც უნდა დადო სანაძლეო,თორემ შეიძლება გაგიმართლოს და ამის შესახებ ვერც კი გაი

Journal number 2 ∘ Harutyun Zakoyan ∘

Methodology for the Definition, Assessment and Forecast of the Credit Risk

The present methodology has been elaborated with the purpose of determination, evaluation and forecast of the possible losses, their quantitative measurement on the loan porVolio in the commercial banks (here in after “bank"). The given method allows to conduct qualitative and quantitative calculation of the level of default (the loan risk) on the loan portfolio of the bank. Keywords: Loan Risk; Default Probability; Ratings of Borrowers; Loan Portfolio; Loan Market Value; Expected Losses; Expert Evaluation. JEL Codes: G30, G32, G38 Методика определения, оценки и прогноза кредитного риска Настоящая методика разработана с целью определения, оценки и прогноза возможных потерь, их количественного измерения по кредитному портфелю в коммерческих банках (далее `банк»). Д

Journal number 2 ∘ Alexandre Mikeladze ∘

Analysis of the Money Laundering Factors

In Georgia, the money laundering problem is not sufficiently researched. The mentioned circumstance has led to the study of the main factors that aff ect the phenomenon of money laundering. Based on the money laundering determinants, the share of income received from unoffi cial activities, the existence of “free trade zone” within the country, the high level of hidden crime promotes the growth of money laundering activities. It is necessary to regularly investigate money-laundering processes and enhance the legislaƟ ve and institutional framework and expertise in accordance with international and European standards for the elimination of the problem; it is also necessary to lower the shadow economy, minimize the Gini coefficient. Keywords: Money Laundering; Shadow Economy; Corruption; Investment Hunger; Economic Freedom. JEL Codes: K40, K42, O17 ფულის „გათეთრების“ ფაქტორული ანალიზი სტა

Journal number 2 ∘ Aleksandre Ergeshidze ∘

Financial Sector of Georgia: Analysis of Current Situation and Modern Challenges

The financial sector is crucial for the country’s rapid economic development, as it plays the role of an efficient intermediary. In the last decade, rapid growth of the loan portfolio substantially contributed to the economic growth in Georgia. However, the size of the financial sector in Georgia is still considerably smaller than in Central and Eastern European developing countries. This study examines current state of the financial sector in Georgia, its challenges and necessary measures to overcome them. One of the main challenges that Georgian economy currently faces is high dollarization rate, which negatively affects the long-term economic growth, as it: weakens the monetary policy transmission mechanism, increases credit and fi nancial stability risks, reduces economic flexibility and efficiency and increases country risk premium. Empirical evidence of countries with successful de-dollarization policy suggest that macroeconomic stability, credible monetary and fiscal polic

Journal number 2 ∘ Paata Koguashvili ∘ David Zardiashvili ∘

Public Consent is a Necessary Condition for the Survival of the Land of Georgia

The Georgian nation is self-evident in reference to the land, so the new edition of the constitution should rely on the historical and legal heritage of the country and in terms of modern conditions and challenges should establish the basic principles of land ownership and land use. Namely: 1. The value principle - land is not only natural resource and economic category, but also the value that determines Georgians identity - national treasure and eternal inheritance; 2. The obligatory principle of the landowner - property is not only a right, but it obliges: its use must be at the same time for the benefit of society; this principle is the historical heritage of Article 116 of the 1921 Constitution; 3. Apart from these fundamental principles, the constitution shall strengthen the forms of ownership of land - state, municipal (community) and private property; 4. Constitutional Principle determining land law- The text of the Contitution must clearly indicate that land owne

Economics and Business Referential and Reviewed International Scientific-Analytical Journal of Ivane Javakhishvili Tbilisi State University, Faculty of Economics and Business

ISSN 1987-5789 ESSN 2587-5426 doi 10.52340	Journal number 2 ∘ Elguja Mekvabishvili ∘ Contradictions in Globalizatin of Economics and Prospects for the Development of the Georgian Economy The artcle reviews economic motives for two major events taken place in the world at the end of the last year – “Brexit" and election of the known billionaire D. Trump as the 45th President of the US. It is found that contradictions and problems characteristic of economic globalization spawn protest moods in a great part of population which later on emerge in incomprehensible and unacceptable decisions for the political-economic establishment. It is noted that a rapidly changing global environment has a great impact on the Georgian economy and makes it more vulnerable to shocks from outside. In order to weaken this impact, the author believes that it is necessary to develop correct and adequate economic policies by the Government of Georgia, the main direcƟ ons of which are the expedited development of importsubstituting and export-oriented production; regulation of financial flows from the speculative field in terms of their redistribution in the field of real prod Journal number 2 ∘ Revaz Kakulia ∘ The Global Economy as a Phenomenon of Modernity Global economy is the main phenomenon at the present stage of societal development. While many today discuss the globalization of economy, the views of the scientific community are substantially different. If in the global economy a sharp outcome of the development achieved through international trade and investment, this is one aspect of the case. But if the model of global neo-liberal globalization of world development was built under the modern global economy, public opinion will be in a difficult situation. The development of trade relations between countries in the modern era promotes the overall improvement of economic relations between them, which in turn is a result of globalization. Keywords: Global Economy, Transnaonal Capital, Transnational Corporations, International Management. JEL Codes: F15, F21, F23 საზოგადოებრივი განვითარების დღევანდელ ეტაპზე გლობალური ეკონ Journal number 2 ∘ Teimuraz Shengelia ∘ Methodology for Establishment of Relation between Social Capital and Motivation Conception of the Social Capital is used by many scientists. It established its wide place in economic, social, politological and other sciences. Along with natural and human capital the social capital essentially influences the growth of effi iency of the transnational companies and promotes their development. The social capital is not the property of individual persons, it is established in the social networks and differs from other forms of capital by the fact that it is reflected not in objects and subjects, but in the human relations that form a social network. In general, conception of the social capital is in homogenous and contradictory. Despite this, it still establishes a worthy place in economic and social science. Conception of the social capital is based on the phenomenon of confience. On the basis of ethical and philosophical analysis of the category of confidence it can be convincingly said that without this category development of the society is impossible only by Journal number 2 ∘ Maya Gonashvili ∘ Nino Togoshvili ∘ International Financial Institutuons Activities in the Conditions of Economic Globalization The fragility of the global financial institutions and their functions’ ineffectiveness are clearly revealed by the current world financial crisis. It is primarily manifested in the loss of public confidence towards them and their inability to respond adequately to the world’s new challenges. It turned out, that the International Monetary Foundation (IMF) and the World Bank are incapable to prevent, not only global but also the financial and economic crisis developed in various countries. It is noteworthy that the current world crisis cast doubt not only the economic and financial theories developed nowadays but also revealed the weakness of the practical anti -crisis leverages during the seƩttement of the situation. In globalization conditions the main direction of the world economic order is necessary to have a purpose the existing differences between the development levels of the countries and therefore, to change the uniform approach by diffrentiated from the internati Journal number 2 ∘ Giorgi Gaganidze ∘ Services Export – An Important Factor for Economic Growth In the article the author discusses the formation of the service export strategies and their management. Special interest is paid to the analysis of the export potential of service exports from Georgia. The author has also analyzed the contributing measures taken by the leaders in service export. There is also presented the most priority directions for the development of services export from Georgia. Keywords: Service Export, Priority Directions of the Development of Service Export, Logistics Hub, Educational Service. JEL Codes: O14, F10, F14 სტატიაში განხილულია მომსახურების საექსპორტო სტრატეგიების ფორმირებისა და მათი მენეჯმენტის საკითხები. განხილულია სხვადასხვა ბაზარზე საქართველოდან მომსახურების ს Journal number 2 ∘ David Kadagidze ∘ Assessment of Georgian Hidroelectricity Market Concentration and Issues for Its Further Improvement Development of energy sector in Georgia is one of the key points of countries economic development. Despite the fact that Georgia has big capacity to produce hydro energy, nowadays small porƟ on from estimated production possibility is utilized / realized. Because of it, concentration in hydro energy market is high. In the article there are developed measures of the competition for electricity market in Georgia. The author tries to explain advantages of competition in energy sector and provides recommendations how to increase the level of competition based on estimated results. Keywords: Hydro power energy; competition; index; electricity generation; concentration; Enguri HPP. JEL Codes: E24, J60, J64, J65 საქართველოს ეკონომიკური განვითარების თანამედროვე ეტაპის აქტუალური ამოცანებიდან უმნიშვნელოვანესია ე Journal number 2 ∘ Zhana Tolordava ∘ Business Education and Factor Formation of Knowledge Economics Contemporary times are characterized by transition to the new innovative stage of development, which implies formation of the “society of knowledge". It’s main feature is an increased interest towards knowledge so far as it is knowledge that represents the main driving force for general increase in productive efficiency. In this regard especially interesting is opinion of the number of scholars about the innovative economics (A. Toffl er, F. Fukuyama, D. Bell, J. NaisbiƩ ), who consider that the majority of the developed countries ensure their global economic supremacy specifically through knowledge and innovative economics. Notably, Georgia is not in possession of such natural resources that could enable its competitiveness globally but it is in possession of the significant workforce potenal, where the knowledge economics represent the best model of their efficient utilization. Knowledge economics based on human resources, on human knowledge and skills makes the country Journal number 2 ∘ Ekaterine Gulua ∘ Modern Challenges of Higher Education (Part 1) This Part of the present article is dedicated to assessing the challenges of higher education system, as the main factor in determining human potential development. The following is a list of the challenges that can be perceived to be main in determining the basis of negative aƫ tude of society, administrative and academic staff and students on system functioning: 1. The challenges of teaching quality management; 2. Staff qualification challenges; 3. Staff development challenges; 4. Organizational culture challenges; 5. Process administraƟ on challenges; 6. The latest technology implementation challenges; 7. Financial challenges. We have distinguished 25 main problems from these seven challenges and analyzed them. Identification of the existing challenges has been accomplished according to the study of international advanced experience and TSU management mechanism based on qualitative analysis. It should also be mentioned, that these challenges can be observed with different intens Journal number 2 ∘ Khatuna Berishvili ∘ The Issues of the Development of Business Ethics Sustainable process of business ethics institutionalization, both in theory and real economy, is deepening. It is established as scientific discipline and management demand. Within last two decades, despite impressive development, business ethics seems to us as not yet established “academic discipline", especially in Europe, with its sustainable traditions. As soon as a new millennium came, both in academic and business environment, grows minimum requirement for specialists trained in “business ethics", which possess an ability to elaborate and use new analytical approaches to settle actual problems of internaonal and naonal level; the problems, which are characteristic for our global unification. Within companies and consciousness of separate managers, institutionalization of such decision-making is necessary, which can contribute to development of really “ethical" policy of organizations, processes and practices. Finally, “business ethics" can be considere Journal number 2 ∘ Anna Tandilashvili ∘ The Role of City Branding in Competitive Advantages of City’s Market Positioning City branding is a relatively new approach of marketing research and aims analyzing modern city positioning on global markets and evolving strategies for its development. A brand is a characteristic of city’s competitive identity and demonstrates and promotes its political, socialeconomic and cultural potential as the object of branding is identifying the strengths for their elevation. Thus, city branding is an important subject for scientific researchers, governing bodies and other interesting parties. The article analyses the main criteria and indexes for city competitiveness evaluation. It examines the role of branding in the process of city positioning on global markets based on recent scientific literature and empirical examples of city branding strategies. Keywords: City Branding; City Competitiveness; City positioning; Strategic Development; Brandcampaign; Creative City. JEL Codes: M30, M31, O18 ბრენდინგის როლი ქალაქის ს� Journal number 2 ∘ Merab Jikia ∘ The Issues of Financial Risks Analysis The article analyzes the types of financial risks and focuses on the interrelation and conditions of profit (income) and risk in the process of financial decisions. At the conceptual level, the risk is shown as the key component of the investment value. In this aspect, the risk category is characterized as a highly complex and multi-aspect category whose reasonable use in the process of business is the prerequisite of business eﬃciency. Keywords: Risks; Investment; Financial Instruments; Credit Risk; Currency Risk; Economic Risk; Purchasing Power Parity; Exchange Rate; Interest Risk. ფინანსური რისკების ანალიზის აქტუალური საკითხი „კაცმა დღეში ერთხელ მაინც უნდა დადო სანაძლეო,თორემ შეიძლება გაგიმართლოს და ამის შესახებ ვერც კი გაი Journal number 2 ∘ Harutyun Zakoyan ∘ Methodology for the Definition, Assessment and Forecast of the Credit Risk The present methodology has been elaborated with the purpose of determination, evaluation and forecast of the possible losses, their quantitative measurement on the loan porVolio in the commercial banks (here in after “bank"). The given method allows to conduct qualitative and quantitative calculation of the level of default (the loan risk) on the loan portfolio of the bank. Keywords: Loan Risk; Default Probability; Ratings of Borrowers; Loan Portfolio; Loan Market Value; Expected Losses; Expert Evaluation. JEL Codes: G30, G32, G38 Методика определения, оценки и прогноза кредитного риска Настоящая методика разработана с целью определения, оценки и прогноза возможных потерь, их количественного измерения по кредитному портфелю в коммерческих банках (далее `банк»). Д Journal number 2 ∘ Alexandre Mikeladze ∘ Analysis of the Money Laundering Factors In Georgia, the money laundering problem is not sufficiently researched. The mentioned circumstance has led to the study of the main factors that aff ect the phenomenon of money laundering. Based on the money laundering determinants, the share of income received from unoffi cial activities, the existence of “free trade zone” within the country, the high level of hidden crime promotes the growth of money laundering activities. It is necessary to regularly investigate money-laundering processes and enhance the legislaƟ ve and institutional framework and expertise in accordance with international and European standards for the elimination of the problem; it is also necessary to lower the shadow economy, minimize the Gini coefficient. Keywords: Money Laundering; Shadow Economy; Corruption; Investment Hunger; Economic Freedom. JEL Codes: K40, K42, O17 ფულის „გათეთრების“ ფაქტორული ანალიზი სტა Journal number 2 ∘ Aleksandre Ergeshidze ∘ Financial Sector of Georgia: Analysis of Current Situation and Modern Challenges The financial sector is crucial for the country’s rapid economic development, as it plays the role of an efficient intermediary. In the last decade, rapid growth of the loan portfolio substantially contributed to the economic growth in Georgia. However, the size of the financial sector in Georgia is still considerably smaller than in Central and Eastern European developing countries. This study examines current state of the financial sector in Georgia, its challenges and necessary measures to overcome them. One of the main challenges that Georgian economy currently faces is high dollarization rate, which negatively affects the long-term economic growth, as it: weakens the monetary policy transmission mechanism, increases credit and fi nancial stability risks, reduces economic flexibility and efficiency and increases country risk premium. Empirical evidence of countries with successful de-dollarization policy suggest that macroeconomic stability, credible monetary and fiscal polic Journal number 2 ∘ Paata Koguashvili ∘ David Zardiashvili ∘ Public Consent is a Necessary Condition for the Survival of the Land of Georgia The Georgian nation is self-evident in reference to the land, so the new edition of the constitution should rely on the historical and legal heritage of the country and in terms of modern conditions and challenges should establish the basic principles of land ownership and land use. Namely: 1. The value principle - land is not only natural resource and economic category, but also the value that determines Georgians identity - national treasure and eternal inheritance; 2. The obligatory principle of the landowner - property is not only a right, but it obliges: its use must be at the same time for the benefit of society; this principle is the historical heritage of Article 116 of the 1921 Constitution; 3. Apart from these fundamental principles, the constitution shall strengthen the forms of ownership of land - state, municipal (community) and private property; 4. Constitutional Principle determining land law- The text of the Contitution must clearly indicate that land owne