Redevelopment of the obsolete Port of Poti, or building an unsuitable greenfield project on the north side of Poti Bay, will cause Georgia to fail in its desire to strengthen its economy and become an economic powerhouse in the Caucasus region, and dash hopes that Georgia can be the gateway for trade between Asia and Europe.
The Government of Georgia has recently been making assertions that it is more interested in the development of a Deep Sea Port at Poti instead of Anaklia, which it had originally selected following an exhaustive review, which included the analysis of expert independent consultants back in 2014. Most recently, APM Terminals (APMT), which operates the Port of Poti, announced that it had received a first-stage land use permit from the Ministry of Economy and Sustainable Development.
The Government’s interest in Poti is troubling, and suggests its motives go beyond simply desiring to strengthen Georgia’s economy and create jobs. Additionally, the Government’s actions are confusing. Just last May (2019) the Government issued the same first-stage land use permit to APMT, only to then revoke it. Furthermore, the Government has indicated an intention to issue a new tender for the Port of Anaklia. Investors and lenders are bound to be confused by the Government’s inconsistencies.
However, the pursuit of a port in Poti will end up a failure for the Georgian economy, for many reasons. The following analysis will remind the public of the reasons why a Deep Water Port is so important to Georgia and its economy, why the Port of Poti is not an acceptable solution, and why Anaklia remains the best location for a world-class deep water port that will enable Georgia to realize its ambition to be a leading regional economy.
WHY A DEEP SEA PORT?
The decision to develop Anaklia was taken in 2013 after the Government hired a consortium of Japanese consultants — PADECO and Orient Consultants — to compare and contrast the options in Georgia for a deep sea port. Anaklia was chosen because it held a number of advantages including the geo-technical conditions of the site, its financial feasibility and most importantly, the significant economic, social and geopolitical impact the project would have both on the Abkhazia region and the wider country.
The report submitted by the Japanese consultants explicitly defined the significant opportunities for the Georgian maritime sector in terms of the container traffic and essential need to build the new deep-sea port in Georgia to utilize these opportunities. In addition, the report has clearly outlined that the existing ports in Georgia (including Poti) are limited in their capacities and hinterland connections, and any expansion would have only short-term impact for the national maritime sector. The consultants advised the Government of Georgia to consider the development of the greenfield and large-scale deep sea port at Anaklia to ensure long term advantages for the country and phased capacity developments to serve Georgia’s needs in long-term perspective.
POTI IS NOT AN ADEQUATE SUBSTITUTE
The existing port in Poti has numerous disadvantages and is not suitable for expansion:
Choosing Poti will restrict Georgia’s future economic growth — Considering the current developments of the Georgian container market, which has been growing by over 37% per year, the latest proposed expansion of Poti to 1 million TEUs maximum capacity will be completely utilized by 2025, thus triggering the need to invest in another new port. The achievement of 1 million TEU, at Poti assumes that both Phases 1 and 2 will be built, though there is no guarantee at present that Phase 2 will be built since the Government has no legal mechanism (as Poti is a fully private port) to influence further expansion of Poti. Choosing Poti therefore ignores Georgia’s strategic aspiration to become a gateway and transit hub between Europe and Asia. (By contrast, the long-term development plan for Anaklia would allow for 100 million tons of annual capacity, including 6 million TEUs). In short, the Poti expansion project offered by APMT completely ignores the needs of Georgia to expand its capacities for container traffic as the key driver for the country’s foreign trade and transit capacity.
The Georgian Government will not receive the full economic benefit from Poti — Poti Port would not be competitive, and the Government will not realize the full benefit of revenues. Because it has a monopolistic position, APMT charges among the highest port fees in the Black Sea and wider region. Furthermore, Poti is privately owned and thus the only revenues the Government would enjoy would be taxes.
There are physical restraints on how development can proceed at Poti. The problem extends to the infrastructure as well. In short, the expansion of Poti relies on the existing road infrastructure which will naturally escalate already congested urban traffic and environmental problems in Poti City.
There are also serious and chronic operating issues with the existing port at Poti — Due to bad weather with closures happening approximately every third day, and a limit on depth due to the route of the Rioni River (which produces sediment that affects the port’s access channel) operating problems will persist at Poti, even if a northern breakwater is constructed.
Congestion will increase. The north territory of the Poti Bay, which is currently being promoted by APMT, is not the most feasible location for a deep-sea port on the Georgian seacoast and will escalate the congestion of the existing rail and road infrastructure.
ANAKLIA THE BEST SOLUTION
Anaklia is the only suitable location if Georgia is to realize its full potential as a transport hub and a transit corridor. The long-term commitments for the Anaklia Deep Sea Port project and constant upgrade of the port’s capacities is a sound signal to Georgia’s neighbours and partners, that the country is a reliable and committed partner for the development of international transportation corridors.
In comparison to the Poti project, ADC has been actively promoting the Anaklia Deep Water Port on an international level, building long-term partnerships and commitments with other regional infrastructure projects to attract to Georgia new cargo flows. Since signing the investment agreement in 2016, ADC has signed cooperation agreements with strategic peers along the Middle Corridor (ports in Azerbaijan, Kazakhstan and Turkmenistan), joined the Trans-Caspian International Transport Route to become a vital part of the cargo transit between Europe and China, collected commitments to attract about 3 million annually of new bulk cargo from Central Asia, and established cooperation with the Constanza port in Romania to secure the connectivity with the European Union as major trade partner.
Other advantages of the Anaklia Deepwater Port include:
Anaklia meets Georgia’s strategic aims — in comparison to any development by APMT at Poti, the Anaklia Port project within the Investment Agreement has a defined schedule for the expansion of the port’s capacities. The long-term master plan of Anaklia Port includes a balanced mix of infrastructure for different cargo types supporting national and regional economic needs. In addition, the government’s initial study conducted by the consultants found that the Anaklia location will have the highest economic impact in terms of regional development to alleviate the economic underdevelopment of the Western Georgia region. Furthermore, Anaklia has a lower resettlement impact for the local population, especially in the mid- and long-term, since the expansion covers mainly uninhabited area).
Anaklia will have much greater capacity — Anaklia is a long-term greenfield 52-year project with the ability to grow to 100 million tonnes. Poti, however, cannot offer the same future capacity because, there is physically no space for such a large port and no space behind the port at Poti to develop even a mid-sized special economic zone. A key advantage of Anaklia is that there is space to create a deep sea port, a special economic zone and even a city.
Anaklia Port will increase revenues for the Government — ADC has agreed a 2% annual royalty on top of the taxes it will need to pay. Over the duration of the concession, the royalties to be paid by ADC to the Government are estimated to be USD 500 million. In addition, ownership of the Port of Anaklia will transfer to the Government at the conclusion of the concession period, meaning even further direct revenue for the Government.
Anaklia will be a state-of-the-art port and new town –The plan for Anaklia is to create state-of-the-art infrastructure at the port. Furthermore, ADC agreed to build additional social infrastructure including a medical facility, a kindergarten, and sport and business amenities. This is part of the long-term vision for Anaklia to be a new regional business centre with large-scale logistics and industrial parks, a new City with a business and financial centre, education and healthcare facilities, plus sport and recreational infrastructure, all of which will create thousands of new jobs in Georgia.
Poti will not cease to exist when Anaklia is built — Many critics believe that building Anaklia will lead to the closure of the Poti and Batumi ports. This is incorrect. These ports will continue and the increase in overall traffic will be handled by Anaklia.