Transportation and Logistics

 

Georgia’s Strategic Location or New Silk Road for Energy and Trade are some of the terms that have been used to describe Georgia’s Focal Point/Bridge/Hub between Europe & Asia. Georgia is the transportation hub for the South Caucasus region, comprising of Georgia Armenia and Azerbaijan, as well as for the landlocked Central Asia region, comprising Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan and Turkmenistan. Georgia’s investment strategy is to attract technologically advanced and export oriented efficiency seeking foreign direct investment.

 

 

The total output of the entire sector in 2006 was over ONE BILLION LARI, employing over 41,000 Georgians. The growth in this sector is 19.6% over the previous year. Total volume of cargo today is 11 million tons and according to many Georgian transportation experts, Georgia has the capacity to support this volume. Transportation today in Georgia represents approximately 9.8% of the Georgian GDP. However, if the volume would increase, per some projections, to 20-25 million tons, the entire system would need to be modernized within Georgia and Azerbaijan, especially the Azeri rail system.   

 

 

Located at the crossroads of Europe, Central Asia, Russia, the Middle East and Asia, Georgia is a bridge connecting several important global economic regions with a total of 827 million people, including:

 

 

 

 

 

 

 

Georgia is the key link in the shortest transit route between Western Europe and Central Asia for transportation of oil and gas as well as dry cargo. Georgia’s oil and gas pipelines, Black Sea ports, well-developed railway systems, airports with direct air services to 17 locations, are playing an increasingly important role in linking East and West. By positioning itself a the central link in a chain connecting Europe and Asia, Middle East and Russia, Tbilisi has been trying to switch what was once a 4,000 year old curse – its geographical sandwiching between Asian/Middle Eastern and European/Russian empires resulting in many invasions – into a new source of strength, commerce and job creation.

 

 

 

 

 

Georgia is quickly rediscovering its “Silk Road” heritage as both Caspian basin oil and western goods flow through its territory. The Eurasia Corridor policy of the Government of Georgia will require substantial investment.   

 

Several investment opportunities are summarized on page 10 of this Overview. Opportunities are in cargo infrastructure (TAM Project), railway links under construction, modern logistical systems in the ports, further airport development, opportunities for management expertise in port structure, implementation and monitoring system, development of the opportunities that will arise from the Special Economic Zones, warehousing and storage facilities and transportation/logistic specific think tanks to provide the system integration that will make Georgia strategy become reality.

 

 

SECTOR SEGMENTS

According to the Georgian Customs Department, the volume of total transit in Georgia (excluding oil and gas) rose from approximately ten million tons in 1999 to twenty-three million tons in 2007. 

 

 

Pipelines

Georgia plays in important role as a strategic crossroad in the Caspian region. British Petroleum (BP) and its partners have invested over $5 billion over the last 10 years to develop the major oil and gas pipelines that cross Georgia.

 

 

Railways

Georgia’s rail system served 3.9 million passengers and 22.2 million tons of cargo in 2007, with links to rail systems of Armenia, Azerbaijan and Russia. The planned new railway serving Georgia, Turkey and Azerbaijan will be completed by 2010.  The advantageous double track rail system in Georgia allows trains in opposite direction to easily pass each other. The road of the railways structure connects the major ports, Batumi and Poti, the capital Tbilisi and east to Azerbaijan. 

 

 

Black Sea Ports & Shipping:

This type of transportation accounts for 41% of total cargo imported in Georgia. There are 2 ports on the Black Sea, Poti and Batumi. Georgia’s ports have rail ferry links with Ukraine, Romania, Russia and Bulgaria. Both ports are key links in the TRACECA trade route. 

 

Poti (depth 11 meters; established 1858; www.potiseaport.com) – Georgia is developing a free economic zone on the territory of Poti and surrounding area to allow investors to leverage Georgia’s strategic location. Poti is estimated to carry 15.5 million tons by 2010 and 19.0 million tons by 2015. 

 

 

Poti, one of the largest Black Sea ports, transshipped 7.7 million tons of dry cargo in 2007, 15% more than in 2006. Poti has direct motorway ferry connections to the following ports: Burgas (Bulgaria), Rize (Turkey) and Novorosiisk (Russia).

 

Kulevi -- This is a new oil terminal, a former military port in the Kolkheti National Park, near Poti which is under construction, privately funded and supported by the World Bank, to be completed by the end of 2007. It will consist of 16 tanks with a capacity of 22,000 cubic meters, each serviced by a railway that could support up to 10 million tons of oil in phase 1 and up to 35 million tons in phase 2. 

 

 

 

Trade Facilitation/Logistics

Freight Forwarders

 

International Freight Forwarders in Georgia are represented by the Association of Freight Forwarders with 26 members, including many employees with FIATA diplomas and involved in the ISO certification process. Also represented in Georgia is the Georgian International Road Carriers Association (www.girca.org).

 

Storage Facilities/Warehousing

 

Most of the storage and warehousing facilities are located around the Poti, Batumi and Tbilisi ports and airports. For air cargo, the storage handling market in 2005 was $1.5 million. The potential for warehousing and storage is substantial, especially in areas of refrigerated storage. 

 

 

Global Participation

 

The United States, via USAID, Millennium Challenge Corporation, Overseas Private    (OPIC), EXIM Bank, along with the World Bank, EBRD, EU, Japan Bank for International Cooperation (JBIC) and other donors are looking at methods to improve the transport, water supply and wastewater treatment infrastructure.   The Millennium Challenge Georgia (MCG) has allocated over $100 for construction and reconstruction of roads in Georgia.  The EU helped start the TRACECA (Transport Corridor for Europe, Caucasus and Asia) with 9 countries, signing bilateral agreements on preferential trade & cargo regimes.

 

Civil Aviation/Airports

 

Tbilisi’s new international terminal, opened in February of 2007, with a 3,000 meter runway, is hailed as one of the world’s most comfortable and efficient terminals. Four national and 14 foreign airlines serve Georgia including Austrian Airlines, British Airways, Lufthansa, Air Baltic, Turkish Airlines. See below chart for direct flights from Tbilisi. Kutaisi has a 2,500 meter runway, Batumi a 2,420 meter runway, Senaki a 2,400 meter runway and Poti a 1,500 meter runway.

 

 

Air Cargo:

 

In 2005 air cargo in Europe-Caucasus-Asia corridor was 2.7 million tons.   In 2005 out of the 20 fastest growing airports in the world, 7 were in China.   Estimates of 8 million ton air cargo market require more logistical hubs, especially 3-modal, in addition to those in Baku, Almaty and Tashkent. These air cargo sites require specific runway lengths, proper equipment control links and parking spaces for planes. Georgia still has significant unused capacity in air cargo, if the proper infrastructure is built. Please see specific investment opportunity in this area on page 10 of this Overview. Some major global players in this air cargo market are Quantas, Lufthansa, KLM, Swissair and Lasare.