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Transit is gainful for Georgia but greed is a bad adviser31.07.2009 | 18:23
Container traffic to Georgia has been paralyzed for the whole week. On July 22 the government introduced new transit duties stipulating obligatory convoy of large-size cargo. The carriers were openly against it forcing the notorious regulation to be cancelled.
For the whole week large-size containers were stuck on Georgian roads halfway to Armenia, Azerbaijan and Central Asia due to the new regulation by the Tax department of the Finance Ministry.
As set forth therein 40 ft containers 4 and more meters high can't be transported without security convoy after being loaded on truck. Watchmen on the way from Poti to Batumi cost nearly USD 600.
In addition to that USD 900 must be paid for the transportation in Georgia as Georgy Tsipuria, President of Motor Carriers Association of Georgia told journalists adding that most forwarding companies including Maersk and Barwill had lodged a protest against the new rules.
Head of Caucasus Forwarding Company Gaga Gulashvili stated the carriers would soon start looking for alternative ways. "The biggest competitor of the port of Poti is the Iranian track. If we want to keep the balance in our favor, these standards won't help us to increase cargo turnover. There is no such a regime on the roads of Azerbaijan and Armenia, - the director of the logistic company said in his interview with Economic Palette newspaper.
According to Gulashvili if the tax is raised the carriage tariff will grow too causing all imported goods to be more expensive. Now there are over 50 motor carriers in Georgia accounting for 26 mln tons transported in 2008. 55% of this volume is transit cargo. If the transit fee is increased, small companies will go bankrupt and the big ones will raise prices.
Eventually the government surrendered. Georgy Tsipuria told Kommersant Radio that the Finance Ministry act was cancelled on the minister's order a week after coming into effect. But shipping taxes continue to be high in Georgia, an unnamed source from a shipping company told Business Georgia. "We ship cargo both from Asia and Europe. A container from China costs USD 700-800 and the same container from Poti to Tbilisi is USD 900 on average", - he says.
According to cargo owners they spend less in the port of Shanghai than in Poti. For instance, an average port fee in Georgia is GEL 200-220 and it's GEL 80-100 in other countries. Port costs in Singapore are GEL 95. Sea shipping has become considerably cheaper because of the crisis. And the transit prices in Georgia remain unchanged. Cargo owners suspect forwarding companies of price bulging.
Representatives of several international companies can offer explanations: tariff policy is determined in head offices, not in Georgia. It was stated in the Georgian office of GMA CGM container carrier that shipments from China were offered at a reduced price for one month only. Now a 20 ft container from Shanghai to Poti is USD 1100 on average. Then it's USD 750 to take the cargo from Poti to Tbilisi by truck plus USD 200 of the port fee which is comparable to the cost of shipping to China.
It is cheaper to transport cargo by railway. It will cost GEL 280 to cover the same distance to Tbilisi on a 20 ft container. But then again a truck is needed to get straight to the customer from the railway station. The Railway department states that since April 1 regional shipments have been offered at a 50% discount making freight trains strong competitors of trucks.
Introduction of the regulation on obligatory guard of truck freight could make container transit even less competitive. Most probably it was lobbied by the railway officials . Maybe they were just prudent enough to protect goods from assaults of local thieves, followers of American cowboys. Only this week an organized gang specializing in robbing freight trains was detained.
But it seems more likely that financiers imposed the new duties due to the problems with the country's budget recharge. Issuance of treasury bonds and the IMF loan have saved the adopted budget from deficit. However now the authorities are giving new promises to raise pensions and it needs extra expenses.
Georgia positions itself as a reliable transit carrier of gas, oil, freight in the world providing its territory at quite a high price. Armenia is particularly resentful at the cost of cargo traffic in Georgia. It has no access to sea and to friendly Russia. Neither has it direct communication with Azerbaijan because of Nagorny Karabakh, with Turkey - because of recognition of genocide of Armenians in the Ottoman Empire issue.
Taking advantage of the desperate situation Armenia is in Georgians charge it double comparing to the transit to Azerbaijan.
As officially Erevan and Tbilisi are on friendly terms Armenians regularly raise the issue of transit tariffs at summit talks. In June Armenian FM Edward Nalbadyan complained about high prices on his visit to Georgia stating that freight carriage from any country to Poti is cheaper than from Poti to Erevan.