regional logistics corridor

Georgian National Investment Agency 2013

REGIONAL LOGISTICS CORRIDORREGIONAL LOGISTICS CORRIDOR

IN IN GEO

www.inves ngeorgia.org 1

INREGIONAL LOGISTICS CORRIDOR

TRANS-CAUCASIAN ROUTETRANS-CAUCASIAN ROUTE

• Latent gateway between Europe and Central Asia

• Around 80% of port cargo and 60% of freight rail are transits

TRANSPORT INFRASTRUCTURETRANSPORT INFRASTRUCTURE

• Rapidly developing road infrastructure

• Ports are cost-compe ve vs. alterna ve routes

• FDI infl ows in the logis cs sector have primarily targeted transport infrastructure

OPPORTUNITIESOPPORTUNITIES

• Deep-sea port with PanaMax vessel

• Containeriza on and logis cal centers

• Direct connec on with European and Central Asian railway networks

VESTORGIA


GEORGIA’S TRANSPORT INFRASTRUCTURE

MODE OF TRANSPORT MODE OF TRANSPORT EXISTING INFRASTRUCTURE EXISTING INFRASTRUCTURE AND FLOWSAND FLOWS

UPGRADESUPGRADES

RAILRAIL• 1,500 km (90% electrifi ed)• ~7,000 rolling stock, 180 locosROADROAD• 1,500 km interna onal road + 20,000 km internal and local roads

POTI SEAPORTPOTI SEAPORT• 13 berths, 8-10m depth• Container and bulk (210k TEU)• Owned/operated by Maersk/RAKIABATUMI SEAPORTBATUMI SEAPORT• 5 berths, 1 off shore mooring, 11m depth• 90% petroleum/oil, 10% containers (44k TEU) • Operated by JSC KazTransOilKUHLEVI SEAPORTKUHLEVI SEAPORT• Crude oil, petroleum, and lubricants• Owned/operated by State Oil Company Azerbaijan

TBILISI INTERNATIONAL AIRPORTTBILISI INTERNATIONAL AIRPORT• ~1 mn passengers (capacity: 3 mn)• Serving 28 des na onsBATUMI INTERNATIONAL AIRPORTBATUMI INTERNATIONAL AIRPORT• 100,000 passengers

RAILRAIL• BTK connec on to Turkey• Moderniza on• Tbilisi bypass• ~2500 new rolling stockROADROAD• East-West highway upgrade

POTI SEAPORTPOTI SEAPORT• New container berth (2014)

DEEP-SEA PORTDEEP-SEA PORT• Min. 2 berth of 20m depth (PanaMax)• First phase: Dry bulk (10m tons) and containers (200k TEU)• USD 200 mn investment volume

KUTAISI INTERNATIONAL KUTAISI INTERNATIONAL AIRPORTAIRPORT• Passenger, incl. low-cost airlines• Currently under construc on

RGIA

Road

/Rai

lRo

ad/R

ail

Mar

i m

eM

ari

me

Air

Air

IN IN GEO


OVERVIEW OF GEORGIA’S LOGISTICS SECTOR

• Logis cs accounts for around 7% of GDP and ~ 3% of employment, contribu ng to 19% of all exports and 9% of all imports

• Strategic loca on: It serves as an entry gate to the Caucasus and Central Asia as well as a stepping stone to the region

• Leveraging its loca on, Georgia’s transport economy can benefi t from large addressable transit fl ows, growing economies and landlocked resources

• Georgia is already largely transshipment oriented, with transshipment values amoun ng to ~3x its GDP

• Latent demand for transport infrastructure

– The current capacity compared to poten al fl ows on the East-West corridor present a latent opportunity to Georgia as a transshipment economy

–However, current infrastructure not suffi cient

• Strategic loca on and latent demand for infrastructure off er poten ally huge economic opportunity/ geostrategic stake for Georgia (direct GDP impact, economic integra on, connec on of the economy)

Value genera on through transit service provision

There is latent demand for transport infrastructure in Georgia

Upgrading infra-structure off ers huge economic and geo-strategic poten al

Georgia is in a highly strategic loca on for transshipment

VESTORGIA


VESTRG

GEORGIA SERVES AS THE ENTRY GATE TO A LANDLOCKED REGION BOOSTING SIGNIFICANT RESOURCE RESERVES

FOR COMPARISON:

REGION REPRESENTSONLY ~1.6% OF

GLOBAL POPULATION

FOR FOR COMPARISON:COMPARISON:

REGION REPRESENTSREGION REPRESENTSONLY ~1.6% OF ONLY ~1.6% OF

GLOBAL GLOBAL POPULATIONPOPULATION

IN IN GEO


GEORGIA IS IN A HIGHLY STRATEGIC LOCATION: IT SERVES AS AN ENTRY GATE TO THE CAUCASUS AND CENTRAL ASIA AS WELL AS A STEPPING STONE TO THE REGION

INN GEOGeorgia

Armenia Azerbaijan

Kazakhstan

Uzbekistan

Turkmenistan

Iran Iraq

Syria

Cyprus

Ukraine

Moldova

Turkey

2

3

4

1

1 Popula on and GDP, numbers cumula ve (apart from stepping stone countries)

2 Includes Russia’s Southern Federal District and North Caucasian Federal District

mn1GDPUSD bn1

Georgia 4.5 14

Caucasus 17 88

Land locked 121 356countries

Steppingstone

Russia 23 154South2

Turkey 74 773 Iran 75 331EU 504 17,330

1

234

VESTORGIA


CARGO TURNOVER

TRANSIT FLOWS THROUGH THE CORRIDOR (MILLION TONS PER YEAR)

CENTRAL ASIACENTRAL ASIA

KazakhstanUzbekistanTajikistanKirgizstanTurkmenistan

CAUCASUS:CAUCASUS:AzerbaijanArmenia

Europe+TurkeyEurope+TurkeySender - 2.6Sender - 2.6

Destination - 4.1Destination - 4.1Total - 6.7Total - 6.7

Central Asia+CaucasusCentral Asia+CaucasusSender - 9.6Sender - 9.6

Destination - 4.7Destination - 4.7Total - 14.3Total - 14.3

APPROXIMATELY 80% ARE TRANSIT FLOWSAPPROXIMATELY 80% ARE TRANSIT FLOWS

IN IN GEO


GEORGIA CAN UTILIZE ITS LOCATION TO ADDRESS SEVERAL FLOWS ON THE MAJOR EUROPEAN-CENTRAL ASIAN TRADING ROUTES

1 Including Eastern Europe, Balkans and Turkey

2 Excluding Central Asia, Asia and Middle East

3 Es mated using total export volume by province

NO

1

2

3

Caucasus – Europe1/RoW2

~44 mn tons p.a. Central Asia – Europe1/RoW2

~79 mn tons p.a.

Western China3 – Europe~3 mn tons p.a.

~126Total trade on all 3 routes (mn tons)

2010

VESTORGIA


IN TOTAL, THE ADDRESSABLE FLOWS RELEVANT FOR TRANSIT THROUGH GEORGIA AMOUNT TO ~126 MILLION TONS

Origin

Caucasus

Central Asia

Europe

Total ad-dressable

Total ad-dressable

Million tons, 2010 Desti nati on Addressable fl ows Other fl ows

WesternChina

RoW

Caucasus Central Asia

Europe WesternChina

RoW

2 1 21 0 14

2 12 60 1 11

3 2 N/A 2

0 1 1 4

4 4 22

N/A

N/A

N/A N/A

11 7 82 2 25

38

73

7

1

8

126

IN IN GEO


LIQUID BULK – MOST RELEVANT ADDRESSABLE FLOWS ARE BETWEEN CAUCASUS AND EUROPE AND CENTRAL ASIA AND EUROPE

Origin

Caucasus

Central Asia

Europe

Total ad-dressable

Total ad-dressable


WesternChina

RoW


Europe WesternChina

RoW

1 0 21 0 13

0 4 55 1 6

1 1 N/A 0

0 0 0 0

1 1 8

N/A

N/A

N/A N/A

3 2 76 0 19

35

61

2

0

2

100

Liquid bulk

VESTORGIA


DRY BULK – MOST RELEVANT ADDRESSABLE FLOWS ARE BETWEEN CENTRAL ASIA AND EUROPE/ROW

Origin

Caucasus

Central Asia

Europe

Total ad-dressable

Total ad-dressable


WesternChina

RoW


Europe WesternChina

RoW

0.5 0.5

0.5

0.5

0.5

0 0

1.5 6.5

1.5

3.5 5.5

1.0

1.0

1.0

1.0 N/A

0 0 0

11.5

N/A

N/A

N/A N/A

4.5 1.5 4.5 0.5 6.0

2.0

10.5

2.5

0

2.0

17.0

Dry bulk

IN IN GEO


CONTAINER – MOST RELEVANT ADDRESSABLE FLOWS ARE BETWEEN CENTRAL ASIA AND EUROPE/ROW

Origin

Caucasus

Central Asia

Europe

Total ad-dressable

Total ad-dressable

Million tons, 2010 Desti nati on

WesternChina

RoW


Europe WesternChina

RoW

0.1 0.2

0.0

0.8

1.5

0.0 0.0

0.0 1.4

1.5

0.7 0.1

0.8

2.3

0.2

1.6 N/A

0.0 0.1 1.0

1.6

N/A

N/A

N/A N/A

2.4 3.1 1.9 0.8 0.3

0.5

0.8

3.2

1.0

3.0

8.5

Container

Addressable fl ows Other fl ows

VESTORGIA


ANSWERING THIS DEMAND, GEORGIA’S EXISTING TRANSPORT ECONOMY IS ALREADY TRANSSHIPMENT BASED – RAIL AND PORTS HAVE TRANSSHIPMENT RATIOS OF >70%

2.0 0.1

1.4 3.5

12.6 1.63.0 17.2

17.5 1.63.0 22.1

57%

73%

79%

Mode of transport Transport volume by purpose Million tons

Transshipment rati o and commodity fl owsPercent

RGRGTransit Import Export

Road

Rail

Ports

• Containers

• Individual trade fl ows, such as manufactured goods, food

• Oil (KZ) and oil products

• Grain (Central Asia)

• Metals and minerals (Central Asia)

• Containers

• Oil and oil products from KZ and AZ (Batumi, Kuhlevi, Supsa)

• Containers (Po )

• Dry bulk (Po )

IN IN GEO


NEVERTHELESS, THE MARKET SHARE OF GEORGIA IN ADDRESSABLE FLOWS IS STILL QUITE LOW – PARTICULARLY IN CENTRAL ASIA

mn tons, 2010/11 Georgia & Caucasus Transcaspian Market share

Liquid bulk

Dry bulk

Containers

Addressable fl ows

Transit Georgia

99.3

4.5

2.8

12.3

5.7

3.6

2.3

2.6

0.4

53.0

Addressable fl ows1

Transit Georgia

Addressable fl ows1

Transit Georgia

80%

82%

21%

7%

53%

...

1 No growth assump on

VESTORGIA


VTHIS TRANSLATES INTO A LATENT DEMAND FOR TRANSIT AND LOGISTICSINFRASTRUCTURE IN GEORGIA, PARTICULARLY IN DRY BULK AND CONTAINERS

Liquid bulk

Dry bulk

Con

tainersssssssss

1 Caucasus – Europe/Row; Central Asia – Europe/Row; Western China – Europe 2 Projec ons based on current growth trajectory 3 Transshipment only, not including /imports/exports 4 Rolling stock not included (might be addi onal bo leneck 5 Full capacity a er fi naliza on of railway moderniza on project

Latent need for infra-structure

■ Ports as capacity and economic bott le-necks

■ Additi onal rail/road capacity may be needed

■ Loading/ off -loading capacity has to be extended (e.g., terminals)

Capacity

Current load

mn tons

Available infrastructure by mode of transportati on

Addressable transshipment fl ows1

Port (for inter-modal and RoRo) Pipeline RoRo ferry Pure rail3,4 Pure road3

Suffi -cient capacityESE[ ] + OR ST+ OR [ ] +

~100

20-25

12-15

99

17

60

405

39

2 2

27

8-20 TBD

15 2

14

7

6

5

4

5

2

3

1

8

2010

2010

2010

20162

20162

20162

Focus desti nati on

Suffi cient capacity

Pipeline to terminal

Pure pipeline

Only includes Black sea RoRo Pure rail Pure road

Rail inter-modal & RoRo

Addi onal capacity on Kars-link to Turkey

Road inter-modal & RoRo

OverseasOverseas/Regional Regional Regional Regional

IN IN GEO


THE OPPORTUNITY SPACE – GEORGIA NEEDS TO BUILD A DEEP-SEA GATEWAY TO ITS ECONOMY AND TO ORGANIZE TRADE FLOWS OF ITS NATURAL HINTERLANDS

Geographic scope

Deep sea-gate for Georgia

CaucasusTranscaspian

Suffi cient pipelines and train capacity availableLiquid bulk

Con-tainer

Dry

bulk

RoRo

Flow types

Deep-sea port Container network

Organizing dry bulk fl ows

Organizing RoRo fl ows

Extension

Extension

Extension

Flagship projects

I

II

III

IV

VESTORGIA


THE VISION FOR THE LOGISTICS CORRIDOR NEEDS TO BE BACKED BY SIZING THE ASPIRATION FOR ADDITIONAL FLOWS

Deep-sea port

Geographicscope

Deep sea-gate for Georgia

CaucasusTranscaspian

Container network

III

dry bulk corridor

III

RoRo corridor

IV

Infrastruc-ture vision

Sizing the

aspirati on1

Additi onal

fl ows in mn tons

Dry bulk

Container

RoRo

Scenarioassumpti ons

• Capacity of deep-sea port

– 10 mn t dry bulk p.a.

– and 200k TEU p.a.

• 10 t/TEU on average

• 80% u liza on

• Increase Georgia’s trade

• Increase market share1

– 90% container (current: 82%)

– 90% dry bulk (current: 80%)

• Increase container/dry bulk fl ow by 50%/30%1

• Increase market share1

– 60% container (current: 7%)

– 50% dry bulk (current: 21%)

• Increase container/dry bulk fl ow by 50%/30%1

+8.0 mt

Included in above volumes

+1.6 mt +1.5 mt

+1.6 mt +5.4 mt

+4.8 mt

IN IN GEO


ASPIRATION NEEDS TO BE TRANSLATED INTO CONCRETE FLOWS TO JUSTIFY DEEP-SEA PORT AND TRANSPORT CORRIDOR INFRASTRUCTURE INVESTMENTS

Pre-conditi on/aspirati on for fl ows

Potenti al ways to secure required fl ows

• Large dry bulk and/or container fl ows that exceed current port capacity

• Suffi cient interest for Panamax/ capesize vessel traffi c

• Container: addi onal containeriza on of goods on relevant routs

• Dry bulk: large fl ows to jus fy infrastructure investments

• Ro-Ro: Capacity limits on current network

• Involve current port owners to evaluate actual market demand for

– Increased capacity

– Improved port economics

• Involve owners of commodity fl ows (container, bulk) in superstructure investment to secure baseload fl ows

• Involve owners of commodity fl ows (container, bulk) in infrastructure investments to secure baseload fl ows

Deep-sea portI

II

III

IV

Transportati on corridors

VESTORGIA

VESTVV TTRGIAVV


THE INFRASTRUCTURE VISION – A DEEP-SEA PORT OPENS UP A GATE FOR GEORGIA’S AND THE CORRIDOR’S TRADE FLOWS

The vision – a deep-sea port1 Required infrastructure

• Deep sea port

– Min. 2 berths for PanaMax size

– 20 m depths2

• Handling capacity/equipment

– Dry bulk terminals, storage, and handling equipment for 10 million tons

– Container terminals, storage, and handling equipment for 200k TEU

• Railway connec on (only ~17 km to main railway line)

• Poten al extension by a liquid terminal3

■ Adds capacity to existi ng ports

■ Changes port economics

USD

200-250 mn

1 New locati on (earmarked) or alternati vely extension of existi ng port 2 Can also serve Capesize 3 Not included in investment size esti mati on

IN IN GEO


DEEP-SEA PORT WILL ADD SIGNIFICANT CAPACITY TO CURRENT PORTS …

Million tons

New deep-sea portCurrent port capacity

Container Dry bulk Liquid bulk Container Dry bulk Total capacityExisti ng capacity Deep-sea port

58

27 210 52

INININContainer Dry bulk

Liquid bulk Ownership

Depth

Deep-sea port Main advantages• Economics (able to accept larger vessels)• Strategic loca on• Geology (20 m depths very close to shore)

2.02.0(≈200 k TEU)

10.0 ?

Container Dry bulk

Liquid bulk Ownership

Depth Poti

4.5 5.6 2.0

8-10 m

Kulevi oil terminal

4.0

Supsa oil terminal

6.3

Batumi 0.9 2.0 15.0

11 m Kulievi oil terminal

Supsa oil twrminal

Batumi

Poti

VESTORGIA


… AND CAN CHANGE THE ECONOMICS OF TRANSPORTATION, REDUCING THE COST OF TRADE AND BENEFITING THE ECONOMY OF GEORGIA

Imports

Exports

Deep-sea port reduces cost of trade Benefi ts to Georgia’s economy

Total cost of marine shipmentUSD mn

Total cost of marine shipmentUSD mn

ILLUSTRATIVE

ILLUSTRATIVE

Current With deep-sea port1

115-140

Current With deep-sea port1

60-70120

p p

1 Assump ons: Total imports through ports 3.0 mn tons; total exports through ports 1.6 mn tons (current volumes); 70% bulk/30% containers; average travel distance 2000 miles; current port capacity for Handymax ships, deep-sea port for Capesize

Increase purchasing power by decreasing prices of everyday consumer goods

S mulate investmentby decreasing cost of investment goods

Improve balance of payments and decrease FX ou lows

Increase compe veness of Georgian exporters

Improve balance of payments and decrease FX ou lows

-40-50%

-40-50%

IN IN GEO


THE INFRASTRUCTURE VISION – ORGANIZING CONTAINER FLOWS REQUIRES THE BUILDUP OF A NETWORK OF TERMINALS

The vision – a terminal network Required infrastructure for terminals

• Sea ports & port opera ons

– Exis ng (see I)

• Network of 3-5 container terminal pla orms to handle ~1 mn TEU including

– Terminal land and construc on

– Railway connec ons and shun ng yards

– Motorways connec ons

– Rail rolling stock upgrade

• Extension of network into other countries of the corridor1

USD 500-

1,000 mn

1 Not included in investment size esti mati on

+ extension throughout corridor

VESTORGIA


ORGANIZING THE CONTAINER CORRIDOR COULD PROVIDE ADDITIONAL OPPORTUNITIES FOR INVESTORS TO ENGAGE

Containertransportfl ow

Shipment company/ freight forwarder

Infra-structure operators

Logisti c service providers

Organize reverse fl ows or containers redistributi onESTERail Port

Inter-national shipping

Inland terminals

Road transit

Ware-housing

Distri-bution

Opportunity for investors to engage into corridor development & coordinati on

GIA

INVESTIN GEORGIA

GEORGIAN NATIONALINVESTMENT AGENCY

Portf olio Manager: Mamuka Chikhladze

E-mail: enquiry@investi ngeorgia.org

E-mail: mchikhladze@investi ngeorgia.org

www.investi ngeorgia.org

regional logistics corridor

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