International Logistics Centres for Western NIS and the Caucasus

Georgia: Areas in the vicinity of Tbilisi airport

Ministry of Economy and Sustainable Development of Georgia

Transport Policy Department20.05.2011

Georgia, Tbilisi

For the implementation of the project Tbilisi Aircraft Manufacturing (TAM) site + Veli Terminal were proposed near Tbilisi City

Tbilisi City Advantages: Major logistic hub in the region Important node on TRACECA Strategic location between Black and Caspian sea ports

(Kulevi, Poti, Supsa, Batumi and Baku) Main industrial and commercial centre in the state and

region

International Logistics Centre (ILC)in Georgia

The establishment of an international logistics centre integrated into an international network along the TRACECA corridor enables the further strengthening of the regional logistics sector and intermodal transport.

Located in the eastern outskirts of Tbilisi metropolitan area, the ILC will gain adequate access to the existing railway line and to the major road network, including the road links to the Black Sea ports and Turkey, Azerbaijan and Armenia.

The future ILC at TAM-Logistics City Tbilisi (LCT)/Veli Terminal, with its logistics facilities and services, will mainly support the local industrial, agricultural and aviation sector as well as further options for cross-border intermodal transport.

In addition it will form a basis and nucleus for more efficient and competitive cargo export and regional cargo import distribution in Tbilisi catchment area

ILC Advantages

Trends Impacts Logistics Potential

• Global • Intercontinental trade • Increasing product complexity • Need for cooperation and integration • Consistent trend towards direct sale

• Enhancement and expansion of transport infrastructure

• Development of regional industrial and logistics nucleus

• Focus on supra-regional markets

• New production structures and supply chains

• Foreign investment and cooperative structures

• Qualifications requirements

• Shortened market supply times

• Demand for modern and efficient logistics solutions and facilities

• Implementation of new delivery chains for import and export trade incl. distribution

• Demand of logistics services for distribution of local agricultural products

• Supply chain management of intermodal border crossing freight transport

• Increased demand for qualified logistics staff

• European • TRACECA corridor strengthening and networking

• Liberalization of competition • Promotion of intermodality

• Regional • Strengthening of the local economy • Creating of new business opportunities • Enterprise mobility • Development of training capabilities

Logistics Trends and Impacts

Very good conditions and development potential for the future establishment of an International Logistics Centre (ILC);

TAM-LCT has a direct connection to the road Tbilisi-Rustavi (the largest industrial city in the Tbilisi region);

In addition, the TAM land plot and the envisaged cooperation with Veli Railway Container Terminal offer an option for the ILC to provide trimodal transport access, as well as potential benefits from synergy effects;

There are about 63 ha of land available for the development of an ILC;

additional expansion areas available for further logistics operations;

TAM-Logistics City Tbilisi (LCT)/ Veli Terminal Land Plot

Following three main functional areas for logistics centre have been defined:

Logistics Services (land allocation: about 55%);

Container Terminal (land allocation: about 30%);

Logistics-Intensive Industries and Trade (land allocation: about 15%);

Functional Areas

3km – Tbilisi City Airport

15km -Tbilisi City Centre

300km – Poti Port

500km – Alyat Port

300km – Yerevan

Access to Urban, Regional and International Transport Network

Road transport infrastructure: Good connection to the urban, regional and supra-regional road network. Proper accessibility of all plot of lands with truck and passenger car. Favourable traffic management and minimization of crossings. Securing of flowing traffic by appropriate standard cross-sections. Consideration of stationary traffic.

Railway transport infrastructure: Good access possibilities to the long-distance traffic nodes and rail freight stations. Efficient operation of trains, train units and railway cars without expensive shunting procedures. Reduction and/or avoidance of crossing road and railway transport infrastructure. Sufficient provision of properties with track connection.

Description of Internal Transport Infrastructure

General Alignment of the Functional Areas TAM/Veli

Public Sector Stakeholders:Georgian Railway The State Customs Department The Ministry of Economy and Sustainable Development of Georgia The Ministry of Defence of Georgia The Ministry of Regional Development and Infrastructure of Georgia Tbilisi City Hall

Private Sector Stakeholders:Logistics service providers Industrial and commercial companies

Stakeholders

The ILC will comprise the following functional areas:

Container terminal, with direct road and rail access. Container depot. Container service centre. ILC service centre. Logistics service facilities. TIR parking. Logistics intensive industries and trade. An area for future expansion.

Project Identification

Performance Indicators Social Discount Rate (SDR) Note

5.5% 10% 12% NA a

EIRR Economic Internal Rate of Return %pa 17% b

MIRR Modified Internal Rate of Return %pa 8% 11% 13% c

NPV Net Present Value EUR M 42 18 11 d

Switching values: e

Costs could change by % 88% 44% 29%

Benefits could change by % -47% -31% -23%

Performance Indicators

The first estimation of required total investment needs (CAPEX) and for each of the three envisaged stages of ILC development has been calculated as follows:

Total of Development Stages 1-3: € 41.3 million thereof

Sum of Development Stage 1: € 31.7 million Sum of Development Stage 2: € 7.7 million Sum of Development Stage 3: € 1.9 million

Investment Needs

Thank you for your attention