What endangers Georgia’s transit function? Is Georgia losing priorities of transitive country or not? Turnover in Georgian ports is almost at zero level

FROM THE REDACTION

According to the data published by the Association of Seaport Trading of Russia, in January-February the number of freight cargos at Russian seaports has reduced by 7.1% in comparison with the same period of previous year.

Overall volume of cargo made up 71.58 million tones in January-February. As the above-mentioned organization declares, the quantity of containers in Russian ports is decreased by 33.7%. This is a result of export volume decrease by 28.7%, import – 44.1% and transition – 56.3%.
The similar tendency is in Kazakhstan. According to the data published by Kazakh statistics department in comparison with the first quarter of 2008, overturn has decreased by 9.1% in January-March 2009. The number of airway transportations has decreased by 15% in first quarter of 2009.
Lithuania statistics department declares that retail trading and overturn rates in January-February of 2009 are reduced by 30% compared with same period of 2008. Oil products turnover is decreased by 19% and foodstuff turnover by 13.4%.
Statistics department of Holland has published country’s overturn data at www.cbs.nl. In 2008 turnover of Holland has increased by 4%, but in the forth quarter of 2008 this rate reduced by 1%. Besides, this is not an optimal rate for the country as its average annual turnover increase was 8% in recent years.
Statistical data indicating negative tendencies can be listed for many other countries. All these data indicates that business activities are lowered in whole world, thus overturn is decreased and this is not surprising in terms of global economic crisis that is raging at present.
Georgia is not an exception. According to Poti seaport corporation in October of 2008, Poti port fulfilled the overturn plan by 115% and processed 103300 tones more cargo than it was planned. Instead of planned 660 000 tones, corporation and operator companies have processed 763 300 tones of cargo in whole. Average monthly plan of overturn in 2008 was 700 000 tones. During the first three quarter, only third quarter was behind the schedule and the reason of this was air strike in August and its consequences. As a result, turnover of third quarter was 385000 tones less than planned. As regards turnover volume for 10 months in 2008, seaport processed 6795.0 million tones of cargo and this rate was 75000 tones more than expected. However, many carrier companies declare that turnover scales are significantly decreased in Georgia either. Our magazine spoke to representatives of several carrier companies, including world’s carrier giant company Maersk’s representatives. Before reviewing current situation in details, allow me to discuss global tendencies of last year published by Maersk head office.
Maersk 2008 report states that despite global financial crisis, year 2008 was profitable for the company almost in every field of its activities. The profit of the company in 2008 made up $3.5 billion. Maersk representatives were expecting more income, but they declare that in terms of global economic crisis these are not bad results at all. Assets of Maersk Group amounted $8.5 billion in 2008 and $7.3 billion in 2007. Main reason and defining factor for economic growth of Maersk was catastrophic increase of oil prices last summer. Maersk is holding own Maersk Oil line. The report states that Qatari project accomplishment was done without any interruptions in 2008. Qatari project is one of big investment projects in oil industry. It concerns Al Shaheen Field project.
However, at the end of 2008, Maersk faced some problems either. According to the data of 2009 year first months, the volume of cargo transported in containers reached its historically low margin and reduced by 20% compared with the data of January 2008. Maersk representatives do not make optimistic prognosis in this direction and reckon that shipping operations and container number will not be increased in 2009-2010 years. On contrary, rate reduction is expected. Another reason of these problems was that during the first two months of this year, oil prices were decreased by 55% on average in comparison with average price of 2008. During first three quarter of 2008, oil market situation advantageous for Maersk, especially in summer months, when the average oil price was $150. However, the situation changed other way round in fourth quarter as the oil prices are decreasing gradually. High oil prices were the main defining factor of Maersk optimal results. However, everything has its other side of the coin, world giant company can benefit from low oil prices either, as the company will have less oil expenses for the ships and thus transportation charges will be reduced consequently. Financial problems of one of the Danish big banks Danske Bank, which holds 20% shares of Maersk played major role in the company’s losses in 2009.
As we see, world-scale difficulties that the company is facing become obvious from the beginning of the year. We tried to find out what is going on in representative office of Maersk in Georgia and generally in this field in the country. However, unfortunately it was rather hard to get precise numbers and data.
We contacted representative offices of two major companies in Tbilisi – Maersk and Barwil Georgia. However, we could not receive precise and full information and answers from them. Maersk representatives noted in an interview that the volume of export-import in decreased on a word-scale and Georgia is no an exception. Though, the company’s representatives refused to provide concrete data and information about their containers and ships. They declared that this is confidential information.
Alltrans Georgia representative in Poti Tengiz Babilua speaks about general situation and challenges in this field:
“Shipping operations and turnover is significantly decreased and equals almost zero. There are several reasons of this. Banks stopped crediting and thus many importer companies that were importing various products by means of bank credits simply stopped functioning. This is not surprising if one takes into account current situation in banking sector. One of the main reasons of turnover reduction is that demand on any kind of goods and services is lowered. Demand is decreased on foodstuffs, articles of consumption etc; nothing to say about construction materials and similar products. This field is totally frozen in Georgia. Frequently, due to cargo unprofitableness, several carrier companies unite and load the containers in one ship, as only one Carrier Company cannot gather necessary volume of cargo. Many ships in our ports and in Istanbul are not working”.
As the head of Batumi port and oil terminal group Abaia Turikpenbaev declares in his interview with The Commercial, August war had negative influence on port business. Many clients are doubtful whether to transport their cargos through Georgia or not. “Fortunately we managed to recover confidence of our client at the end of 2008 – noted Abaia Turikpenbaev – we processes more than 7 million tones of crude oil and oil products. Due to financial crisis, Batumi Port incurred more losses rather than terminal and crisis is not the only reason of this. As the demand on many products is considerably reduced, the volume of dry goods is decreased in Batumi port either”.
The companies admit that shipping operations are significantly reduced and there are objective reasons for this as such August war and global financial crisis. However, “This doesn’t mean that we should be pessimistic and have no hope of the future. Moreover, taking into consideration the fact that our country has transitive function and cargo import/export is done not only for domestic consumer. Georgia plays significant role as a transitive country” – declares Manana Tchelidze, the head of German carrier company Willy Betz representative office in Georgia.
Data published by DHL are opposite. The company’s turnover has increased by 20% this year. DHL had no lack of orders even during August war. As the company’s representatives declare, the reason of this was management’s readiness for extraordinary situations. When there were no flights, the cargos were delivered by ships. DHL received order from oil company Shlumberge and it was delivering oil products by sea to Georgia and other countries. Shipping operations have become very important for DHL.
DHL operates in 220 countries over the world; approximate number of employed people in the company is 300 thousand. Together with international mail service, the company offers airway, inland and overseas transportation of the goods. Almost all of the mentioned services are available in Georgia. The company representatives declare that global financial crisis that is raging in the world will be more notable in 2009. Therefore overturn increase is not expected in the company. Moreover, 9-10% reduction is anticipated in 2009. At present the company is oriented on online sales and orders. It plans to become more active in this direction. The company’s management reckons that in terms of financial recession this will be more profitable.
That is how things stack up today at Georgian transportation market. The country’s transitive role is of strategic meaning. However, the business is at a deadlock and faces serious difficulties. Together with global financial crisis and export/import volume reduction, country’s unstable political situation is guilty of this. Instability and frequent political turbulence are main obstacles not only for transportation business, but also for many fields in Georgia.