Issue 2 2016. April-May



Straddling European, Asian and Middle Eastern trade routes, in recent years Georgia has been trying to bank on its geographical location to raise its profile in the international transit sector as China and Central Asian countries revive the ancient Silk Road for trade. The deep-sea port in Anaklia, on the Black Sea coast, has been slated for years as a key component of Georgia as a transit hub. In February, the Georgian government awarded the Georgian-U.S. consortium, Anaklia Development Consortium, the right to build the facility.

Monica Ellena

Anaklia can be a game-changer for Georgia's economy, which in 2015 was severely hit by a regional downturn and the devaluation of the national currency. A deep-sea channel would enable the access of large Panamax-size vessels that are too large to call in the two other Georgian ports. Currently, sizable ships with Georgia-bound cargo use other ports in the Black Sea region where containers are reloaded onto feeder ships, carrying a maximum of 1,700 containers, heading to the ports of Poti and Batumi. Experts maintain that the Anaklia port may unlock Georgia's capacity as a transit hub.

"Once completed, the port can potentially increase the business flow tremendously," says John Braeckeveldt, regional manager of the Belgium-based logistics group Gosselin. "Currently it takes about 40 days for containers from Antwerp to reach Poti due to the stop-over in Istanbul. It is a very busy port and delays are regular practices, not an exception. Bypassing Istanbul would cut the transport time by two to three weeks."

The project envisions a port that spreads over 988 acres (400 hectares) and, in addition, ADC also received the rights to develop a free industrial zone on about 1,482 acres (600 hectares) of adjacent land for 49 years. ADC is a joint venture between TBC Holding, which is based in Georgia, and Conti International, a U.S. infrastructure developer. The consortium also includes port designer Moffatt & Nichol and Maritime and Transport Business Solutions, a Netherlands-based port transaction advisor.

A Long Wait

The tender award paves the way to the area's development and seals a long process. Originally floated by former President Mikheil Saakashili in 2011, the project stalled and was revived under the new administration in 2014. Twelve consortia and companies responded to the government's call for expressions of interest on construction and development of the deep-water port. Out of those candidates, seven were shortlisted and requested to submit a proposal. By last fall, candidates were down to two consortia, ADC and a consortium of Chinese state-owned Power Construction Corporation of China (PowerChina) and Anaklia Industrial Eco-Park and Port, a company founded by Georgian businessman Teimuraz Karchava.

Upon completion, the port will have the capacity to process 100 million tonnes of cargo per year, potentially boosting Georgia's GDP by 0.5% by 2025. The project comes at a total price tag of $2.5 billion with the first phase being the most capital intense at about $600-700 million. The government has committed to add $100 million in infrastructure upgrades, including the construction of a18-kilometer segment of railway to Zugdidi to connect the port to the national rail system.

The key, though, is not the trade to and from Georgia. Braeckeveldt maintains that the Caucasus market is too small for such an investment, which only makes sense if Georgia acts as a connection for trade between Europe, Central Asia, and China.

"Precious time has been lost and other ports have taken advantage of Georgia's delays. Today, Riga's port accounts for most of the trade with Central Asia, with vessels calling in Latvia and their cargo then being transported via railway through Russia. We are about five years late," Braeckeveldt said. The Belgian group is also betting $11 million on the country's transit potential, as it is building a 70,000 square-meter logistics business park, which is scheduled to be operational by mid-2017.

Work at Anaklia is timed to start in October. The construction phase is scheduled to last three years, with the first vessel expected to dock by the beginning of 2019. The employment opportunities are also relevant: the port envisions the creation of 6,400 jobs (3,400 during the construction phase).

Georgia's Maritime Winning Card

Anaklia is located about 68 km from Poti and their close vicinity to each other has raised questions about whether the new project will jeopardize the country's leading port. In an interview last autumn though, Economy Minister Dimitry Kumsishvili stated that "Anaklia will not kill Poti; the idea is to attract a new flow, not move the already-existing one."

Mamuka Khazaradze, founder and president of TBC Holding, agrees. "All ports have a future in Georgia"; [reviving the Silk Road route] "is a big game and business can only benefit from healthy competition," he explained.

Georgia's ports have been steadily growing since 2000 and were privatized in 2008. Batumi and Poti are the country's two commercial port facilities, while the Supsa and Kulevi oil terminals handle a variety of hydrocarbons.

Last year, APM Terminals, part of world's largest container ship operator, AP Møller-Maersk, which operates and has owned an 80% stake in the port of Poti since 2011, announced a "large scale port expansion" plan in Poti. The project, expected for 2018, foresees the construction of two new deep-water berths able to accommodate vessels with capacities of 9,000 TEUs (twenty-foot equivalent units) and an annual throughput capacity of one million TEUs.

In 2014, Georgian ports' container handling increased by 18.5% y/y to 480,000 TEUs, with Poti accounting for 80% of the total. Estimates for 2015 are for over 8 million tons of cargo and 400,000 TEUs, with more than 1,300 vessel calls.