for Western NIS and the Caucasus

Transcription

1 EuropeAid/126356/C/SER/Multi International Logistics Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova and Ukraine Inception Report April 2009 This project is funded by the European Union A project implemented by Dornier Consulting GmbH / NTU / Inros Lackner AG 1

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4 Name Address Local operator Ministry of Transport and National Secretariat of IGC TRACECA in Azerbaijan 8/2, Aliyarbekov str. Baku, AZ 1005 Azerbaijan Tel. number Fax number Contact Person Signature Mr Akif Mustafayev Local operator Name Address Ministry of Economic Development of Georgia 12, Chanturia str. Tbilisi, 0108 Georgia Tel. number Fax number Contact Person Mr Mamuka Vatsadze Signature Local Operator Name Address Ministry of Transport and Communication of Ukraine 14, Peremogy av. Kyiv, Ukraine Tel. number Fax number Contact Person Mr Hrigoryi Legenkyi Signature Page 2 of 42 Inception Report

5 Local Operator Name Address Ministry of Transport and Road Industry of the Republic of Moldova 12a, Bucuriei str., of.401 Chisinau, MD-2004 Republic of Moldova Tel. number Fax number Contact Person Mr Eduard Biriucov Signature Date of report: April 2009 Reporting period: 26 January April 2009 Author of report: Consortium of Dornier Consulting / NTU / Intros Lackner EuropeAid Project Manager Mrs Barbara Bernardi [name] [signature] [date] EC M & E team Mr Tornike Gotsiridze [name] [signature] [date] EC Delegation in Azerbaijan Mr Alan Waddams [name] [signature] [date] EC Delegation in Armenia Mr Jean-Francois Moret [name] [signature] [date] EC Delegation in Georgia Mr Micha Nekvasil [name] [signature] [date] EC Delegation in Moldova Mr Alexandru Albu [name] [signature] [date] EC Delegation in Ukraine Mrs Jurate Yuodsnukyte [name] [signature] [date] Inception Report Page 3 of 42

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7 TABLE OF CONTENTS PROJECT SYNOPSIS ANALYSIS OF THE PROJECT START SITUATION RELEVANT PROJECT CONTEXT MAIN PROBLEMS AND DEFICIENCIES SITUATION WITH THE LOCAL COUNTERPARTS TARGET GROUPS PROJECT PARTNERS INCEPTION PHASE / PROJECT MOBILISATION PROJECT PLANNING INTRODUCTION RELATIONS AND CO-ORDINATION WITH OTHER PROJECTS PROJECT OBJECTIVES PROJECT APPROACH RISKS AND ASSUMPTIONS Risks Assumptions PROJECT PLANNING FOR NEXT REPORTING PERIOD LIST OF FIGURES Figure 1: Project organisation chart LIST OF TABLES Table 1: Contact Details of the Core Project Team Table 2: Overall Plan of Operations Table 3: Overall Output Performance Plan Table 4: Plan of Operations for the Next Period (Work Programme) Inception Report Page 5 of 42

8 LIST OF ABBREVIATIONS ADB Asian Development Bank CIS Commonwealth of Independent States (former republic of the USSR) also called NIS EU European Union EBRD European Bank for Reconstruction and Development EC European Commission EIB European Investment Bank EU European Union IFI International Financing Instruction IGC Intergovernment Commission TRACECA ILC International Logistics Centre LC Logistic Certre LFM Logframe Matrix MCA Multi-Criteria Analysis (also known as Multi Variate Analysis, MVA) MoS Motoways of the Sea NIS Newly Independent States, also called CIS PS Permanent Secretariat TEN-T Trans-European Transport Network ToR/TOR Terms of Reference (of the present project, unless strated otherwise) TRACECA Transport Corridor Europe Caucasus Asia UNDP United Nations Development Program Page 6 of 42 Inception Report

9 PROJECT SYNOPSIS Overall Objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. Specific Project Objectives: PI Project inception A Logistics network and related infrastructures analysis B Identification, ranking and promotion of logistics centres projects C Preparation of the feasibility studies for the selected projects PM Project management Outputs: A - Logistics network and related infrastructures analysis 1. Report on actual logistics related freight flows and compilation of maps 2. Eight country reports on infrastructure conditions at main TRACECA transport links and nodes 3. Assessment of locations in five direct beneficiary countries for future international logistics centre (ILC) projects at macro level 4. Description of main issues of transport operators (initial stakeholder analysis) in eight countries B - Identification, ranking and promotion of logistics centres projects 1. Final stakeholder analysis and prioritised action programme 2. Final list of the priority projects using MCA for five beneficiary countries 3. Recommendations on financing schemes for beneficiary countries 4. Study tour to LCs in Europe and study tour documentation C - Preparation of the feasibility studies for the selected projects 1. Implementation programme favourable to investments in five direct beneficiary countries 2. Communication plan including promotion and dissemination aspects For each selected project: 3. Pre-feasibility/feasibility study including: assumptions on public support and investment promotion, capacity and institutional strategy action plan, administrative support and staff qualification assessment, services to be rendered, business plans and cost-benefit analysis and environmental impact assessment where relevant. 4. Masterplan (preliminary design) covering functional area allocation schemes, layput for modern infrastructure and cargo handling facilities, description of adequate information system. Activities: PI Project Inception Inception Report Page 7 of 42

10 Tasks PI: Project mobilisation and set up, coordination with the Client, beneficiaries, stakeholders and counterparts A - Logistics network and related infrastructures analysis Task A1: Traffic flow and operating infrastructures analysis Task A2: Description of the main issues of operators B - Identification, ranking and promotion of logistics centres projects Task B1 - Assistance in identifying and characterising priority projects of logistics centres Task B2 - Ranking the priority projects using multicriteria analysis Task B3 - Visit to the relevant logistics centres C - Preparation of the feasibility studies for the selected projects Task C1: Global description of the objectives and functions of the logistics centre Task C2: Identification of the major stakeholders Task C3: Possible site location Task C4: Preliminary design of the site Task C5: Preliminary design of the logistics (functional) areas Task C6: Business Plan for the site Task C7: Environmental impact assessment Task C9: Cost benefit analysis TaskC10: Recommendations for the adapted public support TaskC11: Communication and synergy within the networks of LC along TRACECA PM Project management Task PM1: Quality assurance, risk management and conflict resolution Task PM2: Updates of the Logframe Task PM3: Project planning Task PM4: Project reporting Target Groups: Ports, rail, road and airport operators, freight forwarders, logistics and transport companies, real estate companies, shippers and consignees etc. Beneficiaries: Ministries of Transport of TRACECA member-states, PS IGC TRACECA Inputs: Technical Assistance will include: Long-Term Key Experts: Team Leader: 450 MD / Senior Experts: 800 MD Short-Term Experts: Senior Experts: 1425 MD / Junior Experts: 1890 MD Regional project office in Kiev Communication and visibility actions Project starting date: 26 January 2009 Page 8 of 42 Inception Report

11 1 ANALYSIS OF THE PROJECT 1.1 Start Situation The project was commenced on 26 January 2009, after the contract was signed and a briefing meeting in Brussels on 16 January 2009 took place. The briefing meeting was attended by the EC Task Manager and the Head of the Transport Sector, the EC Consultant represented by Consortium management and the Team Leader. In this meeting the general objectives of the project and activities for the next weeks were discussed. It was emphasised that the present project was intended to enhance the efficiency of the transport industry, quality transport and logistics related value added services. In the TRACECA environment, logistics has not yet been well studied. The present assignment is to initiate a new pattern of discussions in terms of policies, partnerships, shaping the industry to respond to transport demand, areas of assistance to stakeholders, and investments. It was pointed out that the overall approach starts from a country-wise analysis to achieve benefits in the TRACECA region. The project will propose pragmatic infrastructure projects of international logistics centres as priority projects to improve the TRACECA network operations. The Team Leader will report on all project activities on a monthly basis to the Project Manager in the Europe Aid Co-operation Office. The expert team will report to the Team Leader. The mobilization started with the arrival of the Team Leader in Kiev on 26 January 2009, followed by the arrival of Key Expert II and Key Expert III. The complete core team was mobilised by 9 February After completion of a selection procedure, the office in Kiev was rented in February 2009 and was fully operational on 6 March The office premises in Kiev have been rented in line with the ToR on an average level of rent. Fees and rent were approved by the Task Manager. The local staff was recruited following PRAG procedure and in full compliance with the local regulations. The complete contact details were communicated to the Client, beneficiaries, stakeholders, partners and counterparts defined on 19 March The office is located at the following address: 8, Lysenko Street, office 39, Kiev 01034, Ukraine. The general contacts are as follows: Tel/Fax: , info@ilctraceca.org.ua Inception Report Page 9 of 42

12 The contacts of the permanent project team in Kiev are as follows: Table 1: Contact Details of the Core Project Team Position Name Team Leader: Andreas Schoen / Key Expert II Hannes Rueger hannes.rueger@dornier-consulting.com Key Expert III John Standingford Regional Project Olena Nevmerzhytska Coordinator Office Manager / Inna Pokydko Inna.pokydko@ilctraceca.org.ua Project Assistant Project Translator Yulia Akhtonskaya Yulia.Akhtonskaya@ilctraceca.org.ua Below is the project organization chart: Figure 1: Project organisation chart 1.2 Relevant Project Context The project started in a time of change. Positive economic growth rates over the last eight years are being replaced by negative forecasts for this and an uncertain number of coming years. The international financial markets will never be the same again. Economic ties are weakening with a sharp decline in international transport, trade and cross-border investment. On this background, facilitation of trade and transport in the region and the improved integration of the Caucasus & Black Sea region countries in the world's economy is even more necessary than before. Cost effective multi-modal transportation of non-oil cargo from Asia via the Caucasus to Europe will be an important factor for future recovery. The recognition of priority links (rail, road, sea) and strategic intermodal logistic nodes, organised as a consistent network, will serve as an important precondition for the optimisation of cargo flows. Page 10 of 42 Inception Report

13 In the TRACECA Long-Term Strategy up to 2010, an emphasis is given to ensuring the smooth and uninterrupted flow of freight in the region, across the different modes of transport and across the different countries. This project will tackle in particular the lack of modem logistic centres/nodes and common legal ground for its integration and development, since technological ties between these centres directly affect the development of trade and international transport (import, export and transit) in the Caucasus and Black Sea region countries. According to the ToR, the project assignment is divided into three sequential parts that at the same time correspond to the main result areas: A Logistics network and related infrastructures analysis B Identification, ranking and promotion of logistics centre projects C Preparation of the feasibility studies for the selected projects The project beneficiary countries are split into direct beneficiaries eligible to receive technical assistance under EC European Neighbourhood Policy Budgets Armenia, Azerbaijan, Georgia, Ukraine and Moldova; and indirect beneficiary countries Bulgaria, Romania and Turkey, which are either EC or EC accession countries. The countries comprise a variety of political, economic, social, cultural and technological backgrounds. The awareness of logistics and basic understanding of logistics centres vary significantly across the countries. The levels of sophistication of logistics operations are also different, and sometimes not comparable. However, a common initiative for establishment of a network of logistics centres in the Western CIS is only addressed by the current assignment. On a country level mainly scattered initiatives are currently under way. Those are described in greater detail in dedicated country reports. The implementation approach is based on defined work packages, tasks and implementation phases. For each defined project result area a work package was designed. Each work package includes a number of related tasks (A1-A2, B1-B3 and C1-C11). The Consultant also proposed to introduce the Inception Phase and a modern project management component considering the complexity and rather tight schedule of the project. 1.3 Main problems and deficiencies Several areas of deficiency were identified at the beginning of project implementation. These comprise: the current economic crisis and its likely impact on market conditions and willingness to invest in infrastructure; availability of recent and coherent traffic data; and concerns that indirect beneficiary countries are very willing to participate in the projects. The project was commenced and will be implemented under the conditions of the world economic recession. The willingness to invest in infrastructure by private investors and international financing institutions has decreased. Private investors have generally put their investment projects on hold waiting for better market conditions. The international financing institutions have scaled back their investment plans. Even though the topic of international logistics centres is rather interesting, a downward trend in willingness to invest has been confirmed during the investigatory missions in the region and in talks with global players in Europe. In addition to that, statistics from the last quarter of 2008 showed freight flows had dropped across the TRACECA countries. Figures from 20% to 80% have been reported during the initial field missions to the region. This makes traffic forecasting unusually challenging, since the recovery period from the financial crisis is unclear. Inception Report Page 11 of 42

14 This has a direct consequence on implementation of the project, since realistic and viable projects are to be identified under conditions of limited investment possibilities and uncertain trend in traffic flow development The Consultant will strive to pursue a realistic approach and will work on bringing the interests of various stakeholders together for implementation of viable projects. However, the business and financial plans will be adapted to the crisis conditions and the scenarios will be analysed to propose the most economically feasible solutions, with a focus on regional development and coherence of TRACECA routes. The financial estimates and investment recovery rates are to be determined on a case-by-case basis, assuming successful crisis mitigation measures are in place and incentives to invest exist. In this regard, the promotion of land acquisition by public authorities and preparation of the areas for future private logistics operators will become crucial. The other important issue is availability of traffic and logistics related data. Currently the EUfunded project on transport dialogue and traffic forecasting is working on further development of the TRACECA database and creation of the traffic model for TRACECA. Close cooperation with this project has been established from the very beginning of the present assignment. An exchange of data has been initiated. However, availability of data, as well as their quality and consistency, varies significantly across the countries. The most standard data deficiency across the region is unavailability of recent data on imports and exports by commodity groups; also the data on export and import traffic routing are scattered or inconsistent. For preliminary comprehensive analysis at the macro level the data are generally sufficient; however for micro-level analysis more investigation is needed. The Consultant expects that once the micro-level analysis for proposed sites starts the stakeholders will cooperate on data provision more closely. In addition, by that time the traffic flows project will complete its assignment and a reasonable update will be available. At the meeting to present infrastructure projects in Bucharest in February 2009, the Consultant was advised that a new TRACECA corridor project map has been issued, including additions that the countries have made in their respective territories. This was done in December 2008 at the IGC Meeting of TRACECA. Since the ToR for the present assignment were based on the prior TRACECA network, the planning of missions and associated analysis had to be adjusted already in the Inception Phase and for Phase A. The deployment of resources was carefully planned and re-scheduled accordingly to allow enough man-day resources to be available for the next phases of the project. The situation with indirect beneficiary countries is also unclear in terms of counterparts expectations. Following the ToR, the approach to Bulgaria and Romania differs from the approach assigned to Turkey. For instance, the Consultant has to pay special attention to inform the Bulgarian and Romanian authorities on different steps of the project and to include their countries key logistics centres in the network of reference centres. The Consultant was officially requested to seek for the Client s approval to pay special attention to providing information on the different steps of the project for authorities in Turkey. The Consultant has followed this approach and extended the attention to indirect beneficiary countries with respect to implementation of the infrastructure network analysis and traffic flow research. The transport systems of the indirect beneficiary countries are linked to the CIS part of TRACECA and should be cross-referenced in logistics terms. The requests of indirect beneficiary countries were discussed in Brussels and solutions are to be elaborated. In general, the Consultant has explained to the stakeholders in indirect beneficiary countries that in the long-term they can expect levels of service comparable to Page 12 of 42 Inception Report

15 European standards from the network of logistics centres on the TRACECA route once the projects are implemented. The recommendations on potential for improvement identified in the missions to these countries have been also pointed out in the Consultant s technical reports. These aspects will be followed-up in close coordination with the EC AIDCO Task Manager. 1.4 Situation with the Local Counterparts The local counterparts for these projects are the National Secretary and TRACECA structures in each direct and indirect beneficiary country. The Consultant perceives the local counterparts as its main agents and partners to promote the tasks and activities of the Project in particular and TRACECA in general. All local counterparts were duly informed on project commencement. The relevant project introductory presentations were provided. A basis for regular cooperation basis was established. The Consultant will report directly to the counterparts on all aspects of the project implementation. The National Secretaries have provided extensive support in data collection and facilitated the organization of the meetings. The main project outputs and action programme were also discuss with them during the meetings and follow up was organised. 1.5 Target Groups Target groups refer to project beneficiaries who are major stakeholders of the logistics process. A stakeholder is any group that can be affected, or is affected, by any initiative undertaken by the project. Under the present assignment it is justifiable to determine the target groups as the participants involved in the logistics chain and/or the establishment of logistics facilities. On the financing level, the investors and IFIs involved in the process are important project target groups. The business community in the region and interested parties in Europe (industrial circles, consignors and consignees, freight forwarders, trucking companies, shipping lines, operators of transport infrastructure, transport companies, logistics service providers) are also referred to the target groups. The customs authorities, municipalities and chambers of commerce are also referred to as beneficiaries of the present assignment. The representatives of target groups were interviewed in the Inception Phase of the project during the field missions of the Key Experts and short-term expert teams. 1.6 Project Partners The project partners are the donor community, logistics platforms, promoters of similar initiatives in the regions, as well as other EU projects. Close cooperation has been established with Europlatforms, German Association of Freight Villages, and the Logistics Platform in Ukraine. Cooperation has also been established with relevant EU financed projects at regional and national level.they include: Traffic flows and Transport Dialogue project Motorways of the Black and Caspian Sea Development of the Logistical Centres Network in Central Asia Integration of the Transport System of Ukraine into the TEN-T network Ukrainian ports feasibility study Border crossings and transit corridors in Ukraine and Belorussia The cooperation with Europlatforms and German Association of Logistics Villages will be used in preparation of the study tour. Inception Report Page 13 of 42

16 1.7 Inception Phase / Project Mobilisation In accordance with the Time Schedule of Activities for project implementation and the project s ToR, and following the organisation and methodology outlined in the technical proposal, the Consultant carried out the following activities and actions. During the Inception Phase the project approach has been elaborated in greater details and fine-tuned following situation with local counter parts. The project consists of three consequent phases or work packages A Logistics network and related infrastructures analysis B Identification, ranking and promotion of logistics centres projects C Preparation of the feasibility studies for the selected projects The Consultant introduced a project mobilization and project work inception phase. The Inception Phase corresponds to the implementation phase of A, and preparation of the background for the Phase B. Some tasks which were included under the work package C have been also initially been addressed in the inception phase. The Consultant also introduced an overarching project management component. PI Project Inception The main tasks within this work package are project mobilisation and set up, and establishment of coordination with the Client, beneficiaries, stakeholders and counterparts. Team Leader (Andreas Schoen) and Key Experts (Hannes Rueger and John Standingford) were mobilised after commencement of the project. The Regional Coordinator (Olena Nevmerzhytska) was appointed after approval of the EC Task Manager. The Office Manager (Inna Pokydko) was contracted after approval of the EC Programme Manager. The project team has also employed a permanent translator (Yulia Akhtonskaya). The basic team of senior and junior short-term experts in the region was approved and contracted. Further approvals are envisaged for data verification processes and for specific tasks within Phases B and C. The expert teams started field missions in the region after approval of the EC Programme Manager. Premises for the project office in Kiev were rented; the office was fully operational by 06 March within the approved budget. The project registration process was initiated with state authorities of Ukraine and completed by 17 April by the Ukrainian officials. Regular contacts and coordination are taking place with the Client. Ralf Behrens (Project Director), Andreas Schoen (Team Leader) and Yulia Usatova (Senior Expert) took part in the Bucharest TRACECA infrastructure working group meeting on February The project was presented to the TRACECA member states, EU representatives and other EC projects. Contacts to all stakeholders were established and preparations for the presentation of priority project were started. The Team Leader has paid introductory visits to counterparts in all direct and indirect beneficiary countries. Kick-off meetings were organised introducing and discussing the project Field missions of the technical expert teams took place in all beneficiary countries. The meetings of the project team are listed in Annex 2. Page 14 of 42 Inception Report

17 The database specialist (Carsten Schuerman) took part in the data collection coordination meeting in Brussels with representatives of the EC and the Traffic Flow project in January Additionally several meetings about future co-operation were conducted with the Traffic Flow project, the Black Sea and Caspian Motorways of the Sea project, contacts were established with the International Logistical Centres Network in Central Asia project, the TRACECA Land Transport Safety & Security Project, and the TRACECA Developing of the Transport Sector Training Capacity project, and national projects in Ukraine (TEN-T, Ukrainian Ports, Border Crossings, Harmonisation of Transport Legislation). Performance indicators for the project inception phase: Project office established, project mobilised, kick-off meetings organised and coordination established are completely fulfilled. A Logistics network and related infrastructures analysis This should result in the following outputs: 1. Report on actual logistics related freight flows and compilation of maps (Annex 3, Part 1) 2. Eight country reports on infrastructure conditions at main TRACECA transport links and nodes (Annex 3, Part 2) 3. Assessment of locations in five direct beneficiary for future international logistics centre (ILC) projects at macro level (Annex 3, Part 2) 4. Description of main issues of transport operators (initial stakeholder analysis) in eight countries (Annex 4) These reports are included to the present Inception Report as corresponding annexes. This project component includes the following tasks: A1 Traffic flow analysis and characterization of the nature and condition of the operating infrastructures and facilities within the network To approach this task the project team was split into country teams to carry out the field missions with an objective to collect the information needed to complete tasks A1 and A2. The missions to all direct and indirect beneficiary countries took place and the stakeholders were interviewed. The project team developed structured interview guidelines to assure the consistency of the results obtained and comparable level of information for presentation in the reports. In parallel, desk research was implemented. Data collection was organized using TRACECA internal and external sources. The Consultant has analysed merchandise flows, estimated their specific logistics management, and determined traffic flows, flows and routes of container goods and promising locations for logistics centres. The analysis was based on the data that was possible to obtain within the 3 months of the inception period only, but this amount was sufficient for expert estimation and presentation of the required results. The findings on the traffic flows are summarized in Annex 3, Part 1, supported by extensive GIS map material. The analysis of infrastructure and nodes relevant to the project, as well as surveys of the facilities, equipment and technology in use at those nodes, has been implemented. The field missions have identified and described the main existing and missing transport links and performed surveys of the current situation regarding the logistics sector and international Inception Report Page 15 of 42

18 transport corridors. The findings are summarized in country-by-country reports for all direct and indirect beneficiary countries in Annex 3, Part 2. Derived from the findings of the traffic flows and country reports, and in full compliance with the pre-requisites of an international logistics centre, the consultant has performed an assessment of locations indicated in the TOR and determined if they are suitable to accommodate an international logistics centre. The evaluation was performed using a multicriteria analysis on the macro level. The most promising locations will be further investigated in Phase B at the specific site level. The methodology and results of this evaluation is presented in Annex 3, Part 2. With delivery of The regional report on actual logistics related freight flows and compilation of maps (Annex 3, Part 1) Eight country reports on infrastructure conditions at main TRACECA transport links and nodes (Annex 3, Part 2) Assessment of locations in five direct beneficiary for future international logistics centre (ILC) projects at macro level (Annex 3, Part 2) preliminary list of suitable locations for logistics centres The performance indicators for the A1 are completely fulfilled. A2 Description of main issues encountered by the operators The scope of the tasks derives from the activities undertaken for Task A1. The Consultant has summarised the issues raised by the transport operators in interviews. The issues comprise a mix of infrastructure bottlenecks and soft constraints. The findings are presented for the region as a whole and on a country-by-country basis. Relevant recommendations are provided. These recommendations will be taken into account in development of a future country-by-country implementation programme (C6) to be developed in Phase C. The Consultant has also studied the recommendations of the completed EC projects related to logistics performance. The initiatives of international organizations mainly of the EBRD, World Bank, UNDP and ADB on regional transit and trade facilitation were also considered. Training suggested by the ToR will be included into a stakeholder seminar on multicriteria analysis and into the study tour to Europe, once the action programme becomes more precise. The findings in respect to the issues encountered by operators are presented in the Annex 4. The delivery of a report describing the main issues of transport operators (initial stakeholder analysis) in eight countries and an initial action programme (Annex 4) constitute the fulfilment of the performance indicator for A2. B Identification, ranking and promotion of logistics centres projects Only preparatory work has been done at this stage, since the implementation of the Phase B is supposed to start in the progress reporting period I, and main outputs will be finished in six months of the project implementation. This work package includes the following tasks: B1 Identification and characterising of priority projects of logistics centres On the initial level the macro locations for the logistics centres were identified and ranked using MCA at the macro level. B2 Ranking the existing projects using the multicriteria analysis Page 16 of 42 Inception Report

19 The macro criteria used in Phase A were selected to allow pragmatic determination of concrete sites. B3 Organisation of the visit to the relevant logistics centres Some preparatory activities have started. Several global logistics companies were approached to investigate their interest in presenting concepts at such a study tour. Further work will be done during Phase B. C Preparation of the feasibility studies for the selected projects This phase is a conclusive phase of the project, but it contains some tasks that have to start already in the inception period. The work package C includes the following tasks: C1 Global descriptions of the objectives and functions of the logistics centre C2 Identification of major stakeholders C3 Possible site location C4 Preliminary design of the site C5 Preliminary design of the logistics areas C6 Business plan for the site C7 Environmental impact assessment C8 Assessment for key qualification required C9 Cost benefit analysis C10 Recommendations for adapted public support C11- Communication and the synergies within the networks of the logistical centres. Out of all these tasks only Task C11 has started already in the inception phase. The cooperation with the team leader of the parallel project has been established The communication and exchange of information with the most advanced regional and national projects has also started and will be pursued. The close liaison with the International Financing Institutions has started; regular information exchange is foreseen. The basis for the communication plan has been prepared and is included into the chapter 2.2 below. PM Project management The Project management component was proposed by the Consultant given the complexity of the project and necessity to coordinate the multifunctional teams. This work package is implemented, will prevail during the whole project and includes the following tasks. PM1: Quality assurance, risk management and conflict resolution PM2: Updates of the Logframe The Logframe was updated on the basis of the information received during the inception phase. PM3: Project planning The planning results are presented in the tables of the current report. PM4: Project reporting Inception Report Page 17 of 42

20 Project reporting has been done on a monthly basis. The Inception Report is prepared upon completion of the Phase A after 3 months of project implementation. 2 PROJECT PLANNING 2.1 Introduction The consultant developed a logframe which was attached to his technical offer. The objectives, tasks and activities of the terms of reference were translated into this logical frame. It is the intention of the Consultant to work on the basis of an updated logframe matrix (LFM) (Annex 1). The developed time schedule to this logframe is still valid in general. The deviation in timing for organization of the stakeholder seminar and the study tour will be necessary. The study tour will be shifted to September 2009, due to the holiday season. The exact date for the stakeholder seminar proposed on the initiative of the Consultant will be scheduled together with the EC task manager during the implementation of Phase B. 2.2 Relations and Co-ordination with Other Projects Cooperation has been established with all partner projects. The meetings held with other projects are included into the list of meetings presented in Annex 2. The preparation of the project webpage has been initiated. The technical functionality features and user requirements have been drafted. The design features in accordance to visibility guidelines will be determined. The design and budget will be submitted to the task manager for prior approval. Other visibility actions (leaflets, press conferences, banners) will be coordinated with the EU Task Manager for specific occasions. Target group/ Project partner Project Logistical Centres in Central Asia Activity Phase A: Establishment of contact Exchange of general information on evaluation of sites on macro-level Phase B: Coordination of MCA and criteria for the development of logistics centres, exchange of material of the MCA seminar and study tour Exchange of information on traffic flows and main problems encountered by stakeholders, especially concerning the routes over the Caspian sea, Exchange of information about the approved sites for logistics centres Exchange of links on the webpage Phase C: Coordination of technological schemes, safety standards, documentation and IT solutions proposed for the logistics centres Coordination of handling equipment proposed for the logistics centres according to the structure and volumes of goods handled Schedule Constant contact at Team leader and key expert level, Regular meetings of Team leaders within the TRACECA schedule Page 18 of 42 Inception Report

21 Target group/ Project partner Motorways of the Black and Caspian Sea Other TRACECA and national projects IFI and donor community TRACECA community Activity Phase A: Establishment of contact Exchange of information on experts findings in ports and traffic flows Phase B: Inclusion of findings on the MoS project into the MCA of port-related logistics centres in Azerbaijan, Ukraine and Georgia. Exchange of information on traffic flows and main problems encountered by stakeholders Exchange of links on the webpage Phase C: Exchange of information concerning projects proposed in TRACECA ports Inclusion of forecasted MoS traffic into the master- and business planning for approved sites Coordination of technological schemes, safety standards, documentation and IT solutions proposed for the logistics centres Throughout the project: Exchange of information concerning specific findings and topics (training, road safety, integration of Ukraine transport systems into the TEN for Transport, border crossings, etc.) Phase A: Establishment of contact in all countries Presentation of the project Phase B: Information about selected macro-locations Evaluation of IFI national strategies for the beneficiary countries for MCA. Discussion of availability of financing programmes for ILC projects Phase C: Presentation of approved locations to the IFI in beneficiary countries Initiation of discussion of beneficiaries with the IFI concerning the proposed projects Integration of IFI financing into the financial plans, where applicable Newsletters about the project will be published on the website and transmitted to the TRACECA Permanent Secretariat. Schedule Constant contact at Team leader and key expert level, Monthly meetings of Team leaders and/or Key experts in Kiev Regular contact of Team leaders and key experts Regular meetings with EBRD, World Bank, EIB and ADB in beneficiary countries Quarterly May 09, Sep 09, Jan 10, May 10, Sep 10, Jan.11 Inception Report Page 19 of 42

22 2.3 Project Objectives The terms of reference identify quite clearly the project objectives and three major phases of implementation, which correspond with the consultant s perception. In addition, the Consultant has identified indicators in order to have a measure for project achievements and success. The overall objective of the project is to support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. Project Objectives include: A Logistics network and related infrastructures analysis B Identification, ranking and promotion of logistics centres projects C Preparation of the feasibility studies and business plans for the selected projects However, as mentioned in section 1 of this report situation at the project start some specific project objectives, namely preparation of the feasibility studies and business plans, may be influenced by the current global economic slowdown and financial crisis. This will have a substantial impact on willingness to invest in infrastructural projects and availability of funds from donors and IFIs. As originally conceived, the project would have prepared feasibility studies and business plans that were concerned chiefly with commercial profitability of the selected ILC projects. This was in accordance with the objective to attract private investment into the ILC projects. The world now faces an unforeseen financial and economic crisis, which is global in scope but appears to be affecting some beneficiary countries disproportionately. Consequently it may be difficult to justify any investment in narrow commercial terms, or to formulate a business plan that would attract private investment. Therefore we propose, for the EC Task Manager s consideration, that the feasibility studies include a strong economic component focused on socio-economic rather than commercial profitability, and on national and regional development priorities. This approach would be aimed at promoting the ILC projects as targets for substantial public sector investment, thereby reducing the risk to which private investors would be exposed. In addition, the inclusion of the new routes in the TRACECA map will have impact on the resources needed in the Phases B and C to gather information on site-specific traffic flows and links, as well as for possible further verification of the results of the Phase A. These deviate from the initial planning, and will be adjusted in consultations with the EC Task Manager within the phase B. The implementation of Phase A showed, that short-term experts had to be given sufficient time to analyse the results obtained in missions in Europe. This entailed preparation of the technical reports, development of the scenarios, application of specialized software and consultation with global logistics players.these activities were supported by adequate backstopping. The experts ensured constant dialogue with interviewed stakeholders and the key expert team in Kiev. The objectives and the respective indicators are specified in Intervention Logic / Strategy of the updated logframe matrix attached as Annex Project Approach The project objectives require strong coordination with the target groups. Bringing various stakeholders together, promoting partnership, matching the stakeholder strategies and promoting viable solutions belong to the intangible part of the project s technical assistance. In project implementation the Consultant will proceeed from the general to the specific; from regional issues to national, regional and eventually site-specific issues. Page 20 of 42 Inception Report

23 First, the project team has evaluated the macro locations for future logistics centres, based on site visits, traffic flows, infrastructure conditions and in full compliance with criteria of the international logistics centres. In this exersice the project team had considered the initial interest of stakeholders and their readiness to discuss the establishment of such logistics centres at evaluated locations. Second, for the most promising locations specific sites will be identified. This requires a constant coordination with international financing institutions and stakeholders, including local public authorities. A key activity will be inspiring global logistics players to participate in future projects. At each stage of the assignment approval and consent of the beneficiaries, and endorsement by the counterparts, will constitute the basis for further work. Third, once the possible locations are identified, they will be ranked using the detailed micro multicriteria analysis. The criteria and weights will be elaborated by the project team in close consultation with the stakeholders based on best practice worldwide. This process will require further travelling in the region and in Europe, and further involvement of the network of local experts for data verification and coordination with individual stakeholders. The project team will maintain close contact with the responsible Task Manager of the European Commission and will further inform her about all relevant and important issues coming up during the project execution. It has to be clearly stated, that the major workload in order to achieve the results is not only the elaboration of required studies, schemes, recommendations, technical papers etc., but a dialogue with beneficiary states, IFIs and numerous stakeholders in each state. This task also includes the co-ordination of findings and achievement of consensus among the parties involved. These are time-consuming tasks which require concentration of all efforts to achieve the outputs stipulated in the terms of reference. 2.5 Risks and Assumptions Risks The risks are mentioned in the Terms of Reference, but some additional risks were identified by the consultant. These risks are considered in the updated Logframe. In the following table the Consultant summarises the probability of risk occurance, its impact and action needed to counter those risks. Risk description Relations between countries are undergoing difficulties Lack of common goals and priorities in the transport sector of the countries Contradicting interests between the transport legal entities in the countries Probability of occurrence High / Medium / Low Impact High / Medium / Low Mitigation approach M M Improving Beneficiaries awareness about suboptimal impact on their economic development external risk, cannot be mitigated within the project implementation H M Hierarchy of common strategic goals external risk, cannot be mitigated within the project implementation M M The stakeholder analysis should help minimising this risk, the ranking and weights in multicriteria analysis should help mitigare the contradicting interest. Hierarchy of common strategic goals, identification of the regional viable projects. Inception Report Page 21 of 42

24 Risk description Inappropriate implementation of legal framework Delays in implementation of the parallel project in Central Asia and interdependence on the results of the on task C11 Communication and synergy within the network of the logistics centres along the TRACECA corridor. Promotion and lobbying by beneficiaries of logistics projects which would lack commercial attractiveness for further investment Assumptions Probability of occurrence High / Medium / Low Impact High / Medium / Low Mitigation approach H H Increase awareness of the inappropriate legal framework external risk, the Consultant has no influence on change of laws and influence on legal amendments and ratification L L Application of the Consultant s experience in coordinating of the multiple sector programmes with involvement of numerous operators. The communication plan shall be established and agreed with the Contracting Authority. L M The multicriteria analysis as well as the other analyses conducted for all logistics centres and nodes will reduce this risk. The Consultant has extensive experience in identification of the bankable projects. The ToR already identified the following basic assumptions for a successful project implementation: Political continuity and stability in the beneficiary countries Governments continue to pursue policy of regional integration and establishing viable links with the Trans-European Transport Networks Commitment of national authorities to establish a legal basis for the development of transport logistics centres Free access to necessary information and data The Consultant proposes to consider in addition the following set of assumptions: Log Frame Level Level: Project purpose Description of assumptions Political continuity and stability in the beneficiary countries exists Successful measures to mitigate the consequences of the world s financial crisis Continuation of governments in pursuing policy of regional integration and establishment of viable links with the Trans-Eu*ropean Transport Networks Acceptance of international customs and freight documentd snf procedures by beneficiary countries Free access to necessary information and data within the project implementation Continued or increased financial support demonstrated by the IFIs in the region in the transport and real estate sector Continued commitment of responsible national authorities to establish a legal basis for the development of transport logistics centres Clear legal regulations for land acquisitions Page 22 of 42 Inception Report

25 Log Frame Level Level: Project results Level: Project activities: Activities of task Project Inception Description of assumptions Readiness of transport operators to cooperate with their current competitors with a regional logistics centre Free access to necessary information and data within the project implementation Beneficiary support and continuity in decision-making Favourable political and economic situation Willingness of stakeholders and authorities to cooperate under a coherent, integrated logistics centre network solution Relevant legislation and regulatory framework exist Market conditions remain attractive to potential investors despite the current financial and economic crisis Access of project team to all countries within the region, and to all project relevant areas (e.g. ports, border crossing points, airports, terminals, etc.) Approval process for promotions of project activities takes place in due time Offices established Availability of counterpart staff to engage in meetings, project steering and working panels Timely response to reports by the beneficiaries Participation from counterpart staff Activities of task A Relevant data and supporting documents are made available to the project team Support and commitment from project partners Activities of task B Full support and commitment from project partners Commitment to development of the selection criteria and acceptance of the indicators (including public support) by all involved counterparts Willingness and cooperation between various counterparts Commitment from stakeholders to regional interests, respect for transport demand and network principle, rather than to locality preferences The stakeholders will participate actively in round tables on identification and appraisal of priority sites Measures to improve efficiency of the sector performance will be implemented Co-operation with neighbouring countries Activities of task C The data are available and counterparts provide strong input for the package implementation on the sustainable basis Relevant data and supporting documents are made available to the project team Means and forms of possible public support to the projects are being formulated and will be presented during task B Activities PM Standard project management tools are applicable Inception Report Page 23 of 42

26 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : 26 January January 2011 Project number : EuropeAid/126356/C/SER/ MULTI Prepared on: 26 April 2009 Table 2: Overall Plan of Operations Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS 1. 01: Inception year PERSONNEL (man-days) month Senior Junior x x x TL: 20 MD KEII+ KE III: 11MD STE: 12 MD STE: 32 MD EQUIPMENT & FURNITURE N / A Number of Pages: 5 OTHER N/A Incidental expenditure Euros 1 The project implementation started on 26 January The project team therefore worked only 1 week in January, so the days initially planned in the technical proposal for the 1 st month of the project implementation had to be split into 4 weeks. The man-days input corresponding to the first week of project implementation remained as input month of January The rest of the days were shifted to the end of the project to cover the January Page 24 of 42 Inception Report

27 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : 26 January January 2011 Project number : EuropeAid/126356/C/SER/ MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS A1: Traffic flow analysis and characterisation of the nature and the condition of operating infrastructures and facilities within the network A2: Description of the main issues encountered by operators B1:Assistance in identifying and characterising priority projects of logistics centres B2: Ranking the priority projects using multicriteria analysis year PERSONNEL (man-days) month Senior Junior x x x x x x x x x x x x x x x x x x x TL: 28 MD KEII+ KE III: 74 MD STE: 155 MD TL: 60 MD KEII+ KE III: STE: 267 MD STE: EQUIPMENT & FURNITURE Number of Pages: 5 OTHER Inception Report Page 25 of 42

28 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : 26 January January 2011 Project number : EuropeAid/126356/C/SER/ MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS B3: Visit to the relevant logistics centres C1: Global description of the objectives and functions of the logistics centre C2: Identification of the major stakeholders year PERSONNEL (man-days) month Senior Junior x x x x 9. C3: Possible site location x x x x x x x x C4: Preliminary design of the site C5: Preliminary design of the logistics (functional) areas 100 MD STE: 245 MD x x x x x x x x x x x x x x x x x x x x x x x x x TL: 302 MD KEII+ KE III: 555 MD STE: 998 MD STE: 1276 MD x x x x x x x x x x x x x 295 MD EQUIPMENT & FURNITURE Number of Pages: 5 OTHER Page 26 of 42 Inception Report

29 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : 26 January January 2011 Project number : EuropeAid/126356/C/SER/ MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS year PERSONNEL (man-days) month Senior Junior Task C6: Business Plan 12. for the site and countryby-country legal x x x x x x x x x x x x x x x programme 13. C7: Environmental impact assessment x x x x x x x x x x x x x x x 14. C8: Assessment of key qualifications required x x x x x x x x x x x x x x x 15. C9: Cost benefit analysis x x x x x x x x x x x x x x x x x x C10: Recommendations 16. for the adapted public x x x x x x x x x x x x x x x x x x support C11: Communication and synergy within the 17. networks of logistical centres along the x x x x x x x x x x x x x x x x x x x x x x x x x TRACECA corridor EQUIPMENT & FURNITURE Number of Pages: 5 OTHER Inception Report Page 27 of 42

30 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : 26 January January 2011 Project number : EuropeAid/126356/C/SER/ MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS 18. PM01: Quality assurance, risk management and conflict resolution year PERSONNEL (man-days) month Senior Junior x x x x x x x x x x x x x x x x x x x x x x x x x 19. PM02: Updates of the Logframe x x x x 20. PM03: Project planning x x x x x x x x x x x x x x x x x x x x x x 21. PM04: Project reporting x x x x x x x x x x x TOTAL (MD) TL: 40 MD KEII+ KE III: 60 MD STE: 15 MD Team leader 450 MD Key Experts I + II 800 MD Short-term experts 1425 MD STE: 20 MD 1890 MD EQUIPMENT & FURNITURE N/A Number of Pages: 5 OTHER Euros Incidental expenditure Page 28 of 42 Inception Report

31 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : Project number : EuropeAid/126356/C/SE R/MULTI Prepared on: 26 April 2009 Table 3: Overall Output Performance Plan Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Number of Pages: 6 26 January January 2011 Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. Outputs Agreed Objective Verifiable Indicators Assumptions Component project inception - IP Key expert team within 2 weeks after the project Project mobilised commencement Project office established and is fully operational within 6 weeks after the project commencement Project registered at the basis of operations country by the end of inception phase Kick-off meetings in all eight direct and indirect beneficiary Kick-off meeting took place countries are conducted Component A: Logistics network and related infrastructures analysis 1. Report on actual logistics related freight flows and compilation of maps The report on logistic related traffic flows is delivered by the end of the inception phase. Availability of counterpart staff to engage in meetings, project steering and working panels Timely response on Consultant s requests Availability of counterpart staff to engage in meetings, project steering and working panels Free access to necessary information and data within the project implementation Access of project team to all countries within region, and to all project relevant areas (e.g. ports, border crossing points, airports, terminals, etc.) Inception Report Page 29 of 42

32 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : Project number : EuropeAid/126356/C/SE R/MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Number of Pages: 6 26 January January 2011 Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. Outputs Agreed Objective Verifiable Indicators Assumptions 2. Eight country reports on infrastructure conditions at main TRACECA transport links and nodes 3. Assessment of locations in five direct beneficiary for future international logistics centre (ILC) projects at macro level Field missions of expert teams took place in eight beneficiary countries (both direct and indirect) Structured interviews were conducted with relevant stakeholders Eight reports on infrastructure conditions, current situation in logistics sector and main hub are prepared Multicriteria analysis matrix is prepared The locations at macro level are analysed and evaluated in five direct beneficiary countries Free access to necessary information and data within the project implementation Access of project team to all countries within region, and to all project relevant areas (e.g. ports, border crossing points, airports, terminals, etc.) Willingness of stakeholders and authorities to cooperate under coherent, integrated logistics centre network solution Beneficiary support and continuity in decision making Access of project team to all countries within region, and to all project relevant areas (e.g. ports, border crossing points, airports, terminals, etc.) Market conditions remain attractive to the potential investors despite the current financial and economic crisis Approval process for promotion of project activities takes place in time Page 30 of 42 Inception Report

33 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : Project number : EuropeAid/126356/C/SE R/MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Number of Pages: 6 26 January January 2011 Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. Outputs Agreed Objective Verifiable Indicators Assumptions 4. Description of main issues of transport operators (initial stakeholder analysis) in eight countries Structured interviews are conducted with the stakeholders in all eight beneficiary countries Report summarising findings is prepared and contains information on all eight beneficiary countries Preliminary action programme is proposed Component B - Identification, ranking and promotion of logistics centres projects 1. Final stakeholder analysis and prioritised action programme Stakeholder analysis is prepared for each country and prioritised action programme is proposed (report) Willingness of stakeholders and authorities to cooperate to develop a coherent, integrated logistics centre network solution Favourable political and economic situation Relevant legislation and regulatory framework exist Full support and commitment from project partners The stakeholders will participate actively in round tables on identification and appraisal of priority sites Inception Report Page 31 of 42

34 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : Project number : EuropeAid/126356/C/SE R/MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Number of Pages: 6 26 January January 2011 Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. Outputs Agreed Objective Verifiable Indicators Assumptions 2. Final list of the priority projects using MCA for five beneficiary countries 3. Recommendations on financing schemes for beneficiary countries 4. Study tour to LCs in Europe and study tour documentation List of the priority project resulting in selection of one project per direct beneficiary country Relevant European experience presented (in the report) Problems identified in each direct beneficiary countries and recommendation provided (in the report) Study tour to Europe organised upon completion of the Phase B with participants approved by the EC Capacity building actions / stakeholder MCA workshop are organised for beneficiary countries Study tour documentations is available Willingness and cooperation between various counterparts Commitment from stakeholders to regional interests, respect to transport demand and network principle, rather than to local preferences Commitment to development of the selection criteria and acceptance of the indicators (including public support) by all involved counterparts Co-operation with neighbouring countries Measures to improve efficiency of the sector performance will be implemented Availability of the counterparts and stakeholder Page 32 of 42 Inception Report

35 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : Project number : EuropeAid/126356/C/SE R/MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Number of Pages: 6 26 January January 2011 Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. Outputs Agreed Objective Verifiable Indicators Assumptions Component C - Preparation of the feasibility studies for the selected projects 5. Implementation programme favourable to investments in five direct beneficiary countries 6. Communication plan including promotion and dissemination aspects Country-by-country implementation programme for five direct beneficiary countries Communication plan is prepared in the inception period Regular meetings with project partners and IFIs held For each selected project: The data are available and counterparts provide strong input for the package implementation on the sustainable basis Relevant data and supporting documents are made available to the project team Means and forms of possible public support to the projects is clearly formulated by the beneficiary countries Market conditions remain attractive to the potential investors despite the current financial and economic crisis No constraints Inception Report Page 33 of 42

36 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Planning period : Project number : EuropeAid/126356/C/SE R/MULTI Prepared on: 26 April 2009 Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey EC Consultant : DCo / Inros Lackner / NTU Number of Pages: 6 26 January January 2011 Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. Outputs Agreed Objective Verifiable Indicators Assumptions 7. Pre-feasibility/feasibility study including: assumptions on public support and investment promotion, capacity and institutional strategy action plan, administrative support and staff qualification assessment, services to be rendered, business plans and cost-benefit analysis and environmental impact assessment where relevant. 8. Masterplan (preliminary design) covering functional area design, design for modern infrastructure and cargo handling facilities, adequate information system. Feasibility / Prefeasibility studies are prepared by the end of the project and contain the required components The data are available and counterparts provide strong input for the package implementation on the sustainable basis Access of project team to all countries within region, and to all project relevant areas (e.g. ports, border crossing points, airports, terminals, etc.) Relevant data and supporting documents are made available to the project team Means and forms of possible public support to the projects is clearly formulated by the beneficiary countries Master plans are prepared The data are available and counterparts provide strong input for the package implementation on the sustainable basis Relevant data and supporting documents are made available to the project team Means and forms of possible public support to the projects is clearly formulated by the beneficiary countries Page 34 of 42 Inception Report

37 Table 4: Plan of Operations for the Next Period (Work Programme) Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Project number : EuropeAid/126356/C/SER/ MULTI Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey Number of Pages: 5 Planning period : 26 January July 2009 Prepared on: 26 April 2009 EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS year 2009 month PERSONNEL (man-days) EQUIPMENT & FURNITURE OTHER 01: Inception TL: 15MD KEII+ STE: 32 MD N/A Refer to financial reporting 1 x x x KE III: 11 MD STE: 12 MD 2 The project implementation started on 26 January The project team therefore worked only 1 week in January, so the days initially planned in the technical proposal for the 1 st month of the project implementation had to be split into 4 weeks. The man-days input corresponding to the first week of project implementation remained as input month of January The rest of the days were shifted to the end of the project to cover the January Inception Report Page 35 of 42

38 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Project number : EuropeAid/126356/C/SER/ MULTI Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey Number of Pages: 5 Planning period : 26 January July 2009 Prepared on: 26 April 2009 EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS 2. year 2009 month A1: Traffic flow analysis and characterisation of the nature and the condition of operating x x x x x infrastructures and facilities within the network A2: Description of the main PERSONNEL (man-days) TL: 28MD KEII+ KE III: 74 MD STE: 155 MD STE: 267 MD EQUIPMENT & FURNITURE OTHER 3. issues encountered by x x x x x operators B1:Assistance in identifying and characterising priority projects of logistics centres B2: Ranking the priority projects using multicriteria analysis x x x x x x x x TL: 60 MD KEII+ KE III: 100 MD STE: 245 STE: 295 MD Page 36 of 42 Inception Report

39 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Project number : EuropeAid/126356/C/SER/ MULTI Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey Number of Pages: 5 Planning period : 26 January July 2009 Prepared on: 26 April 2009 EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS B3: Visit to the relevant year 2009 month PERSONNEL (man-days) MD EQUIPMENT & FURNITURE OTHER 6. logistics centres x x 7. C1: Global description of the objectives and functions of the logistics centre x x 8. C2: Identification of the major stakeholders x x 9. C3: Possible site location x x 10. C4: Preliminary design of the site 11. C5: Preliminary design of the logistics (functional) areas TL: 20 MD KEII+ KE III: 35 MD STE: 67 MD STE: 120 MD Inception Report Page 37 of 42

40 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Project number : EuropeAid/126356/C/SER/ MULTI Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey Number of Pages: 5 Planning period : 26 January July 2009 Prepared on: 26 April 2009 EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS year 2009 month PERSONNEL (man-days) EQUIPMENT & FURNITURE OTHER Task C6: Business Plan for the 12. site and country-by-country legal programme 13. C7: Environmental impact assessment 14. C8: Assessment of key qualifications required x x 15. C9: Cost benefit analysis 16. C10: Recommendations for the adapted public support C11: Communication and 17. synergy within the networks of logistical centres along the x x x x x x x TRACECA corridor Page 38 of 42 Inception Report

41 Project title: International Logistical Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova, Ukraine Project number : EuropeAid/126356/C/SER/ MULTI Beneficiary countries: Direct Armenia, Azerbaijan, Georgia, Moldova, Ukraine Indirect Bulgaria, Romania, Turkey Number of Pages: 5 Planning period : 26 January July 2009 Prepared on: 26 April 2009 EC Consultant : DCo / Inros Lackner / NTU Project objective: To support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. No MAIN ACTIVITIES TIME FRAME INPUTS year 2009 month PERSONNEL (man-days) EQUIPMENT & FURNITURE OTHER PM01 Quality assurance, risk 18. management and conflict x x x x x x x resolution 19. PM02: Updates of the Logframe x x x x 20. PM03: Project planning x x x x x x x 21. PM04: Project reporting x x x x TOTAL NA NA Team Leader: 128 MD Key Experts II + III 240 MD Short-term experts 484 MD 719 MD Inception Report Page 39 of 42

42 3 PROJECT PLANNING FOR NEXT REPORTING PERIOD The next reporting period encompasses the time from 26 January 2009 till 26 July 2009, i.e. six months from the project start. This reporting period will be mainly related to the delivery of the results of the Phase B Identification of the priority projects Activities of the task A: A1: Traffic flow analysis and characterisation of the nature and the condition of operating infrastructures and facilities within the network necessary follow up will be organised in relation to the phase B covering site-specific data verification, analysis of the relevant links and merchandise flow A2: Description of the main issues encountered by operators based on the preliminary action programme and issues indentified, further follow up will be organised. This relates to identification of the capacity building needs to be covered during stakeholder meetings and a study tour. Consultations will be carried out with the on-going project Strengthening of the transport training capacities in the NIS countries to exchange views in order to achieve synergy in the capacity building actions. The target groups of this project are however the trainers and transport institutes. In addition, the training programmes already executed under the TRACECA umbrella will be also analysed in order to gain experience from the lessons learned. However, it should be mentioned, that capacity building is already included into the daily work of the project team. Mainly the team work to increase awareness of the local counterparts and stakeholders on the modern logistics centres. Activities of the task B: Considering the assumptions to delivery of the results B, and analysing the occurrence of the identified risks the Consultant will implement the following activities: B1: Assistance in identifying and characterising priority projects of logistics centres Based on the macro locations identified in the phase A, the consultant will provide assistance to the beneficiary countries in identification of the promising projects at those locations. The Consultant will follow up investigations towards ports, rail, roads, airports, freight forwarders, transport companies, real estate sector, shippers and consignees started in the Phase A. This will require travelling of the established country teams in the region and involvement of the experts from countries for the follow up. The Consultant envisages an extensive workload in Europe with global logistics sector players, logistics platforms, associations of the logistics centres and freight villages. These are important stakeholders who could be interested in development of the logistics centres in the direct beneficiary countries. B2: Ranking the priority projects using multicriteria analysis The Consultant will rank the identified initiatives using the multi-criteria analysis. This process required coordination with the Client, beneficiaries and stakeholders. These criteria will include regional and country specific parameters. From the very beginning of the phase B the Consultant will start the preparation of the multicriteria matrix, containing the relevant indicators for micro-level analysis and their respective weights. This will be developed in accordance with the best-practice in Europe and taking into account the TRACECA specific background. The project key expert and country teams will carry out individual consultations with the target groups in each direct beneficiary country. In addition, based on its experience in TRACECA Page 40 of 42 Inception Report

43 countries, the Consultant has proposed to implement a stakeholder seminar for finalisation of the ranking process and ultimate selection of the site for those the studies will be prepared. Such a seminar was not requested by the Terms of Reference. Initially, the Consultant s proposedl to conduct this workshop in the region in the month 5 of the project implementation, or 1 month before a study tour. Since the project was commenced later that initially specified in the tender documents, the month 5 of the project implementation will be June. There are already important TRACECA events scheduled for June 2009 as for instance IGC Meeting at Issyk-Kul Lake, Kyrgyzstan. Summer is also a traditional vacation time both in Europe and in the region. The Consultant supposes that the counterparts may not be available for such a seminar at this period of time, as well as EU-based stakeholders as global logistics companies or management of the freight villages may not secure their participation on June. The Consultant proposes to reschedule this seminar and conduct it together with the study tour in Europe to bring in the synergy effects. The participants from the beneficiary countries will be determined together with the EC Task Manager. Based on this the respective budget for such a seminar will be presented for approval of the task manager. The task B2 also entails preparing the recommendations on optimisation of the degree and nature of the most relevant public granting scheme to be applicable for the financing of the logistics centres. The PPP opportunities will be also given high consideration. The suitable schemes applicable in Europe will be presented and benchmarked against the local realities and potential. The financing scheme will reflect the both direct and indirect investments, and analyse the potential for its application in the TRACECA countries. B3: Visit to the relevant logistics centres The study tour will concentrate on the following objectives - Visit Logistics Centres in Europe and demonstrate the PPP in practice and applied in order to visualise and demonstrate best practice solutions. This will focus on topics not yet covered by previous EC TRACECA projects. The study tour will be organised to the EU logistics centres, comparable to the sites identified in direct beneficiary countries. The participants will also benefit from knowledge and knowhow generated by experiences of Europlatforms and or association of the freight villages in the EU countries. The programme and the participant list for the study tour will be developed in cooperation with the beneficiaries, and submitted to the EC Project Manager for approval. The study tour will give the participants the opportunity to see state-of-the-art logistics facilities in function the best practices related to organisational and financial appraisal will be also presented. For the same reasons as the stakeholder seminar, the Consultant proposes to reschedule the study tour to September 2009 assuming the availability of the counter part. Activities of the task C Most of these activities will not yet start within the next reporting period, but all previous tasks related the C component will be followed up C1: Global description of the objectives and functions of the logistics centre The Consultant will start to elaborate the drafts for each selected site, once the priority projects are identified. Inception Report Page 41 of 42

44 C2: Identification of the major stakeholders There will be no specific activity on this task with the Phase B, but the consultant will continue working together with the stakeholders. C3: Possible site location Initial investigations will be done, based on the results of the phase B. C4: Preliminary design of the site No activities are envisaged in this respect within the Phase B. C5: Preliminary design of the logistics (functional) areas No activities are envisaged in this respect within the Phase B. C6: Business Plan for the site In regards of business plans, no activities are envisaged within the Phase B. As far as countryby-country implementation programme (legal aspects) is concerned the preparation will be followed up, based on the action programme and stakeholder analysis. C7: Environmental impact assessment No activities are envisaged in this respect within the Phase B. C8: Assessment of key qualifications required This task correlates to the task C1 and some initial investigation will start. C9: Cost benefit analysis No specific activities are envisaged in this respect within the Phase B. C10: Recommendations for the adapted public support This task correlates to the task B2 and B3. The results achieved within these tasks will be followed up. C11: Communication and synergy within the networks of logistical centres along the TRACECA corridor The work on this has started from the beginning of the project. The Communication plan is drafted and presented in this report. The activities will be followed up. The structure of the project webpage will be presented for approval, as well as the design and launch of the project webpage will take place. The necessity of the promotion materials will be formulated. Activities of the task PM These are the regular activities embarked into the daily work of the key expert team. PM01: Quality assurance, risk management and conflict resolution will be implemented PM02: Updates of the Logframe no specific activity is envisaged. The Logframe was update in the inception period PM03: Project planning will be detailed further and fine-tuned PM04: Project reporting monthly reports will be submitted, progress report II containing Page 42 of 42 Inception Report

45 International Logistics Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova and Ukraine Inception Report Annex 1 Project Logical Framework April 2009 This project is funded by the European Union A project implemented by Dornier Consulting GmbH / NTU / Inros Lackner AG 1

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47 LOGFRAME Overall objectives Project purpose Intervention logic Objectively Verifiable Indicators Sources of Verification Assumptions The overall objective of the project is to support international trade and facilitate the movements of goods along the TRACECA corridor through improving logistics capabilities, interoperability and multimodal transport. To develop financial, technical, environmental and institutional conditions and studies for a network of logistical centres along the TRACECA corridor in direct beneficiary countries (Armenia, Azerbaijan, Georgia, Moldova, Ukraine) in view of: Provision of pre-feasibility and feasibility studies for selected sites; Analysis of the needs assessment and surveys Increased volumes of cargo transport due to increase in export and import of goods after implementation of the proposed projects Increased share of logistics value added services in GDP after implementation of the proposed projects Higher share of multimodal operations in national and international supply chains Increase in level of investment in logistics centres and logistics service in case of project realisation Increase funding of logistics and freight transport sector projects by IFIs or PPP Priority on intermodal transport and logistics in national transport strategies National statistics Export and import statistics of national and international organisations Reports and relevant Statistics of the international organisations TRACECA database National and international statistics IFI funding reports and programming documents and action plans Publications of professional investment promoters, e.g. chambers of commerce Political continuity and stability in the beneficiary countries exists Successful measures to mitigate the consequences of the world s financial crisis Continuation of governments in pursuing policy of regional integration and establishment of viable links with the Trans-European Transport Networks Acceptance of international customs and freight documents and procedures by beneficiary countries Inception Report Annex 1 - Logframe Page 1 of 9

48 Intervention logic Objectively Verifiable Indicators Sources of Verification Assumptions of the current logistics capabilities; Elaboration of the master plans for selected locations Preparation of the business and organisational plans, financial and economic analysis considering the changed cargo volumes resulted from worldwide economic slowdown. To promote realistic, attractive and sustainable projects for further investment by financial institutions and/or public and private actors possible under conditions of the world economic crisis. Official governmental publications Transport strategies and programming documents of TRACECA countries Project reports Project feasibility studies Free access to necessary information and data Continued or increased financial support demonstrated by the IFIs in the region in the transport and real estate sector Continued commitment of responsible national authorities to establish a legal basis for the development of logistics centres Clear legal regulations for land acquisitions Readiness of transport operators to cooperate with their current competitors within a regional logistics centre benefiting from synergy effects Inception Report Annex 1 - Logframe Page 2 of 9

49 Results Intervention logic Objectively Verifiable Indicators Sources of Verification Assumptions Result 0 Project Inception Result A Analysis of TRACECA logistics network and of the related operation of transport and logistics within the existing network delivered Kick-off meetings held Main project office established in Kiev Project team mobilised Regional field missions took place in each beneficiary country Country reports providing information on infrastructure conditions of the main TRACECA transport links and nodes and capabilities of existing entities / stakeholder to perform logistics operations Traffic flowsreport analysis on TRACECA traffic flows and network capacities is provided in the inception report Description of the main issues encountered by operators (first stakeholder analysis) Prioritised action programme to be discussed with beneficiary countries Preliminary list of assessed locations for logistics centre projects Project reports Project documentation Official communications of beneficiaries TRACECA GIS traffic Database Government reports and decisions Documentation of professional associations for transport or trade IFI reports Publications and information reports in mass media Free access to necessary information and data within the project implementation Beneficiary support and continuity in decision making Favourable political and economic situation Willingness of stakeholders and authorities to cooperate under coherent, integrated logistics centre network solution Relevant legislation and regulatory framework exist Market conditions remain attractive to the potential investors despite the current financial and economic crisis Access of project team to all countries within region, and to all project relevant areas (e.g. ports, border crossing points, airports, terminals, etc.) Approval process for promotion of project activities takes place in time Inception Report Annex 1 - Logframe Page 3 of 9

50 Intervention logic Objectively Verifiable Indicators Sources of Verification Assumptions Result B Logistics centres projects are identified, ranked and promoted Result C Feasibility studies for the selected projects Stakeholders seminar on multicriteria analysis Multi-criteria analysis (MCA) is prepared A set of priority projects in each country is identified, ranked using MCA and submitted for approval Coordination missions and meetings with sector stakeholders, investors and IFIs are held Recommendation are provided for optimizing the degree of most relevant public granting scheme and necessary regulatory changes Study tour to relevant logistics centres in Europe is organised For each selected project: Pre-feasibility / feasibility study including: - assumptions concerning public support and finetuned recommendations for promotion of investments - capacity and institutional strategy (action plan) - associated administrative Inception Report Annex 1 - Logframe Page 4 of 9

51 Intervention logic Objectively Verifiable Indicators Sources of Verification Assumptions support needed - staff qualifications defined - services to be rendered - business plans and costbenefit analysis - Environmental impact assessment is prepared if relevant Masterplan (preliminary design) including - functional area description and layout concept - dimensioning for infrastructure and cargo handling eqipment - adequate IT technologies Country by country implementation programme favourable to investments Communication plan is prepared including promotion of project activities (website, leaflets, press conferences, etc.) and coordination meetings with parallel Central Asia project are held Result PM Successful Final project dissemination is project implementation held Inception Report Annex 1 - Logframe Page 5 of 9

52 Activities Intervention logic Objectively Verifiable Indicators Sources of Verification Assumptions 01: Inception A1: Traffic flow analysis and characterization of the nature and the condition of operating infrastructures and facilities within the network A2: Description of the main issues encountered by operators B1: Assistance in identifying and characterizing priority projects of logistics centres B2: Ranking the priority projects using multi-criteria analysis B3: Visit to the relevant logistics centres Inputs: Key experts: Team leader: 450 man days Other key experts: 800 man days Short-term experts: International experts: 1425 man days Local experts: 1890 man days Costs Fee budget on key experts and short-term experts Incidental expenditures verifications Inception activities level: Offices established Availability of counterpart staff to engage in meetings, project steering and working panels Timely response on Consultant s reports / requests by the beneficiaries Participation from the counterpart staff Activities A level Relevant data and supporting documents are made available to the project team Support and commitment from project partners Activities B level Full support and commitment from project partners Commitment to development of the selection criteria and acceptance of the indicators (including public support) by all involved counterparts Willingness and cooperation between various counterparts Commitment from stakeholders to regional interests, respect to transport demand and network principle, rather than to local preferences The stakeholders will participate Inception Report Annex 1 - Logframe Page 6 of 9

53 Intervention logic Objectively Verifiable Indicators Sources of Verification Assumptions C1: Global description of the objectives and functions of the logistics centre C2: Identification of the major stakeholders C3: Possible site location C4: Preliminary design of the site C5: Preliminary design of the logistics (functional) areas C6: Business Plan for the site C7: Environmental impact assessment C8: Assessment of key qualifications required C9: Cost benefit analysis C10: Recommendations for the adapted public support C11: Communication and synergy within the networks of logistical centres along the TRACECA corridor actively in round tables on identification and appraisal of priority sites Measures to improve efficiency of the sector performance will be implemented Co-operation with neighbouring countries Activites C level The data is available and counterparts provide strong input for the package implementation on the sustainable basis Relevant data and supporting documents are made available to the project team Means and forms of possible public support to the projects is clearly formulated by the beneficiary countries Inception Report Annex 1 - Logframe Page 7 of 9

54 Intervention logic Objectively Verifiable Indicators Sources of Verification Assumptions PM 01: Quality assurance, risk management and conflict resolution PM 02: Updates of the Logframe PM 03: Project planning PM 04: Project reporting Activities PM level *This area of activities is not directly related to delivery of the technical results (A, B and C), so the Consultant will apply standard Project Management tools throughout project implementation. Pre-conditions: Relations between countries are not undergoing difficulties Common goals and priorities in the transport sector of the countries prevail Contradicting interests between the transport legal entities in the countries can be regulated Appropriate legal framework will be adapted or is in place National transport legislation is on the way to adaptation to international standards No delays in implementation of the parallel project in Central Asia to assure implementation of interdependent results of the on task C11 Communication and synergy within the network of the logistics centres along the TRACECA corridor Promotion by beneficiaries of logistics projects with commercial attractiveness for further investment, limited lobbying of unbankable projects Inception Report Annex 1 - Logframe Page 8 of 9

55 Inception Report Annex 1 - Logframe Page 9 of 9

56 International Logistics Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova and Ukraine Inception Report Annex 2 List of meetings April 2009 This project is funded by the European Union A project implemented by Dornier Consulting GmbH / NTU / Inros Lackner AG 1

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58 Schedule of the Missions / Events in January April 2009 Institutions / Events / Persons Met Participants Issues Discussed / Investigated January - February 2009 Belgium EC Mr Leonidas Kioussis, DG Europe Aid Cooperation Office, Unit A.3, Head of Sector Mrs Barbara Bernardi, DG Europe Aid Cooperation Office, Unit A.3, Programme Manager (Transport) Seminar of the traffic flows project on traffic data collection and modelling with participation of representatives of EC Directorates, data collection expert of the Traffic Flows Project Ukraine EC Delegation, Kiev Mrs Jurate Yuodsnukyte, Sector Manager Transport, Delegation of the European Commission to Ukraine and Belarus Mr Hans Rhein, Head of Operations Section 3 Mr Ralf Behrens Mr Andreas Schoen Mrs Yulia Usatova Mr Lars Bentzen Mr Carsten Schuermann Mr Andreas Schoen Mr Hannes Rueger Introduction of parties Overview of project objectives and methodology Project organisation aspects Project mobilisation Coordination with logistics centres project in Central Asia and other EU funded projects Data collection and data access aspects Communication and approval procedures Data collection strategy Approach to A1 and A2 Exchange of information with the project experts Project presentation, inviting feedback and establishing contacts Overview of the related projects of the TRACECA programme Inception Report Annex 2 List of meetings Page 1 of 37

59 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Ministry of Transport and Communications of Ukraine (MoTC), Kiev Mr Hrigory Lehenkiy, Head of Transport Systems Coordination and Development Department Mrs Antonina Kuzmenko, Deputy Head of the Department of Development and Coordination of the Transport Systems and Communications Mrs Svetlana Lipinska, Department Specialist, Responsible for International Logistics Centres IIyichevsk Commercial Sea Port, IIyichevsk Mr Georgiy Tokman, Director of Development and Investment Department Mrs Iryna Babeshko, Engineer at the Development and Investment Department Odessa Commercial Sea Port, Odessa Mr Mikhail Shaposhnikov,Head of Development and External Relations Department of the Odessa Sea Commercial Port International Chamber of Commerce Ukraine (ICCU), Kiev Mr Vladimir Mikhailov, Secretary General ICCU Dr Sergiy Babak, Deputy Secretary General ICCU & Head of International Department Mr Andreas Schoen Mr Hannes Rueger Mrs Olena Nevmerzhytska Mrs Yulia Usatova Mr Jan Scheele Mr Jan Scheele Mr John Standingford Mrs Olena Nevmerzhytska Project presentation, inviting feedback and establishing contacts Review and coordination of the locations to be visited in Ukraine Steps to be taken by the Consultant Registration of the office Project approach Project presentation, inviting feedback and establishing contacts Overview of the services and responsibilities of the Port Throughput statistics Development plans Preferable locations for ILC Site inspection Project presentation Overview of the services and responsibilities of the Port Development plans Site inspection Project presentation Overview of the role, structure and work of ICCU Offered support from ICCU Inception Report Annex 2 List of meetings Page 2 of 37

60 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Ministry of Transport and Communications of Ukraine (MoTC), Kiev Mr Hrigory Lehenkiy, TRACECA National Secretary, Ukraine and Head of Transport Systems Coordination and Development Department MoTC officials LISKI Freight Terminal, Kiev Mr Aleksandr Lukyanenko, Head of Technology Department, Liski Association of International Freight Forwarders of Ukraine (AIFFU), Kiev Mr Yuri Prykhodko, General Director, Association of International Freight Forwarders of Ukraine (AIFFU) MOTC State Department Maritime Transport, Kiev Mr Hannes Rueger Mr John Standingford Mr Armin Hansmann Mr Jan Scheele Mrs Olena Nevmerzhytska Mr Hannes Rueger Mr John Standingford Mr Armin Hansmann Dr Stefan Denzinger Mr Lars Bentzen Mr Hannes Rueger Mr John Standingford Mr Armin Hansmann Mr Jan Scheele Mr Olena Nevmerzhytska Brief overview of the ILC project Questions from MoTC officials Expectations of the project Follow-up meetings Support for organisation of visits in Ukraine Overview of ILC Project Overview of the Terminal Throughput statistics Future development plans Site inspection Project presentation, inviting feedback and establishing contacts Overview of AIFFU Customs Service Cooperation of AIFFU with other organisations Mr Ugenli, Maritime Department Coordinator Mr Nefedov A.V., Head of Coordination Department of State Department for Maritime and River Transport Mr Lisenko A.V., Specialist Coordination Department of State Department for Maritime and River Transport Mrs Kondzerskaya L., Chief Specialist of Coordination Division of State Department for Maritime and River Transport Mr Armin Hansmann Mr Jan Scheele Mr Hannes Rueger Project presentation Overview of the scope of work and responsibilities of the State Department of Maritime Transport Offered support and general information from the State Department of Maritime Transport Request from the State Department of Maritime Transport Inception Report Annex 2 List of meetings Page 3 of 37

61 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Ministry of Transport of the Ukraine, International Transport Department of State Automobile Administration, Kiev Mr O.P. Kornienko, Chief Specialist of International Transportation Department of State Automobile Administration Logistrans Co, Kiev Mr Valeriy A Belinskiy, President Mr Vladimir M. Kostuchenko, Deputy Director Mr Andrey V. Belinskiy, Financial Director Kovel Railway Station, Yagodin Railway Station, Kovel/Yagodin Mr Ruslan Alexandruk, Deputy Station Manager Kovel Mr Nikolai Brischko, Station Manager Yagodin Kiev River Port, Kiev Mr Vladimir Zigankov, Chairman of the Board Mrs Anna Gregori, Executive Chairman World Bank in Ukraine, Kiev Mrs Tatyana Dyachenko, Trade & Transport Facilitation Diagnostics Consultant Mr Hannes Rueger Mr Armin Hansmann Mr John Standingford Dr Stefan Denzinger Mr Hannes Rueger Mr Armin Hansmann Mr John Standingford Mr Armin Hansmann Dr Stefan Denzinger Mr Armin Hansmann Dr Stefan Denzinger Mr Andreas Schoen Project presentation Overview of the department Major bottlenecks Expectations of MoTC towards the project Overview of ILC Project Overview of Logistrans Logistrans activities and plans Legal/institutional environment Customs Service Tariffs Overview of Kovel railway station Throughput statistics of Kovel railway station Potential locations of multimodal LC Overview of Yagodin railway station Throughput statistics of Yagodin railway station Development plans Project presentation Overview of Kiev River Port Future development plans Discussion regarding future ILC World bank activities in Transport sector Overview of two road and railway infrastructure projects in the pipeline Yagodin / Kovel railway station potentials for future ILC Inception Report Annex 2 List of meetings Page 4 of 37

62 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Kuehne and Nagel Ltd Ukraine, Kiev Victor Shkarban, National Manager, Head of Kuehne and Nagel Ukraine Motorways of the Sea Project (MoS), Kiev Mr Marc Abeille, Team Leader, egis bceom Mrs Oksana Novoseletska, Project Development Manager, egis bceom Mrs Nataliia Dashchenko, Senior Legal Expert, egis bceom Armenia Mr Armin Hansmann Dr Stefan Denzinger Mr Andreas Schoen Mr Hannes Rueger Mr John Standingford Project presentation Overview of the Scope of Work and Responsibilities of the Kuehne and Nagel Ltd Ukraine Investment planning Preferable locations for ILC Overview of the ILC project Brief overview of MoS project Traffic flows data supplied to both projects Inter-project coordination Exchange of information Ministry of Transport and Communication, Yerevan Mr Gurgen Sargsyan, Minister Ministry of Transport and Communication, Yerevan Mr Gagik Grigoryan, Head of Foreign Relations Department, National Secretary of IGC TRACECA Mr Mr Khachatur Manukyan, Chief Specialist, Foreign Relations Department Mr Andreas Schoen Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Project presentation, inviting feedback and establishing contacts Report on visited sites in Yerevan Situation of the MOTC railway terminal Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Inception Report Annex 2 List of meetings Page 5 of 37

63 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Meltrans Ltd (Freight Forwarding Company), Yerevan Mr Samuel Melikyan, Director Staff member Association of International Road Carriers of Armenia (AIRCA), Yerevan Mr Herbert Hambardzumyan, Secretary General Railway Terminal JSC, Yerevan Mr Dalakjan Warlan, Director General Mr Gagik Grigoryan, Head of the Foreign Relations Department, MOTC APAVEN Co. Ltd (Freight Forwarding Company), Yerevan Mr Gagik Aghajanyan, Executive Director Staff member Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Khachatur Manukyan Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Andreas Schoen Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Khachatur Manukyan Mr Gagik Grigoryan Mr Andreas Schoen Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Khachatur Manukyan Project presentation, inviting feedback and establishing contacts Overview of the company Major bottlenecks in establishing future logistics centres The main routings on the Black Sea Specific requirements to an International Logistics Centre Customs services Membership and activities of the trucking industry Road conditions Interest and potentials for an International Logistics Centre Customs and border crossing issues Project presentation, inviting feedback and establishing contacts Overview of the terminal Company structure and ownership Services provided by the terminal Preferable locations for LC Project presentation, inviting feedback and establishing contacts Overview of the company Modal operations Container terminal operations Overview of the transportation market in Armenia Structure of cargo flow Development plans Customs services Inception Report Annex 2 List of meetings Page 6 of 37

64 Institutions / Events / Persons Met Participants Issues Discussed / Investigated APAVEN s rail and road terminal, Yerevan Customs Office at Apaven Ltd Rail and Road Terminal, Yerevan NN, Chief Customs Officer State Revenue Committee of the Government of the Republic of Armenia Mr Karen Beglaryan, Head of Strategic and International Relations Division of Customs Chamber of Commerce and Industry of the Republic of Armenia, Yerevan Mr Araik Vardanyan, Executive Director Mr Vladimir Amiryan, Head of International Collaboration Department Trans-Alliance Ltd (Freight Forwarding Company), Yerevan Mr Sargis Martirosyan, General Director Mr Gagik Grigoryan Mr Andreas Schoen Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Khachatur Manukyan Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Khachatur Manukyan Mr Andreas Schoen Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Khachatur Manukyan Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Khachatur Manukyan Site visit to the terminal Project presentation, inviting feedback and establishing contacts Major bottlenecks in requirement of information from the Customs Office Incoming cargo Project presentation, inviting feedback and establishing contacts Customs clearance in Armenia Project presentation Ideas about potential locations of ILCs Customs and border crossing issues Functions, container handling potentials etc. Development plans Foreign trade relations Overview of the core activities of Company Specific requirements to an International Logistics Centre Services of the local logistics providers Main export-import routes Customs services Influence of financial crisis - statistics Inception Report Annex 2 List of meetings Page 7 of 37

65 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Ministry of Transport and Communication, Yerevan Mr Khachatur Manukyan, Chief Specialist, Foreign Relations Department EBRD Office in Yerevan Mr Alexandr Babayan, Principal Banker Asian Development Bank, Yerevan Mr Areg Barseghyan, Senior Country Coordination Officer The World Bank Armenian office, Yerevan Mr Jorgen Kristiansen Mr Andreas Schoen Mr Andreas Schoen Project presentation, inviting feedback and establishing Overview of the department Development plans of transport in Armenia Expectations of the project Preferable locations for LC Project presentation, inviting feedback and establishing contacts Information about past and present EBRD projects in Yerevan Project presentation, inviting feedback and establishing contacts Information about North-South-Corridor project Mrs Ani Balabanyan, Operations Officer, Sustainable Development Unit Mr Arthur Kochnakyan, Consultant, Sustainable Development Unit Delegation of the European Commission to Armenia, Yerevan Mr Jean-Francois Moret, Attache, Project Manager Moldova TRACECA National Secretariat in Moldova, Chisinau Mr Eduard Biriucov, TRACECA National Secretary Mr Andreas Schoen Mr Andreas Schoen Mr Andreas Schoen Project presentation, inviting feedback and establishing contacts Activities of the World Bank in Armenia (Rural roads) Project presentation, inviting feedback and establishing contacts Overview of EC-founded programs Offered support of the EC-Delegation in arranging meetings with Armenian authorities Project presentation, inviting feedback and establishing contacts Inception Report Annex 2 List of meetings Page 8 of 37

66 Institutions / Events / Persons Met Participants Issues Discussed / Investigated EBRD Resident Office in Moldova, Chisinau Mr Octavian Costas, Senior Banker, EBRD Resident office Moldova EC-Delegation in Moldova, Chisinau Mr Alexandru Albu, EC Delegation Moldova World Bank in Moldova, Chisinau Mr Sandu Ghidrim, Operations Officer, Sustainable Development Department Europe and Central Asia Chisinau Airport, Chisinau Mr Tolevni, Economist and Advisor to the Managing Director (Mr Roman Podcoritov), Chisinau Airport Mrs Alla Tubari, Head of Economic Department Mrs Elena Mazur, Assistant to the Managing Director Agency of Transport, Chisinau Mr Ion Cotruta, Chief of Department of Terrestrial Transport Mrs Elena Darii, Foreign Affairs and EU Integration Mr Andreas Schoen Mr Andreas Schoen Mr Hannes Rueger Mr John Standingford Mr Andreas Schoen Mr Hannes Rueger Mr John Standingford Mr Hannes Rueger Mr John Standingford Project presentation, inviting feedback and establishing contacts Expectations of the project Project presentation, inviting feedback and establishing contacts Contact details of other organisations Project presentation, inviting feedback and establishing contacts Major bottlenecks of the World Bank and EBRD involvement in road rehabilitation projects in Moldova Overview of ILC Project Overview of cargo activities at Chisinau Airport Throughput statistics Cargo services and facilities Development plans Takeaway material Overview of ILC Project Overview about background and implementation of the Agency of Transport (AoT) of Moldova Brief overview of transport sector in Moldova Potential sites of future ILC Border problems Inception Report Annex 2 List of meetings Page 9 of 37

67 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Moldovan Railway Technical Services Department, Chisinau Mr Zaika Alexandr Anatoljewitsch, First Deputy and Chief Engineer, Head Technical Services Chamber of Commerce and Industry of the Republic of Moldova, Chisinau Mr Vladimir Didilica, Vice-President, Chamber of Commerce and Industry of the Republic of Moldova International Association of Road Hauliers (AITA), Chisinau Association of Forwarders and Customs Brokers (AEM-TRANS), Chisinau Mr Vladimir Pendiurin, Secretary General, AITA Mr Serghei Taran, President, AEM-TRANS Georgia Mr Hannes Rueger Mr John Standingford Mr Hannes Rueger Mr John Standingford Mr Hannes Rueger Mr John Standingford Brief overview of railway transport sector in Moldova Border control and customs issues Potential sites of future ILC Development plans Statistical data Overview of ILC Project CCI scale, role and organisation Moldova s economic and trade strategy Possible ILC sites Scale, role and organisation of AITA and AEM-TRANS AITA s logistics centre Other projects and plans Government organisation and legal framework Freight transport activity Moldova s economic and trade strategy National Secretary of the IGC TRACECA in Georgia Mr Mamuka Vatsadze, Head of Transport Department Mr Andreas Schoen Mr Bodo Roessig Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Giorgi Doborjginedze Project presentation, inviting feedback and establishing contacts Inception Report Annex 2 List of meetings Page 10 of 37

68 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Ministry of Economic Development, Tbilisi Mr Paata Zakareishvili, Head of the Center of Development and Cooperation EC Delegation, Tbilisi Mr Micha Nekvasil, Second Secretary, Deputy Head of Operations, Delegation of the European Union to Georgia Association of Freight Forwarders of Georgia, Tbilisi Prof. Dr. Surab Schengelia Maersk Logistics, Tbilisi Mr Christian Roeder, Managing Director (Maersk Line) Mr Konstantine Kaukhchishvili, Country Logistics Manager Mr Andreas Schoen Mr Bodo Roessig Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Giorgi Doborjginedze Mr Andreas Schoen Mr Mamuka Chantladze Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Project presentation, inviting feedback and establishing contacts Planed foundation of Ministry of Infrastructure and Regional Development in Georgia. Responsibilities of the Ministry unclear so far. Project presentation, inviting feedback and establishing contacts Foundation of Ministry of Infrastructure and Regional Development in Georgia Overview of related projects Project presentation, inviting feedback and establishing contacts Overview of the department Concrete proposals for ILCs Preferable locations for LC Customs and border crossing issues Development plans Expectations of the project Project presentation Overview of the company Core activities of Company Development plans Main areas covered with services: export, import, transit Concrete proposals for ILCs Preferable locations for LC Customs services Inception Report Annex 2 List of meetings Page 11 of 37

69 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Georgian Railway Ltd, Tbilisi Mr Dimitry Kemoklidze, Director (Restructuring and Development Agency) Site visits along the road between Tbilisi and Poti, Shunting yards at Zestaponi and Kutaisi; Samtredia, Senaki and railway junction; road sections Silk Road Express, Poti Mr Korneli Korchilava, General Director Planning meeting with Office Manager and Accountant Mr Bodo Roessig Mr Jorgen Kristiansen, Mr Mamuka Chantladze Mr Bodo Roessig Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Bodo Roessig Mr Jorgen Kristiansen Mr Mamuka Chantladze Project presentation, inviting feedback and establishing contacts Railway restructuring, core business units Major bottlenecks Throughput statistics Development plans e.g. Tbilisi bypass line, rail section Khachuri / Zestaponi Projects under development e.g.poti port connection and shunting facilities Expectations of the project Railway land plot for as preferable locations for LC Takeaway material Site inspection Site inspection Project presentation, inviting feedback and establishing contacts Core activities of Company Modal operations Development plans Main areas covered with services: export, import, transit Specific requirements to an International Logistics Centre Expectations of the project Preferable locations for LC Involvement in development of logistics projects in Tbilisi Inception Report Annex 2 List of meetings Page 12 of 37

70 Poti Seaport Institutions / Events / Persons Met Participants Issues Discussed / Investigated Mr Rony Saab, General Director Mr Eduard Machavariani, Commercial and Investment Director Mr Devi Gvalia, Deputy Manager Reconstruction & Development Gi Anti (Freight Forwarding Company), Poti Mr Levan Gabiskiria, Deputy of Director Georgian Railways, Poti Mr Akaki Gotoshia, Station Manager SOFMAR, Poti Mr Wakhtang Alania, General Manager Mr Bodo Roessig Mrs Aza Shengelia Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Bodo Roessig Mrs Aza Shengelia Mr Jorgen Kristiansen Mr Mamuka Chantladze Project presentation, inviting feedback and establishing contacts Overview of the management structure Major bottlenecks Throughput statistics Development plans including the new port project Expectations of the project Preferable locations for LC Site inspection Project presentation Overview of the company Core activities of Company Development plans Main areas covered with services: export, import Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Throughput statistics Development plans Expectations of the project Site inspection Project presentation Core activities of Company Intermodal operations Development plans Investment planning Main areas covered with services: export, import, transit Specific requirements to an International Logistics Centre Customs services Inception Report Annex 2 List of meetings Page 13 of 37

71 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Poti-Cargo Service, Poti Mr Iuri Esebua, General Director Mr Alexander Gurtovoy, Chartering & Agency Management Customs Office, Poti Sea Port Mrs Nicka Aklobadze, Customs Officer Georgian Railway, Territorial management of Batumi Mr Otar Katamadze, Chief of Cargo and Commercial Department TeRo Co. Ltd, Batumi Mr Soso Bokuchava, General Director Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Bodo Roessig Mrs Aza Shengelia Mr Mamuka Chantladze Mr Jorgen Kristiansen Mr Jorgen Kristiansen Mrs Aza Shengelia Project presentation Overview of the company Core activities of Company Development plans Main areas covered with services: export, import, transit Project presentation Overview of the department Procedure and documentation in customs clearance Computer software application Facilities for customs services Clearance of consignments Development plans Project presentation, inviting feedback and establishing contacts Responsibility of the management Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Site inspection Core activities of Company Development plans Main areas covered with services: export, import Specific requirements to an International Logistics Centre Expectations of the project Preferable locations for LC Inception Report Annex 2 List of meetings Page 14 of 37

72 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Geoinspect Ltd (Shipping and Forwarding Agency, Brokering, Maritime Consultant and Cargo Surveyors Co.), Batumi Mr Kakha Kandelaki, Director Maritime Administration, Batumi Capt. Paata Inaishvili, Deputy Director Batumi International Container Terminal LLC Mr Frank Carter, General Manager Mr Rafael Nieto, Terminal Manager Mr Jorgen Kristiansen Mrs Aza Shengelia Mr Bodo Roessig Mr Giorgi Doborjginedze Mr Bodo Roessig Mr Giorgi Doborjginedze Project presentation Overview of the department Development plans Main areas covered with services: export, import, transit Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Responsibility of the Maritime Administration Development plans Expectations of the project Preferable locations for LC Takeaway material Project presentation, inviting feedback and establishing contacts Overview of the newly established Container Terminal Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Inception Report Annex 2 List of meetings Page 15 of 37

73 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Batumi Seaport Ltd Mr Khartyan Vyatcheslov, Deputy General Director of Production Site visit to port terminals, Poti and the entrance gate - Inland Terminal and main entranced of the port have been visited DIPLOMAT (Importer), Tbilisi Mr Giorgi Vasadze, Head of Logistic& Operation Department Customs, Tbilisi Mr Samson Umidia, Deputy Head of Customs Control Department, Revenue Service, Ministry of Finance Mr Bodo Roessig Mr Giorgi Doborjginedze Mr Bodo Roessig Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Bodo Roessig Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Bodo Roessig Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Mamuka Chantladze Project presentation, inviting feedback and establishing contacts Overview of the Management structure Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Photo have been made Project presentation, inviting feedback and establishing contacts Overview of the department Development plans Throughput statistics Main areas covered with services: export, import Logistics concept implemented by DIPLOMAT Project presentation, inviting feedback and establishing contacts Overview of the customs departments responsibilities Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Custom procedures for bounded warehouses Site inspection Inception Report Annex 2 List of meetings Page 16 of 37

74 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Georgian Chamber of Commerce and Industry, Tbilisi Mr George Kakabadze, Executive Director Roads Department of Georgia, Ministry of Regional Development and Infrastructure, Tbilisi Mr Irakli Litanishvili, Vice-Chairman Caucastransexpress (Forwarder), Tbilisi Mr Gia Danelia, General Director Tbilisi City Hall Mr Akakki Jokhadze, Chief Municipal, Transport Department Intertrans, rail terminal in Tbilisi Mr Zaza Narimanidze, General Director Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Bodo Roessig Mr Giorgi Doborjginedze Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Bodo Roessig Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Mr Bodo Roessig Mr Giorgi Doborjginedze Mr Bodo Roessig Mr Jorgen Kristiansen Mr Giorgi Doborjginedze Project presentation, inviting feedback and establishing contacts Major bottlenecks Customs and border crossing issues Preferable locations for LC Project presentation, inviting feedback and establishing contacts Institutional and organisational issues Roads Classification and standards Development plans Roads maintenance Project presentation, inviting feedback and establishing contacts Overview of the company Core activities of Company Development plans Throughput statistics Main areas covered with services: export, import, transit Investment planning Project presentation, inviting feedback and establishing contacts Overview of the responsibility within the Municipality related to project subjects Project presentation, inviting feedback and establishing contacts Overview of the terminal Types of terminal services and operations Throughput statistics Development plans Preferable locations for LC Inception Report Annex 2 List of meetings Page 17 of 37

75 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Site visit to the Georgian / Azeri border station at the Red Bridge - Road section Tbilisi Red Bridge; road junctions at E60/E117 and at north-eastern bypass Municipality of Tbilisi / Tbilisi City Hall Mr Mamuka Akhvlediani, First Deputy Mayor of Tbilisi Mr Nino Bakhtadze, Head of the Municipal Property, Management Agency Mr Zviad Archuadze, Head of Economic Policy Agency Georgian Chamber of Commerce and Industry Mr Jemal Inaishvili, President TAV Georgia, Tbilisi International Airport Mr Tamaz Andguladze, Deputy General Manager Mr Jorgen Kristiansen Mr Mamuka Chantladze Mr Bodo Roessig Mr Mamuka Chantladze Mr Bodo Roessig Mr Mamuka Chantladze Mr Bodo Roessig Mr Mamuka Chantladze Site inspection Project presentation, inviting feedback and establishing contacts Overview of the responsibilities Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Development plans Expectations of the project Need for a LC Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Throughput statistics Development plans Operation concept Inception Report Annex 2 List of meetings Page 18 of 37

76 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Lasare Ltd, Cargo Terminal, Tbilisi Airport Mr Sergo Lasreishvili, Director Georgian Air Gate, Tbilisi Mr Boris Mchedlidze, General Director GRDC, Georgian Reconstruction & Development Company Mr Irakli Kilauridze, Executive Vice President / CEO European Bank for Reconstruction and Development (EBRD) Mr Nino Marshania, Associated Banker-Transport Mrs Nataly Mouravidze, Principal Banker Mr Bodo Roessig Mr Mamuka Chantladze Mr Bodo Roessig Mr Mamuka Chantladze Mr Bodo Roessig Mr Mamuka Chantladze Mr Bodo Roessig Mr Mamuka Chantladze Project presentation, inviting feedback and establishing contacts Overview of the company Throughput statistics Development plans Expectations of the project Preferable locations for LC Takeaway material Project presentation, inviting feedback and establishing contacts Overview of the company Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Project presentation, inviting feedback and establishing contacts Overview of the activities of the GRDC Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Cooperation with EBRD Project presentation, inviting feedback and establishing contacts Overview of the EBRD involvement in transport projects Development plans Expectations of the project Preferable locations for LC Inception Report Annex 2 List of meetings Page 19 of 37

77 March 2009 Germany Institutions / Events / Persons Met Participants Issues Discussed / Investigated Willi Betz International Spedition, Reutlingen, Germany Mr Thomas Betz (tw.), Technical Manager Ukraine Odessa Commercial Sea Port Mr Mikhail Shaposhnikov,Head of Development and External Relations Department of the Odessa Sea Commercial Port Mr Morij Andreij Gregorjevic, Deputy Port General Director on Legal Affairs of the Odessa Sea Commercial Port Mr Bronislav M Sukhodolskyy, Executive Director, HPC Container Terminal Ports of Ukraine Publish House, Odessa Mrs Natalija Minkina, Editor - reporter, Ports of Ukraine Publishing House Mr Armin Hansmann Mr Jan Scheele Mr Vytautas Paulauskas Mr Jan Scheele Mr Vytautas Paulauskas Development of transport by W. Betz in South-Eastern Europe, Caucasus and Central Asia Quality of transport infrastructure Handling procedures at the borders Assessment of potential LC sites Project overview Budget approval procedures New Port law as a major bottleneck for required new private investment Port fees, penalties and other port and cargo handling fees in the port Overview of Hamburg Port Consultant (HPC) Container Terminal Container handling statistics Project presentation Overview of Ports Of Ukraine Publish House Takeaway material: book Ports of Ukraine (Russian and English) and journal Ports of Ukraine No with statistics for the 2009 Inception Report Annex 2 List of meetings Page 20 of 37

78 Institutions / Events / Persons Met Participants Issues Discussed / Investigated IIyichevsk Commercial Sea Port Mr Lutsenko Ananoliy, Deputy Director of Department for Development and Investment of IIyichevsk Commercial Sea Port Mr Alexey G. Khomenko, Deputy General Director Foreign Economic Activity and Investments of IIyichevsk Commercial Sea Port Mr Nezavtin Stanislav, Harbour Master, IIyichevsk Commercial Sea Port Mr Slabodnichenko Andrey, Technologist of Technological Department of IIyichevsk Commercial Sea Port Mrs Blagodir Helen, Leading Specialist of the Department for Development of Investments of IIyichevsk Commercial Sea Port State Administration of Railway Transport of Ukraine, Kiev Mr Viktor Kushnirchuk, Head of Commercial Department, State Administration of Railway Transport of Ukraine Mr Anatoly Prybatyen, Head of Combined Transportation and Operational Activity Department, State Administration of Railway Transport of Ukraine Mr Jan R. Scheele Mr Vytautas Paulauskas Mr John Standingford Mr Hannes Rueger Unavailability of Port Performance Indicators Development plans Major bottlenecks Throughput statistics of IIyichevsk Commercial Sea Port Custom Procedures Preferable locations for ILC Brief outline of the ILC project Legal environment Logistics Centres: Ukraine s needs Transit traffic International forwarders involvement Border control/customs procedures Impacts of crisis Inception Report Annex 2 List of meetings Page 21 of 37

79 Institutions / Events / Persons Met Participants Issues Discussed / Investigated World Bank in Ukraine, Kiev Mrs Tatyana Dyachenko, Trade and Transport Facilitation Diagnostics Consultant Odessa Euro Terminal (dry port) Office Mr Vanenkov Mikhail, Deputy Director on Commerce and Development, Limited Liability Company Euro Terminal (dry port) Project Support to the Integration of Ukraine in the Trans-European Network TEN-T, Kiev Mr Douglas Rasbash, Team Leader, TEN-T Ukraine Project Mr Ebby Adhami, Director, Corporate Solutions (Lead Consultant) Mr Anthony Pearce, Senior Adviser, Road Sector Project Accession and Implementation by Ukraine of International Agreements and Conventions in Transport, Kiev Mr Marc Graille, Team Leader Mr Andreas Schoen Mr Jan R. Scheele Mr Vytautas Paulauskas Mr John Standingford Mr Michel Prouzet Mr John Standingford World Bank activities in rail and road transport Current transport-related studies Past TRACECA projects Objective indicators available online ( Legal System Introduction and project overview Overview of LLC Euro Terminal Euro Terminal future development plans LCs in Europe Peculiarities of public owned logistic centres and those operated by private operators Inter-project coordination Government organisation Transport strategy and planning Obstacles to international transport and logistics centres Multimodalism Sea ports Container routes Black Sea Ring Highway Economic Cooperation Organisation (ECO) Law on freight forwarding Introduction and project overview Brief overview of the IAC(U) project Problems with laws and legal processes General Problems with laws and legal processes - Transport sector PPP law Customs Transport policy Transport subsectors Inception Report Annex 2 List of meetings Page 22 of 37

80 Institutions / Events / Persons Met Participants Issues Discussed / Investigated TRACECA Project Land Transport Safety and Security Mr Rudolf Kamphausen, Team Leader, TRACECA Land Transport Safety and Security Project Mrs Angela Huzun, Project Coordinator Support to the integration of Ukraine in the trans- European Transport network TEN-T, IIyichevsk Olga Seniuk, Local Expert Project Ukraine Ports Feasibility Study, Odessa Mr Michael Bennett, Team Leader of the Project Moldova Mrs Olena Nevmerzhytska Mr John Standingford Mr Jan Scheele Mr Vytautas Paulauskas Mr Jan Scheele Mr Vytautas Paulauskas Overview of ILC project Overview of Safety and Security project Inter-project cooperation Overview of both projects Inter-project cooperation Dry ports situation in Illychevsk and Odessa Ukraine Transport Policy, legal documents and their status Overview of both projects Inter-project cooperation Exchange of information about the status of laws and regulations, customs procedures, port state control, health and environmental authorities Ministry of Construction and Territorial Development of the Republic of Moldova, Chisinau Mr Andrei Cuculescu, Head of Investment and Infrastructure Development Division of the Ministry of Construction and Territorial Development of the Republic of Moldova TRACECA National Secretariat in Moldova, Chisinau Mr Eduard Biriucov, TRACECA National Secretary Mr Jan Scheele Dr George Doborjginidze Mr Jan Scheele Dr George Doborjginidze Introduction of the ILC project Responsibilities of Ministry Planned road projects in Moldova Statistics of cargo traffic in Moldova Inception Report Annex 2 List of meetings Page 23 of 37

81 Institutions / Events / Persons Met Participants Issues Discussed / Investigated River Port of Giurgiulesti, EFZ, Danube Logistics SRL Mr Edgar Martin, Port Director Mr Alexander Di Leonardo, Business Development Executive Azerbaijan Mr Jan Scheele Dr George Doborjginidze Introduction of the ILC Project Introduction of the EFZ Danube Logistics SRL Share holding and оwnership, relationship with Government Organization of the Port Current status of сonstruction Services to be provided Outlook and future plans Cooperation with Constantza Port Interested to become an ILC Safety, security and environmental response plans Customs services and procedures Expected cargo throughput Rail and road connections Bottlenecks Site Visit Permanent Secretariat of the IGC TRACECA, Baku Mr Rustan Jenalinov, Secretary General of the IGC TRACECA Mr Bodo Roessig Mrs Yulia Usatova Project presentation, inviting feedback and establishing contacts Expectations of the project Takeaway material New port in Baku new site development, documentation and presentation of the concept of the new port Inception Report Annex 2 List of meetings Page 24 of 37

82 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Permanent Secretariat of the IGC TRACECA, Baku Mr Akif Mustafayev, TRACECA National Secretary in Azerbaijan Ministry of Transport of Azerbaijan Republic, Baku Mr Javid Najarov, Head of Administration Mr Fikrte Babayev, Head of International Relation Department Ministry of Transport of Azerbaijan Republic, Baku Mr Sadraddin Mamedov, Head of Transport Policy and Economy Department State Customs Committee of Azerbaijan Republic, Baku Mr Shahin Soltan, Head of the Main Department Mr Andreas Schoen (as introductory meeting) Mr Bodo Roessig Mrs Yulia Usatova Mr Andreas Schoen (as introductory meeting) Mr Bodo Roessig Mrs Yulia Usatova Mr Andreas Schoen Major bottlenecks Development plans Expectations of the project Preferable locations for LC position of the Azerbaijan Government Takeaway material New port in Baku new site development, documentation and presentation of the concept of the new port Project presentation, inviting feedback and establishing contacts Development plans Expectations of the project Project presentation, inviting feedback and establishing contacts Throughput statistics Development plans Expectations of the project coordination with the new project of development of the Baku port Preferable locations for LC in Alat concept of a satellite logistics centres Takeaway material Inspection of the site development documents Project presentation, inviting feedback and establishing contacts Throughput statistics Development plans Expectations of the project Involvement of customs Takeaway material Inception Report Annex 2 List of meetings Page 25 of 37

83 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Project Analysis of Traffic Flows in TRACECA countries and Interregional Dialogue between the EU and NIS, Baku Mrs Ingrid Angela Goessinger, Team Leader / TRACECA Liaison Officer International Sea Trade Port of Baku, Baku Mr Vahid Aliyev, First Deputy General Director Mr Soltan Kazimov, Technical Director Bulgaria Mr Andreas Schoen (as introductory meeting) Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Exchange of view on mutual collaborations of the projects Communication plans and information exchange Takeaway materials Project presentation, inviting feedback and establishing contacts Port development plans Port statistics Presentation of the development plans for the new port locations in Alyat Site inspection Discussions on major traffic flows and bottlenecks and soft barriers Ministry of Transport of Republic of Bulgaria, Sofia Mrs Tonka Yankova Expert in National Transport Policy directorate, Ministry of Transport Mr Boyko Kalachev, Chief Expert in Monitoring Department, Ministry of Transport National Transport Policy Directorate, Ministry of Transport of Bulgaria, Sofia Mrs Tonka Yankova Expert in National Transport Policy Directorate, Ministry of Transport Mr Andreas Schoen Mr George Doborjginidze Mr Jan Scheele Mr Andreas Schoen Mr George Doborjginidze Mr Jan Scheele Project presentation, inviting feedback and establishing contacts Overview of responsibilities of the Ministry of transport in Bulgaria Main infrastructure projects Market overview Major bottlenecks Strategy for the development of transport infrastructure in Bulgaria Development of intermodal terminals Master plan of the infrastructure development in Sofia Inception Report Annex 2 List of meetings Page 26 of 37

84 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Bulgarian State Railways (BDZ), Sofia Mr Krasimir Angelov, Head of Projects Unit Mrs Angelina Kurisheva, Senior Expert in the Directorate of International Relations Mr Dian Boev, Chief of Trade Department BDZ Cargo Ltd, Sofia Mrs Nadya Ganeva, Head of Sector Information Systems and Technologies National Railway Infrastructure Company, Sofia Mr Emil Lozanov, Head of Sector Strategic Development Mrs Penka Dilova, Head of Sector Monitoring of SOPT Mr Andreas Schoen Mr Jan Scheele Mr George Doborjginidze Mr Andreas Schoen Mr Jan Scheele Mr George Doborjginidze Mr Andreas Schoen Mr Jan Scheele Mr George Doborjginidze Project presentation, inviting feedback and establishing contacts Overview of the department Organizational structure of BDZ Major bottlenecks Throughput statistics Railway market overview, competitors, private rail companies Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Inception Report Annex 2 List of meetings Page 27 of 37

85 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Intermodal, Shortsea and Inland Waterway Promotion Association, Sofia Mr Georgi Petkov, Director The National Association of Freight Forwarders, Sofia Mr Ivan Petrov, Vice President Mr Georgi Minchev, Chairman Maritime Administration Republic of Bulgaria, Sofia Mr Anton Pashov Mr Andreas Schoen Mr Jan Scheele Mr George Doborjginidze Mr Andreas Schoen Mr Jan Scheele Mr George Doborjginidze Mr Jan Scheele Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Overview of the NSBS Overview of problems in the Bulgarian transportation sector Logistics market overview Problems in the railway operation Existing infrastructural bottlenecks Customs clearance procedures Preferable locations for LC Necessity of LC in Sofia Site inspection Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Inception Report Annex 2 List of meetings Page 28 of 37

86 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Port of Varna, Varna Mr Danail Papazov, Executive Director Mrs Irina Gevezieva, Senior Expert of Statistics and Analyses PORTCONSULT Dept. Mr Veselin Kapakchiev, Director Mobille Ltd, Varna Mr Angel Safev, Managing Director Port of Bourgas Mr Capt. Tanyo Ivanov, Chief for Marketing and QA Dpt Mr Jan Scheele Mr George Doborjginidze Mr Jan Scheele Mr George Doborjginidze Mr Jan Scheele Mr George Doborjginidze Project presentation, inviting feedback and establishing contacts Overview of the Port Organisational structure in the maritime sector Major bottlenecks Throughput statistics Development plans Regular services of the Port No port performance indicators available Project presentation, inviting feedback and establishing contacts Major bottlenecks Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection No port performance indicators available Inception Report Annex 2 List of meetings Page 29 of 37

87 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Ports Infrastructure, Bourgas Mr Smanimir Georgiev, Director Romania Mr Jan Scheele Mr George Doborjginidze Project presentation, inviting feedback and establishing contacts Overview of the department Major bottlenecks Throughput statistics Development plans Expectations of the project Preferable locations for LC No Port Performance Indicators available Site inspection CRF MARFA Terminals (Romania Railway Freight Company), Bucharest Mr Constantin Ruxanda, Head of Container Department Mr Dragan Petre Dania, Director of Bucharest Sud Container Terminal National Union of Road Hauliers from Romania, Bucharest Mrs Ioana Ciorzan, Department Internal and External Affairs National Union of Road Hauliers from Romania Mrs Roxaha Radu, Department Internal and External Affairs National Union of Road Hauliers from Romania Mr Jan Scheele Mr Vytautas Paulauskas Mr Jan Scheele Mr Vytautas Paulauskas Project presentation, inviting feedback and establishing contacts Visit of Bucharest Sud Container terminal Visit of Bucharest Progress Intermodal terminal Overview and development plans of Intermodal terminals in Bucharest Project presentation, inviting feedback and establishing contacts Overview of the Road Hauliers Association UNTRR Border crossing procedures for High Risk Countries Inception Report Annex 2 List of meetings Page 30 of 37

88 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Constanta Port, Constanta Mrs Andreea Nistor, Commercial Manager port Of Constanta Mrs Cristiana Racautaniu, Head of International Affairs Port Of Constanta Mrs Aleksandra Papescu, Port Representative in Romania Intermodal Platform CFR MARFA Ferry Company, Constanta Mr Jan Scheele Mr Vytautas Paulauskas Project presentation, inviting feedback and establishing contacts Overview of the Constanta Port Development plans Overview of other projects in Romania and possible links with presented by Consultants project Mr Constantin Nita, CFR MARFA Ferry Company technical director Mr Marin Ionescu, CFR MARFA Ferry Company Administrative director Mrs Nicoleta Apostal, Head of Romania Intermodal Association Mrs Aleksandra Papescu, Port Representative in Romania Intermodal Platform CONSTANTA RIA (Romania Intermodal Association), Constanta Mrs Nicoleta Apostal, Head of Romania Intermodal Association Mrs Aleksandra Papescu, Port Representative in Romania Intermodal Platform Mr Jan Scheele Mr Vytautas Paulauskas Mr Jan Scheele Mr Vytautas Paulauskas Brief outline of the ILC project Presentation of CFR MARFA Ferry Company Tariffs Possibilities of improving the poor condition of the Company Project presentation Overview of the RIA Presentation of the World container terminal Inland waterways container shipping lines Development plans Inception Report Annex 2 List of meetings Page 31 of 37

89 Institutions / Events / Persons Met Participants Issues Discussed / Investigated DB Schenker Romtrans, Constanta Mr Andrian Vlad, Head of the DB Schenker Romtrans in Constanta Mrs Nicoleta Apostal, Head of Romania Intermodal Association Mrs Aleksandra Papescu Port Representative in Romania Intermodal Platform Romania Ministry of Transport TRACECA SECRETARIAT, Bucharest Mr. Barcila Dumitru, Advisor, Ministry of Transport Romania, Department of Railway Transport Mr Serban Daniel, Expert, Ministry of Transport Romania, Maritime Department Mr Parvo Marcel, Office Chief, Ministry of Transport Romania, State Aviation Administration Mr Stoica Gheorghe, Project manager, National Freight railway Company MARFA Romania Ministry of Transport, Bucharest Mr Sorin Sirbu, General Manager, Ministry of Transport Romania, General Directorate for Infrastructure and Road Transport Mr Eduard Ungureanu, Senior Counsellor, Ministry of Transport Romania, General Directorate for Mr Jan Scheele Mr Vytautas Paulauskas Mr Jan Scheele Mr Vytautas Paulauskas Mr Jan Scheele Mr Vytautas Paulauskas Project presentation, inviting feedback and establishing contacts Overview of the DB Schenker Romtrans Customs service Project presentation, inviting feedback and establishing contacts Current situation with Intermodal Terminals in Romania Overview about maritime and inland water transport main running projects in Romania Preferable locations for ILC Other TRACECA projects Contacts with other organisations Project presentation, inviting feedback and establishing contacts Overview of Directorate Activities and Responsibilities Preferable locations for the Public Logistics Centres in Romania related to the TRACECA and other Transport Corridors crossing Romania Romania Transport Strategy Inception Report Annex 2 List of meetings Page 32 of 37

90 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Infrastructure and Road Transport Turkey Ministry of Transport and Communications, Ankara Mr Baris Tozar, TRACECA National Secretary in Turkey / Counsellor of Minister Mr Izzet Isik, TRACECA National Secretariat Turkey Mrs Secil Ozyanik, TRACECA National Secretariat Turkey Joint stakeholder meeting organised by Ministry of Transport and Communication, Ankara Mr Hasan S. Tasus, Commercial Manager / Charter Cargo of MNG Airlines, Turkey Mr Serkan Selik, EU Expert, Directorate General Civil Aviation Mr Abdulkadir Aksu, Chief of the Section Turkish Railways Mr Orhan Aksay, TCDD Turkish Railways Katircioglu, Trucking company, Istanbul Mr Hakan Ates Mr Andreas Schoen Mr Bodo Roessig Mrs Yulia Usatova Mr Andreas Schoen Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Project presentation, inviting feedback and establishing contacts Expectations of the project Takeaway material Project presentation, inviting feedback and establishing contacts Throughput statistics Development plans Expectations of the project Preferable locations for LC Takeaway material Site inspection Project presentation, inviting feedback and establishing contacts Structured interview Development plans Issues encountered by operators Inception Report Annex 2 List of meetings Page 33 of 37

91 Institutions / Events / Persons Met Participants Issues Discussed / Investigated TCDD, Haydarpasa Port, Istanbul Mr Dursun Arpacioglu, Port Operation Manager Mr Erdal Gemici, Assistant to the Port Operation Manager Akport, Istanbul Teriktag Port Operator Mr Mehmed S. Bosna, Director Sales and Marketing Mr Cenk Mehmed Anil, Marketing Manager UN RORO Terminal, Istanbul Site visit - location proposed as a potential logistics centre for Istanbul by municipality and UND Ulusoy Sea Lines Management S.A., Istanbul Mr Volkan Erucar, Marine Superintendent Mr Onder Ulas Basboga, Manager International Transporters Association (UND), Istanbul Mrs Mine Kaya, Chairman of Executive Committee Mr Aybek Abdrahman, Member of Executive Committee Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Project presentation, inviting feedback and establishing contacts Structured interview Port statistics Links to TRACECA corridor Bottlenecks and recommendations Site inspection Project presentation, inviting feedback and establishing contacts Structured interview Port statistics Links to TRACECA corridor Bottlenecks and recommendations Site inspection Site inspection Structured interview Links to TRACECA corridor Motorways of the Sea concept Project presentation, inviting feedback and establishing contacts Structured Issues of the operators Soft constrains in transportation process Logistics activities Statistics Development plans Inception Report Annex 2 List of meetings Page 34 of 37

92 Institutions / Events / Persons Met Participants Issues Discussed / Investigated TCDD Samsun Seaport, Samsun Mr Temel Demir, Port Manager Cenk Group, Samsun port, Shipping Line Mr Nihat Budanoglu, Branch Manager Ulusoy Karadengiz Black Sea RORO and Container, Samsun Mr Tuncer Ucuncuoglu, Branch Coordinator TCDD Logistics Village, Samsun Mr Adil Tekin, Manager Trabzon Port Akbayrak Group of Companies, Port Operator Mr Muzaffer Ermis, Port Manager Abdullah Cakir Shipping Agency, Trabzon Mr Yusuf Cakir, Managing Director, Advisor of the Chairman of the Chamber of Commerce Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Project presentation, inviting feedback and establishing contacts Structured interview Port statistics Links to TRACECA corridor Bottlenecks and recommendations Site inspection Operation issues Transportation on TRACECA Operation issues Transportation on TRACECA Site inspection Development plans Recommendations Project presentation, inviting feedback and establishing contacts Structured interview Port statistics Links to TRACECA corridor Bottlenecks and recommendations Site inspection Operation issues Transportation on TRACECA Inception Report Annex 2 List of meetings Page 35 of 37

93 Hopa Port Institutions / Events / Persons Met Participants Issues Discussed / Investigated Mr Oguz Capkinoglu, Port Operations Manager, Park Denizcilik Yeniguller Forwarder, Hopa Mr Ibragim Yenigul, Manager Site visit to the Turkish Georgian Border (Sarpi) - Site visit, observations Interviews with truck drivers waiting at border TRACECA Turkey, Izmir Mrs Secil Ozyanik, Expert TRACECA National Secretariat Turkey Izmir Port Mr Ismet Canbaz, Port Manager Izmir Port, Turkish Railways Manisa Industrial Zone, Izmir Mrs Funda Karaboran, Deputy Director Site visit, observations Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mr Bodo Roessig Mrs Yulia Usatova Mrs Secil Ozyanik Mr Bodo Roessig Mrs Yulia Usatova Mrs Secil Ozyanik Mr Bodo Roessig Mrs Yulia Usatova Mrs Secil Ozyanik Project presentation, inviting feedback and establishing contacts Structured interview Port statistics Links to TRACECA corridor Site inspection Structured interview Operator issues Transportation on TRACECA Site inspections Interviews with drivers Recap of the 1st part of the mission to Turkey Development plans in terms of logistics Project presentation, inviting feedback and establishing contacts Structured interview Port statistics Links to TRACECA corridor Bottlenecks and recommendations Site inspection Project presentation, inviting feedback and establishing contacts Structured interview Operation concept for a logistics centre Logistics centre site inspection Inception Report Annex 2 List of meetings Page 36 of 37

94 Institutions / Events / Persons Met Participants Issues Discussed / Investigated Barsan Global Logistics, Aegean Region, Izmir Mr Huseyin Isteermis, Aegean Region Director a partner of Mosbar consortium Mr Ahmed Akman, Operation Chief Mr Erkan Aksoy, Deputy Regional Director April 2009 Ukraine Ministry of Transport and Communications of Ukraine (MoTC), Kiev Mr Hrigory Lehenkiy, Head of Transport Systems Coordination and Development Department Mr K. Savchenko, Deputy Head of the Department of Development and Coordination of the Transport Systems and Communications Mrs Antonina Kuzmenko, Deputy Head of the Department of Development and Coordination of the Transport Systems and Communications Mrs Svetlana Lipinska, Department Specialist, Responsible for International Logistics Centres CJSC UVK Mr Oleg Kalensky Mr Bodo Roessig Mrs Yulia Usatova Mr Andreas Schoen Mr Hannes Rueger Mrs Olena Nevmerzhytska Mr John Standingford Mrs Katerina Bassova Issues encountered by operators Development plans Transportation on TRACECA Overview of project status quo Status of harmonisation of borders controls, procedures and documentation in Ukraine Current status of project related working groups Background and mechanisms for setting tariffs Current status of the railway reform programme Legal framework for multimodal transport and logistics nodes in Ukraine Initial remarks on possible ILC sites Brief outline of the ILC project Overview of UVK company profile, facilities and services Demands and Interest in future ILC Inception Report Annex 2 List of meetings Page 37 of 37

95 International Logistics Centres for Western NIS and the Caucasus in Armenia, Azerbaijan, Georgia, Moldova and Ukraine Inception Report Annex 3 Traffic flow analysis and characterisation of the nature and the condition of operating infrastructure and facilities within the network April 2009 This project is funded by the European Union A project implemented by Dornier Consulting GmbH / NTU / Inros Lackner AG

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97 ANNEX 3 INTRODUCTION EXECUTIVE SUMMARY & METHODOLOGY AND APPROACH

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99 TABLE OF CONTENTS LIST OF ABBREVIATIONS EXECUTIVE SUMMARY DIRECT BENEFICIARY TRACECA COUNTRIES... 9 Armenia... 9 Azerbaijan... 9 Georgia Moldova Ukraine INDIRECT BENEFICIARY TRACECA COUNTRIES Bulgaria Romania Turkey METHODOLOGY AND APPROACH PART 1 CARGO FLOWS AND TRANSPORT NETWORK CAPABILITIES PART 2 TRANSPORT INFRASTRUCTURE AND MAIN LOGISTICS NODES Inception Report Annex 3 Introduction Page 1 of 18

100 Page 2 of 18 Annex 3 Introduction Inception Report

101 LIST OF ABBREVIATIONS 2PL 3PL ADB ADDY ADR AFD AFER AGTC AIA AIFU AIFFU ARD Arkas ARMCO ASYCUDA ATP BALO BASPA BCT BESEC URTA BGL BSEC BTC BDZ CASPAR CCL CFR Second Party Logistics Provider. Third Party Logistics Provider. Asian Development Bank. Azerbaijan State Railway. Agreement on Dangerous goods by Road. French Development Agency. Romanian Railway Authority. European Agreement on Important International Combined Transport Lines and Related Installations. Armenian International Airports. International Forwarders Association. Association of International Freight Forwarders of Ukraine. Armenian Road Directorate. Arkas Shipping and TransportSA, Izmir. Armenian national trade & transport facilitation committee (in existence ). Automated SYstem for CUstoms Data (computer software developed by UNCTAD). Autonomous Trade Preferences (EU scheme to extend selective preferences to non-member countries, including Moldova). Western Anatolia Logistics Organisation. Black and Azov Seas Port Association. Baku Cargo Terminal. Union of Road Transport Association in the Black Sea Economic Cooperation Region. Barsan Global Logistics. Back Sea Economic Cooperation pact/organization. The permanent secretariat is at Istanbul. The membership comprises this project s eight beneficiary countries plus Albania, Greece and Russia. Baku-Tbilisi-Ceyhan pipeline. Bulgarian State Railways. Caspian Shipping Company. Shipping Line belonging to GF Group an Italian Company. National Railway Company - Compania Nationala de Cai Ferate CFR SA (Romania).. Inception Report Annex 3 Introduction Page 3 of 18

102 CIA Central Intelligence Agency (US Government agency). CIS Commonwealth of Independent States (former republics of the USSR) also called NIS. CMA See CMA/CGM. CMA/CGM Container Shipping Line based in Marseilles. COSCO China Ocean Shipping Company. CSCL China Shipping Container Line. CWG Customs Working Group. DHL Deutsche Post DHL. DP World Largest Marine Terminal Operator in the world, Dubai. DTCSDC Directorate of Transport and Communication System Development and Coordination. DWT Deadweight. EASA 145 European Aviation Safety Agency. EBRD European Bank for Reconstruction and Development. EC European Commission. ECMT European Conference of Ministers of Transport. EDI Electronic Data Interchange. EDP Electronic Data Processing. EHS Environmental Health and Safety. EIB European Investment Bank. E-Road International E-road network. ENP European Neighbourhood Policy. EU European Union. EUR Euro (also abbreviated as ). FEZ Free Economic Zone (where imports and internal transactions are free of tax). FIATA Federation Internationale des Associations de Transitaires et Assimiles (International Federation of Freight Forwarders Associations). FMCG Fast Moving Consumer Goods. FSC Flag State Control (maritime terminology). GDCA General Department of Civil Aviation of the Government of the Republic of Armenia. GDP Gross Domestic Product (the value of goods and services produced within a country, usually an annual amount either in the domestic currency or in US dollars. It may be expressed in terms of purchasing power parity (PPP: see below). GIFP Giurgiulesti International Free Port. Page 4 of 18 Annex 3 Introduction Inception Report

103 GOSKOMSTAT State Committee for Statistics (CIS Counties). GRECO Council of Europe Group of States Against Corruption. HACCP Hazard Analysis and Critical Control Points. HHLA Hamburger Hafen und Lagerhaus AG. HMM Hyundai Merchant Marine. HPC Hamburg Port Consultant. IATA International Air Transport Organisation. ICAO International Civil Aviation Organization. IFFA International Freight Forwarders Association. IFI International Financial Institution (for example EBRD, EIB, World Bank). IFZ Industrial Free Zone (similar to an FEZ, intended for manufacturing and related activities). IGC Intergovernmental Commission TRACECA. ILC International Logistics Centre. IMF International Monetary Fund. IMISK Logistics provider and trading company. IMO International Maritime Organisation. IRF International Road Federation. IRU International Road Transport Union (association of the road transport industry, including truck operators, and international guarantor of the TIR carnet system). ISO ISPA ISPS ISTPB ITF JAR145 JBIC JHA JICA JSC JV Kalder KfW K-line International Organization for Standardization. Instrument for Structural Policies for Pre-Accession. International Shipping and Port Security. International Sea Trade Port of Baku. International Transport Forum. Joint Aviation Authority / Approved Maintenance Organisation. Japan Bank of International Cooperation. Justice and Home Affairs (the 3 rd pillar of the EU, covering corruption inter alia). Japan International Cooperation Agency. Joint Stock Company. Joint Venture. Turkish Society for Quality (Turkish). KfW Bankengruppe. Kawasaki Shipping Line. Inception Report Annex 3 Introduction Page 5 of 18

104 LC Logistic Centre. LCL Less than full Container Load. LiLo-1 Lilo-1 Ltd, terminal operator. LLC Limited Liability Company. LSGLGA Local Self-Government and Local Government Act. Maersk Container and logistics operator. MASBAR Manisa Free Zone and Barsan Logistics. MCA Multi-Criteria Analysis (also known as Multi-Variate Analysis,MVA). MCC Millennium Challenge Corporation (US Government agency). MCG Millenniums Challenge Georgia. MCL MCL Feeders Ltd. Shipping Line operation in the Mediterranean. MLA Multilateral Agreement (TRACECA). MLWG Multilateral Legal Working Group. MNG Airline situated in Istanbul operating air freight (Turkish). MoT / MOT Ministry of Transport. MoTC Ministry of Transport and Communication. MSC Mediterranean Shipping Company. MSG MSG Container Ship Operator. MSI Management Systems International. MTT International Railway Transit Tariff (originally a Soviet tariff schedule). NCA National Customs Agency. NGO Non-Governmental Organisation. NIS Newly Independent States (former republics of the USSR) also called CIS. NLWG National Legal Working Group. NYK Nippon Yusen Kaisha Shipping Line. OIZ Organized Industrial Zone (Turkey). OPIC Overseas Private Investment Corporation (Us government agency). PAN Pan-European transport corridors. PID Project Information Document (World Bank). PPP (1) Public-Private Partnership. PPP (2) Purchasing Power Parity (GDP or some other measure of national or per capita income, adjusted for price levels relative to those of the USA). PS Permanent Secretariat. PSA Port operating Company based in Singapore. PSC Port State Control (maritime terminology). Page 6 of 18 Annex 3 Introduction Inception Report

105 PSIGC Permanent Secretariat of the Intergovernmental Commission TRACECA. RaK Ras al Khaimah. RAKIA Government of Ras al Khaimah RAK Investment Authority. RODER RoRo and Rola associoation (Turkish). Ro-Ro / RoRo Roll on Roll off (applied to rail and ferry operations where rail cars and road vehicles are carried). SCR South Caucasian Railways. SECI Southeast European Cooperation Initiative. SJSC State Joint Stock Company. SNCFR Romanian Railways National Company (now defunct). SOCAR State Oil Company. TACIS Technical Aid to the Commonwealth of Independent States. TCDD Turkish Railways (Turkish). TDI Turkish Maritime Administration (Turkish). TEN-T Trans-European Transport Network. TEU Twenty-foot Equivalent Unit (a 20 shipping container or its equivalent; for example a 40 container is 2 TEUs). TFWG Trade Facilitation Working Group. TI Transparency International. TINA Transportation Infrastructure Needs Assessment. TIR Transports Internationaux Routiers (usually pronounced Teer in all langages). TIR carnet Single document that must accompany transit cargoes under the TIR system. TND Turkish Transport Association. TNT TNT Express. ToR / TOR Terms of Reference (of the present project, unless stated otherwise). TRACECA TRAnsport Corridor Europe Caucasus Asia. UASC United Arab Shipping Company. UFS UFS Shipping International, Hang Kong. UN United Nations. UNCTAD United Nations Conference on Trade And Development. UND International Transport Association (Turkish). UNECE United Nations Economic Commission for Europe (also UN-ECE). UNTRR Romanian Road Hauliers Union. USAID United States Agency for International Development. Inception Report Annex 3 Introduction Page 7 of 18

106 USCTS Ukrainian Centre of Transport Service. USD USSR UZ WTO United States Dollar (also abbreviated as US$). Union of Soviet Socialist Republics (Soviet Union). Since its dissolution it is often referred to as the Former Soviet Union (FSU). Ukrainian Railways. World Trade Organization. Note: Standard ISO abbreviations are used where appropriate; for example ha [hectare(s)], m [metre(s)], m 2 [square metre(s)], m 3 [cubic metre(s)], t [tonne(s)], kt [kilotonne(s)], Mt [megetonne(s)]. An apostrophe may denote minutes [for example: N] or feet in the imperial measurement system [for example: 20 container]. Page 8 of 18 Annex 3 Introduction Inception Report

107 1 EXECUTIVE SUMMARY 1.1 Direct Beneficiary TRACECA Countries Armenia Armenia is a land-locked country, bordering with Georgia, Azerbaijan, Turkey and Iran. The economy is mainly agricultural, with some development of the service sector during the last years. Exported are mining products, followed by food and beverages, and precious stones. Import is crucial for Armenia, covering a wide range of products and for times higher in terms of value. After stable two-digit growth rates after 2000, Armenia is now severely hit by the global financial and economic crisis, a shrinking of the economy being predicted for The transport network (rail and road) is mainly inherited from Soviet times, well developed by capacity standards, but does not correspond to European standards in terms of general condition, average speed and safety. A main hindrance for the development of international traffic, economic development and investment are the transport costs, which are extremely high in comparison with neighboring countries. The borders to Azerbaijan and Turkey for road and rail transport are closed, limiting international transport to the rail and road connections to Georgia (ports of Poti and Batumi) and a road connection to Iran. A re-opening of the railway connection to Kars (Turkey) is envisaged at the moment. In terms of upgrading the international network, the main attention is given to the North-South road corridor, connecting Georgia and Iran through Armenia. End of 2009, construction work is scheduled to begin on first sections on the way from Yerevan to the Georgian border. Strategically, a new railway connection from Sevan-area to Iran is under consideration, but not likely to be implemented in the near future. The logistics sector is emerging, only. The road transport sector is dominated by freight forwarding companies (including Georgian). The railway is operated by the South Caucasian railways, a 100% daughter of the Russian railways, on a concession basis. Multimodal container handling is concentrated in Yerevan, at four container terminals. Before the crisis, these facilities were working at the limit of their capacities. During the expert visit the former industrial zone on the way to Zvartnots International airport and near Erubeni military airfield was identified as suitable area for a logistics centre, as railway access is available and taking into account the currently limited opportunities for expansion at the present container handling facilities. Azerbaijan Azerbaijan is located in Southern Caucasus and covers an area of about 86,600 sq.m. with a population of 8,6 million, whereof 56% resides in urban areas. Azerbaijan is one of the world s oldest oil exporters. Also transit of regional oil reserves remains central to country s economic future. Azerbaijan is developing infrastructure needed to realize rapid growth in oil sector, but the challenge ahead is to ensure growth in the non-oil economy. After gaining its independence, the economy of Azerbaijan has been facing difficulties common to many of the ex-soviet republics until With complex economic measures the GDP growth rate was 10.2% in 2005 and rocketed to 25% in For 2008, the national statistics reported modest 10.8% growth. The latest IMF assessment confirmed 2008 figures, but further outlook remains uncertain. Inception Report Annex 3 Introduction Page 9 of 18

108 Azerbaijan is well situated on the crossroad of major international traffic routes including. Azerbaijan s geographical position makes it an important link between the Black and Caspian Seas (TRACECA) and between Russia and Iran (North-South Corridor). Reinforcement of the two transit corridors has to permit to give transport capacity corresponding to the trade relations development between Europe, Russian Federation and Asia. The international road network is generally well developed and is being constantly upgraded. The rail transport sector is not in optimal condition but workable. Maritime transport plays an important role, especially for the oil cargos. There is also scattered containerized transportation of supplies for oil industry. The maritime industry of Azerbaijan consists of state owned companies with a monopolistic behaviour. These are Maritime Administration and Caspian Shipping Company. The Maritime Administration of Azerbaijan is the national regulatory body for implementation of State policy in the maritime sector. The Caspian Shipping Company (CASPAR), active in the seaborne transport mainly on the Caspian Sea. In the former Soviet Union all of the ports of the Caspian Sea except Iranian ports were part of CASPAR. Nowadays, the port of Baku functions as an independent State Own Enterprise. Port facilities and equipment are suitable for handling of all major commodity groups including containers. The port was also used as a station for switching cargo between the road and rail transport modes. However, the traffic via the port of Baku is rather small. In 2007 the Government decided to move the current port facilities out of capital city Baku. The new port will be built within 5-6 years period on the completely new site 70 km south to Baku, near Alyat settlement thus making the easy and fast access to both rail and road connections on East-West and North-South corridors. The Ministry of Transport envisages that the new port will be the real hub for all transport and logistics. The location of a logistics centre is included in the master plan of the new port. A number of industrial and manufacturing companies have established a base in that region. The new port will be the real hub for all transport and logistics, collecting the majority of cargo on Caspian. According to the port master plan a logistics centre will be located at its territory. The air freight transport sector in Azerbaijan is a relatively small in volumetric terms when compared to the other modes of transport. In the north of Baku a modern cargo terminal is located. This is one of the largest ones in the Commonwealth of Independent States (CIS). The terminal, equipped to international standards and handles up to 200 ton per day. The Transport Sector Development Strategy was elaborated to face the long-term challenges, existing in the transport sector of Azerbaijan Republic in accordance with the relevant strategic objectives. Azerbaijan is on the right way to improve the overall situation, entailing a political support to changes in the transport procedures and operations. The Government of Azerbaijan is recommended not only to focus on the adoption of regulations and rules but also enforce execution and control procedures. Georgia Georgia is strategically placed between the Black and Caspian Seas, with Russia to the north and Turkey to the south. Its several Black Sea ports and its road and rail networks are important TRACECA links between Europe, the other South Caucasian and Asia. Transit services are provided to and through Georgia s neighbours. These services include carrying oil and oil products via the pipelines that link Baku to the Georgian port of Supsa. Page 10 of 18 Annex 3 Introduction Inception Report

109 The country is rich in minerals (copper and manganese), agricultural production (tea, citrus fruits, wine) and tourism potential; and it has a diverse manufacturing sector. However it is largely import-dependent with respect to energy and most consumer goods. Until the global financial and economic crisis the Georgian economy enjoyed strong growth: the IMF estimated an increase of 12.5% between 2006 and It suffered decline in 2008 but is expected to grow by 4% in Cargo flows are expected to drop by 20-30% however. The road network is in good condition and is being further improved through a number of externally funded projects. The road freight transport industry has undergone fleet modernization and has been increasing its market share. There is ongoing heavy investment in extending and improving the rail network too, including a new 98km line to Kars (Turkey) financed with a low-interest loan from Azerbaijan. Georgian Railway LLC is a state-owned corporation, but the government wishes to privatize it with separation of the ownership/management of infrastructure from the operation of passenger and freight services Poti is the country s biggest container port, handling 220,000 TEU per year. It is managed by a private concessionaire which is committed to invest in modernizing the port. Lack of storage space forces the transfer of containers to eight inland terminals nearby, which is costly and time-consuming. A number of private companies rent space in the port for their operations. Batumi Port is leased to two operators. One has facilities for oil products, general cargo and ferry operations; the other for containers and ferry operations. The port has access problems and limited container storage, and some equipment is yet to be updated. Investment of US$15-20 million is planned. There are four regular shipping services to/from Georgia per month, connecting Batumi Port to Burgas (Bulgaria) and Ilyichevsk (Ukraine). All other calls are by chartered vessels. A number of inland terminals serve Tbilisi and other urban centres. The biggest is Lilo-1, located close to Tbilisi International Airport. It is privately operated and mainly serves as a distribution point for imported goods. Customs clearance and warehousing are provided on-site. It has road and rail connections, as does the Intertrans terminal at a railway station in the city centre with poor road access. Both terminals are in need of substantial renovation. Of Georgia s three international airports only Tbilisi is significant for air freight, which is handled by two specialized companies with facilities inside the airport perimeter and equipment leased from the airport s owner. Before the global financial and economic crisis the annual throughput was 17,500 tonnes. The market is dominated by the freight forwarding industry, which is well developed for a limited range of functions, almost entirely related to import/export activities and local distribution. But there are no logistics centres as such and intermodal infrastructure is lacking. There is a strong consensus that the Tbilisi region would be the most sensible location for an ILC. There are several land plots, owned by different companies near the airport, which could qualify for the development of an International Logistics centre. The only other location that has support is Poti Port. The project Industrial Free Zone will open opportunities to develop logistics facilities and add container handling capabilities, which are limited in the existing ports, provided that the project will be realized as planned before the economic crisis. The concessionaire is committed to investing US$200 million in port expansion and upgrading by Inception Report Annex 3 Introduction Page 11 of 18

110 Moldova Moldova divides the EU from the CIS. It is characterized by its small size (in area and population); low income; large emigrant population; near-landlocked status; and temporary loss of territory and productive capacity to Transdniestrian separatists. The country is largely dependent on its agricultural sector, particularly on its wine exports. It is following a strategy of diversification and employment generation featuring development of nine Free Economic Zones throughout the country. Diversification and improvement of international transport links are also part of this strategy, and transit transport services are recognized as a potentially important invisible export. The road network is in need of rehabilitation. Such activities have been hampered by a cancelation of road project funding by the World Bank and EBRD, which have been leading sources of capital for infrastructural development. There are two candidate locations for an ILC: The Chisinau region provides due to its concentration of population and economic potentials as well as transport node of two international transport corridors promising opportunities for a future regional logistics centre. The Moldovan Railway owns a railway freight terminal with container handling and storage facilities, which are in need of renovation and updating. Giurgiulesti International Free Port (GIFP), situated at the confluence of the Rivers Prut and Danube, which is undergoing phased development by its private owner Danube Logistics. It lacks still a economic hinterland that would provide a sufficiently strong production/consumption base to support a full-scale ILC, but the master plan is projected for future handling of a wide range of bulk and containerised cargoes with the potential for transshipment between sea-going and river-going vessels. Ukraine Ukraine is the second largest country in Europe in terms of area and fifth in terms of population. Furthermore Ukraine is by far the largest and economic most significant country of all five direct beneficiary countries. Ukraine is a lower middle-income country with significant economic potential and a strategic location connecting Europe, Russia, and Asian markets. The countries resources include some of Europe's best agricultural land, significant coal and some oil and gas reserves. The most important Ukrainian export goods traditionally are metallurgical products, chemical goods, machines, food and textiles. The main import products are equipment, vehicles and chemical products. Ukraine depends to a large extent on Russia as an energy supplier. The Ukrainian economy's dependence on steel exports made it particularly vulnerable to the effects of the global financial and economic crisis of 2008 and was hard-hit by the global financial and economic crisis of Demand and prices collapsed for Ukraine s export commodities like steel and chemicals. Ukraine is an important transit country as well as a major hub in European multimodal transport networks connecting the country westbound to the EU, eastbound to (Central) Asia and northsouth with CIS countries. Out of ten Pan-European Transport Corridors that cross Europe, three go through the territory of Ukraine. In addition, since the opening of the Black Sea - Danube Canal, Ukraine is directly connected to Corridor VII, the Danube. The TRACECA corridor passes through the country from Yagodin (Polish border) via Kovel to Odessa/Ilyichevsk. Page 12 of 18 Annex 3 Introduction Inception Report

111 To enhance Ukraine s competitive position as a transit country and location for regional logistics hubs, infrastructure development is a necessary but not sufficient condition. Also trade and transport facilitation and establishment of adequate logistics nodes, contributing to improved level of service and lower transport costs, are of vital importance. The country is implementing a variety of logistics and transport infrastructure related projects. However, logistics system development and networking is still lacking in Ukraine. Ukraine has a total road network of about 165,000 km paved roads. Most of the Ukrainian road system has not been upgraded since the Soviet era, and is now outdated. Rail transport in Ukraine plays the role of connecting all major urban areas, port facilities and industrial centres with neighbouring countries. The railway network in Ukraine extends for 22,473 kilometres and its density is one of the highest among other CIS countries. The inland waterway network consists of about 1,670 km and 15 inland harbours are in operation. Ukraine possesses the most powerful seaport potential among the countries of the Black Sea region. Along its Black Sea and Sea of Azov coastline there are 19 merchant sea ports. The most important are the two ports of Odessa and Ilyichevsk. In Ukraine there is still a lack of intermodal terminals and logistics centres with comparable international standards and capabilities. In recent years the Ukrainian Government has expended 48,7 million UAH on upgrading the six LISKI logistics centres. There are many privately operated logistics centres in Ukraine, but mainly they only have road access. In Odessa region there is the currently still port related LLC Euro Terminal. The airport of Kiev (Borispol), airport Odessa and airport Dnipropetrowsk are the most important international airports of Ukraine. The International Airport Borispol is by far the biggest airport in Ukraine, accounting for 74% of air cargo and mail handling in Ukraine. The main bottlenecks of the Ukrainian transport and logistics network regarding the future development of international logistics centres along the TRACECA corridor are the following: No coherent motorway network and limited traffic capacities; Poor quality of road conditions; Lack of intermodal hubs and logistics nodes; Poor or overloaded road and railway access to the Sea Port Terminals of Odessa and Iliychevsk; Limited infrastructure and service facilities on the crossing border points. International logistics providers and container terminal operators have entered the logistics and transportation market of Ukraine, mainly in Kiev region and nearby or inside the main Ukrainian ports. Some of them have investment plans for the future. On basis of the Terms of References and criteria for an ILC, the following three regions for ILC locations are the main promising candidates: South part of Ukraine Odessa region; Central part of Ukraine Kiev region; West part of Ukraine Lviv region. These regions also were stated and recommended in interviews from national and international logistics providers as well as further stakeholders of the transport and logistics sector in Ukraine. Inception Report Annex 3 Introduction Page 13 of 18

112 1.2 Indirect Beneficiary TRACECA Countries Bulgaria The global financial crisis is causing a economic slowdown in Bulgaria. Bulgaria's GDP increased by 6% in 2008, slower than the 6.2% growth recorded in IMF estimated 2% growth of Bulgarian GDP in this year. The transportation infrastructure in Bulgaria doesn t yet meet the international standards. The main problem in road sector is the chronic lack of maintenance funds and previously postponed repair works. The existing road network has a lack of bypass roads around the main Bulgarian cities. Road connection between Varna/Bourgas Sofia is in poor condition and doesn t have sufficient capacity. The technical condition of railway is underdeveloped. Level of maintenance is unsatisfactory. There is a lack of intermodal infrastructure in Bulgaria. Technology and equipment in the existing intermodal terminals are mainly outdated. The costumers aren t satisfied with the service in the railway terminals operated by Bulgarian Railways (BDZ). The managements of the terminals are inefficient by administration. One of the essential obstacles for efficiency of Bulgarian railway is an absence of regular rail connections between the main industrial and high density regions in Bulgaria. There is absence of regular block train services between the ports Varna/Bourgas and main container destinations in the country. Road transport plays an essential role in the distribution of cargo from the ports. There is a lack of competition in the truck service between Ports and main container destinations. For this reason the shipment prices are extremely high. Bulgarian Black Sea ports are the main transportation hubs in the country, handling 60% of all imports and exports. They are state-owned companies, controlled by Executive Agency "Port Administration". The ports Varna and Bourgas are characterised by a lack of specialization of the terminals. There is a lot of free capacity at the moment. During the visit of the experts the both ports were practically empty. Port of Varna has a poorly developed internal infrastructure. Eequipments in the existing terminals are mainly outdated. Port of Bourgas has well maintained infrastructure. The Port has developed the largest complex for bulk cargoes in Bulgaria. The port completed ammonium nitrate facility, which is not in operation and has never been used. The road transport is still the dominant mode of transportation due to the relatively underdeveloped railway system. Air transport has been neglected. An entrance of the international manufacturers and retailers into the Bulgarian market have resulted the growing demand for complex logistics services in the country. International logistics providers: Shenker, Rhenus, DHL are already operating there. The national transportation companies are mainly focused on the import/export logistics services. Financial crisis hits the transportation industry. According to the personal interviews with the stakeholders of transportation sector the total cargo revenue decreased by 25% in the first quarter of There are some problems created by customs authorities in customs clearance procedures. After Bulgaria s entrance into the European Union the customs bonded cargo has decreased extremely. For this reason the Customs Administration has become less important. Sofia is a key logistics intensive location and industrial centre in Bulgaria. The main manufacturers and international retailers are located there. There is a necessity for the development of intermodal infrastructure and optimization of the rail connections with the ports. The Ministry of Transport of Bulgaria is planning to develop the new railway container terminal in Sofia. There is 73 ha plot identified. The planned location has a good connectivity to road and Page 14 of 18 Annex 3 Introduction Inception Report

113 railway junction but no expansions possibilities. Implementation of intermodal terminal at this location will have a negative impact on traffic in the city as the location is situated practically in the city centre. Romania Romania is strategically located in the Europe, on the frontier between the EU and the CIS; on the Black Sea; and with the River Danube (the continent s principal waterway, designated as Trans-European Transport Corridor VII) passing through its territory and forming most of its southern border. Consequently Romania is an important gateway for the landlocked states of Central and Eastern Europe, in particular Hungary, Slovakia and Austria through whose territories the River Danube flows. In support of this role, Romania s transport infrastructure is extensive and well-connected across its borders with Bulgaria, Serbia, Hungary, Ukraine and Moldova. But in some areas there is a need for renovation and upgrading. Projects are under way in the roads sector, the main one being construction of the A2 Motorway from Bucharest to Constantza which is due for completion in In the railway sector improvement is slower. Despite reorganisation of the Romanian Railways National Company (SNCFR) in 1998 the railway network remains under-developed and inadequately maintained. The same is true of the associated intermodal freight handling facilities and ferry services. The inland waterways network is said to work well, and connects via the Black Sea Danube Canal to Constantza Port on the Black Sea. Constantza is one of the 10 biggest ports in Europe with a good record for efficiency and growth. It has the capacity to handle 120Mt of cargo per year, which is supplemented by the much smaller satellite ports of Midia and Mangalia. Planned developments will substantially increase capacity and handling efficiency. Constantza is a landlord port. It is state-owned and managed by a state-owned company. But individual terminals are operated by private companies, as are all port services (stevedoring, towage, pilotage etc). There are two outstanding locations where new or enhanced logistics services might be synergistic with ILCs in the Black Sea region: Bucharest; it is the capital city and main centre of population, production and consumption. It is the country s main transport hub and international logistics service providers already have a strong presence. Constantza Port; via Romania s road, rail and inland waterway network - including the River Danube it has a very large hinterland in Central and Eastern Europe. It has proved its competitiveness and appeal to private shipping companies and port operators. Turkey The purpose of this report is to provide an assessment of the transport infrastructure network and links in Turkey. The findings result from surveys and a field expert mission carried out in March The assessment is focused on transport links important for the TRACECA corridor. The report provides recommendations for improvement of intermodal transport and logistics relevant for Turkey and TRACECA corridor. Inception Report Annex 3 Introduction Page 15 of 18

114 Turkey plays a significant role in regional integration of TRACECA, Black Sea, Balkan and Mediterranean regions. Its dynamic economy is a complex mix of modern industry, commerce and a traditional agricultural sector. Turkey is an important trade partner for EU and TRACECA countries. However, economic fundamentals are sound, but the Turkish economy according to IMF is to face negative economic indicators in The World Bank ranked Turkey 34 among all the countries analysed in the overall logistics services performance indicator. Among all TRACECA countries in the logistics performance Turkey has scored the best. Turkey has a well developed road network. The TRACECA road route is in excellent condition. The network is further upgraded. The TRACECA road border-crossing point at Sarp is operated at juxtapose basis with Georgia. The importance of railways as for combined transport is given impetus in recent years. A constant upgrade of the railway system takes place. The Turkish railway (TCDD) is outsourcing its secondary activities to concentrate on the core businesses. The railway ports are being or going to be privatised. The Turkish railway network is to gain utmost importance for the TRACECA corridor once the railway link Kars (Turkey)-Ahalkalaki (Georgia) is opened. The main port hubs on TRACECA route are those located in Istanbul, Tekirdag, Samsun, Trabzon and Izmir. Despite having traditionally a very well developed port sector, some deficiency in organisation of operation in various ports was observed. This implies a range of issues of infrastructural and organisational manner. The importance of private ports is growing. In general, private ports included into a survey demonstrated a well-thought development plans. At the country macro level, such locations as Ankara, Manisa, Sivas, Adana and Erzurum located at the crossroads of rail and road routes have potential to develop as inland hubs. These cities have a high consumer demand, and industrial and agricultural concentration. The main aviation cargo hubs are Istanbul, Ankara and Izmir. The related services range from inbound, outbound air cargo transportations, transhipment, handling, bonded warehousing and customs clearance. The most influential association of transporters are International Transporters Association UND, Ro-Ro and Ro-La association (RODER), and Turkish Transporters Association TND. The municipalities have no direct responsibility and right to establish or run logistics centre in terms of legal regulations. However, according to new provisions Municipalities, Chambers of Industry and Commerce, and Provincial Administrations are allowed to propose such projects. The Istanbul municipality supports creation of logistics centres in the vicinity of Istanbul together with UND and other transport stakeholders. The Samsun municipality is promoting a logistics centre together with a group of transport sector investors as an alternative to the planned railway-based logistics village. Lack of consistency in logistics centre development initiatives is revealed. The general master plan for a logistics sector development is missing. In overall management of the transport sector the Ministry of Transport is highly recommended to take over a masterminding process for improvement of Turkey s nationwide logistics sphere by development of such a plan. The policies development requires stakeholder consultations. Page 16 of 18 Annex 3 Introduction Inception Report

115 2 METHODOLOGY AND APPROACH The project team s methodology and approach for Task A1 Traffic flow analysis and characterisation of the nature and the condition of operating infrastructures and facilities within the network is briefly described below for Part 1 and Part Part 1 Cargo Flows and Transport Network Capabilities Part 1 contains an overview of the main cargo volumes and flows on the main transport axes and hubs of the direct and indirect beneficiary countries. This also includes the foreign trade between the beneficiary countries and the EU countries as well as domestic cargo flows by transport mode. The main initial data source was the TRACECA GIS database from the Permanent Secretariat of the IGC TRACECA in Baku. Additional data were collected from the national transport and statistical ministries, and from responsible port authorities of the direct and indirect beneficiary countries. Other data sources from international institutions such as Eurostat, UN-ECE and IMF have also been reviewed. Furthermore the RRG GIS database has been utilized in terms of GIS information, and data and information from other related studies and ongoing projects have been compiled and considered. All these data have been adjusted and completed using the results of the expert missions in the beneficiary countries. The main project in this respect is the ongoing project of the TRACECA program: Analysis and forecasting of traffic flows for the TRACECA countries and interregional transport integration (i.e. traffic flows project). At the very beginning of this project, in January 2009, the project team participated in the GIS Experts Meeting in Brussels and contacted the traffic flows project to receive their results. Unfortunately, their progress was not as expected, so that the available data were very preliminary. Especially the preliminary data on cargo flows in tonnes between main logistics hubs in the beneficiary countries were not sufficient, and are still lacking to a large degree. Therefore, the present Annex Report only presents cargo flows in monetary terms (US$). As soon as new data are available they will be presented in a subsequent report. All compiled data were, as far as possible, harmonized and presented in a set of standardized maps and diagrams, allowing easy understanding and comparison between beneficiary countries. Another import issue for the next project phases is forecasting of freight flows. Traditionally, forecasts assume that development takes place continuously. Based on this approach the traffic flows project already developed future scenarios of economic and thus cargo development in the beneficiary countries. The current economic crisis, however, marks a very significant discontinuity. This makes it impossible to make further use of any such forecasts generated before the crisis without making adjustments for its expected duration and severity. As the current crisis started already during 2008, the project team expected that the effects of the economic crisis would already be included in the traffic flows project forecasts; however, to date it remains unclear how and to what extent the traffic flows project took account of the latest economic developments. As soon as final outputs of the traffic flows project are available to this project, they will be incorporated. The Consultant s view is that, because of the global recession, it is impossible to make traffic forecasts based on past trends with any confidence. In the interviews with national and international transport operators it was stated that cargo volumes have declined by 30-85%. No interview partner was willing to speculate on when demand is likely to grow again. Inception Report Annex 3 Introduction Page 17 of 18

116 But it will not be possible in the next project phases to conduct feasibility studies or formulate business plans without traffic forecasts, or, more precisely, without reliable information on future cargo volumes (in terms of tons). To address this problem the consultant has devised a set of scenarios, the purpose being to initiate productive debate, leading to an agreed basis for traffic and cargo forecasting. The Consultant therefore suggests three scenarios. These may be crudely described as High, Medium and Low. They might also be called Optimistic, Neutral and Pessimistic. The description of these scenarios is specified in chapter 2.4 General Remarks on the Impacts of the Financial Crisis. 2.2 Part 2 Transport Infrastructure and Main Logistics Nodes The main focus of Part 2 is the identification and description of the transport infrastructure, main logistics nodes and existing transport links by mode of transport in the direct and indirect beneficiary countries. In February and March 2009 the project team was engaged in expert missions, including site visits and meetings, in all beneficiary countries. Based on standardised questionnaires, structured interviews were held with national transport agencies; other relevant public sector organizations; private sector representative bodies and selected national and international private stakeholders in the transport and logistics sector. All the main logistics nodes, defined in the TOR interms or regions located on the TRACECA corridor, were visited and analysed by the respective experts. The data and information have been compared and completed by back-stopping desktop research as far as possible. In addition related TRACECA, TACIS and other relevant studies are under review, but could not be completed yet due to the limited time schedule. Direct contacts have already been established by the project team with several related ongoing TRACECA and TACIS projects. Besides the already mentioned TRACECA project Analysis and forecasting of traffic flows for the TRACECA countries and interregional transport integration further contacts and meetings have been held with the regional TRACECA projects Motorways of the Sea project foreseen in the Action Programme 2006, Freight Forwarders Training Courses and Land Transport Safety & Security. In addition direct contact has been established with the ongoing national TACIS projects TACIS Support to the integration of Ukraine in the Trans-European Network TEN-T, Ukraine port development feasibility study and Accession and Implementation by Ukraine of International Agreements and Conventions in Transport. Some requested data are still awaited from public authorities and owners or operators of logistics nodes in the beneficiary countries. These will supplemented existing data in the next phase. At this stage only an overview of the main results and identified bottlenecks is presented in the country reports. Based on the results of the expert missions, interviews and consultants experience an initial evaluation of suitable locations for future International Logistics Centres in the direct beneficiary countries has been made. This evaluation was prepared based on a standardised Multi Criteria Analysis at the macro level (that is, considering general locations not specific sites). The methodology and criteria are described in Chapter 1.3 Preliminary List of Suitable Locations for Logistics Centres. In the next phase the current evaluation will be completed and detailed with a micro level analysis for the specific sites within these locations. In cooperation with the stakeholders in the direct beneficiary countries, a short list with a ranking of priority projects will be prepared. Page 18 of 18 Annex 3 Introduction Inception Report

117 ANNEX 3 PART 1 CARGO FLOWS AND TRANSPORT NETWORK CAPABILITIES

118

119 TABLE OF CONTENTS 1 TRANSPORT NETWORKS AND MAIN LINKS IN THE BENEFICIARY COUNTRIES OVERVIEW OF THE OVERALL TRACECA CORRIDOR AND RELATED TRANSPORT NETWORKS OVERVIEW AND GENERAL CHARACTERISATION OF THE TRACECA ROAD NETWORK OVERVIEW AND GENERAL CHARACTERISATION OF THE TRACECA RAILWAY NETWORK OVERVIEW OF THE TRACECA PORTS AND MARITIME NETWORK OVERVIEW OF RELEVANT LOGISTICS HUBS IN THE TRACECA NETWORK INTERNATIONAL AND DOMESTIC CARGO FLOWS FOREIGN TRADE OF BENEFICIARY COUNTRIES COUNTRY ANALYSIS OF FOREIGN TRADE PATTERNS General remarks on data Foreign Trade of Armenia Foreign Trade of Azerbaijan Foreign Trade of Georgia Foreign Trade of Moldova Foreign Trade of Ukraine CARGO FLOWS IN THE BENEFICIARY COUNTRIES Armenia - transport and logistics sector Azerbaijan - transport and logistics sector Bulgaria - transport and logistics sector Georgia - transport and logistics sector Moldova - transport and logistics sector Romania - transport and logistics sector Turkey - transport and logistics sector Ukraine - transport and logistics sector GENERAL REMARKS ON THE IMPACTS OF THE FINANCIAL CRISIS Expected growth rates before economic downfall Discontinuity in business and traffic development Determinants of Future Traffic Scenarios OVERVIEW OF CARGO FLOWS BETWEEN MAIN LOGISTICS HUBS IN THE BENEFICIARY COUNTRIES CARGO FLOWS DATA CARGO FLOWS ON MAIN MARITIME TRANSPORT LINKS CARGO FLOWS AT MAIN AIRPORTS REFERENCES APPENDIX Inception Report Annex 3 Part 1 Page 1 of 88

120 Page 2 of 88 Annex 3 Part 1 Inception Report

121 LIST OF FIGURES Figure 1: TRACECA area and TRACECA transport networks... 7 Figure 2: Map on beneficiary countries... 9 Figure 3: TRACECA road corridors, TEN road corridors and E-roads in beneficiary countries Figure 4: E-road census 2000 Number of lanes Figure 5: E-road census 2000 Average design speeds Figure 6: Annual average daily traffic (AAD) Figure 7: Percentage of heavy motor vehicles Figure 8: TRACECA rail corridors and TEN rail corridors in beneficiary countries Figure 9: Length and density of railways in beneficiary countries Figure 10: TRACECA ports, Black Sea ferry connections and navigable inland waterways in beneficiary countries Figure 11: Ferry connections in the Black Sea Figure 12: Main cargo seaports and river ports in Ukraine Figure 13: Freight villages and airports in beneficiary countries Figure 14: Ukrainian port activities Figure 15: Port of Odessa: Handling of containers Figure 16: Container Revenues in Georgian Ports Figure 17: Cargo Traffic by Type of Cargo in the Poti Port Figure 18: Port of Constanta, Romania main cargo handling indicators Figure 19: Ports of Bulgaria main cargo handling indicators Figure 20: Port of Varna, Bulgaria main cargo handling indicators Figure 21: Destination of exports from beneficiary countries Figure 22: External Trade EU27 with TRACECA Beneficiary Countries: Development in 2008 (tons, Jan 08 = 100) Figure 23: External Trade EU27 with TRACECA Beneficiary Countries: Development in 2008 (Euros, Jan 08 = 100) Figure 24: Exports and imports EU27 beneficiary countries, (in tons, 2005=100) Figure 25: Trade Flows between Beneficiary countries and EU27 countries by mode (2008, in 1,000 tons) Figure 26: Main trade partners of Armenia Figure 27: Exports of Armenia to countries in Black Sea region Figure 28: Imports of Armenia from countries in Black Sea region Figure 29: Armenia: Exports, imports and trade balance (by quarters, mln US $) (Statistical Yearbook of Armenia, 2008) Figure 30: Armenia: Exports by commodity groups (m US-$) Figure 31: Armenia: Imports by commodity groups (m US-$) Figure 32: Armenia: Imports and exports to CIS countries (%) ( ) Figure 33: Armenia Rail cargo transport: share of commodity groups Figure 34: Main trade partners of Azerbaijan, Figure 35: Azerbaijan: Exports to neighbouring countries Figure 36: Azerbaijan: Imports from neighbouring countries Figure 37: Azerbaijan: Imports and exports by commodity groups, Figure 38: Main trade partners of Georgia, Figure 39: Georgia: Exports to neighbouring countries Figure 40: Georgia: Imports from neighbouring countries Figure 41: Main trade partners of Moldova, Figure 42: Moldova: exports of goods 2008 to neighbouring countries (in thsd US-$) Figure 43: Moldova: imports of goods 2008 from neighbouring countries (in thsd US-$) Figure 44: EU27 Merchandise trade with Moldova by product (2007) Figure 45: Main trade partners of Ukraine, Figure 46: Ukrainian exports of goods 2008 to neighbouring countries (in thsd US-$) Figure 47: Ukrainian imports of goods 2008 from neighbouring countries (in thsd US-$) Figure 48: EU27 merchandise trade with Ukraine by product (2007) Figure 49: Transport network in Armenia Inception Report Annex 3 Part 1 Page 3 of 88

122 Figure 50: Armenia: Cargo transported by mode Figure 51: Share of commodity groups on rail cargo transport Figure 52: Transport network in Azerbaijan Figure 53: Transport network in Bulgaria Figure 54: Transport network in Georgia Figure 55: Georgia: Freight turnover by mode Figure 56: Truck Movement in Export, Import and Transit in Figure 57: Railway Cross-Border Transportation in Figure 58: Transport network in Moldova Figure 59: Transport network in Romania Figure 60: Transport network in Turkey Figure 61: Annual daily traffic on Turkish road network Figure 62: Turkish rail freight traffic flows, Figure 63: Transport network in Ukraine Figure 64: Ukraine: Cargo transported by mode Figure 65: Ukraine: Cargo transported by mode (indexed at 1996) Figure 66: Structure of transit transportation in Ukraine Figure 67: GDP growth and air cargo growth rates Figure 68: Annual average growth rates of GDP, productivity and employed people in , percent/year Figure 69: Three scenarios about future economic developments: (a) high/optimistic (top), (b) medium/neutral (middle), (c) low/pessimistic Figure 70: Container ports in Black Sea Region: container turnover and capacities Figure 71: Black Sea region: Container turnover 2007 at main container ports Figure 72: Black Sea region: development of container handling volumes Figure 73: Container throughput in Ukraine: Forecasts capacities vs. demand Figure 74: Container throughput in Black Sea ports: Forecasts capacities vs. demand Figure 75: Total cargo turnover at airports in beneficiary countries (in tonnes, most recent year) Figure 76: Airport cargo turnover: development Figure 77: Share of exports going from TRACECA countries to EU15, CIS and other countries in Page 4 of 88 Annex 3 Part 1 Inception Report

123 LIST OF TABLES Table 1: Basic economic features of the beneficiary countries Table 2: Length of E-roads by type of road (km) Table 3: Length of E-road sections by average annual daily traffic (AADT) (km) Table 4. List of TRACECA ports in beneficiary countries Table 5: Ferry connections in the Black Sea region Table 6: Trade Volume of beneficiary countries 2006 [m US$] Table 7: Export rates: value of exports in % of GDP Table 8: External Trade EU27 with TRACECA Beneficiary Countries: Development in 2008 (in 1,000 tons) Table 9: External Trade EU27 with TRACECA Beneficiary Countries: Development in 2008 (in m EUR) Table 10: Total exports and imports from EU27 to TRACECA beneficiary countries (tons, all modes of transport) Table 11: Trade Ukraine and Turkey with neighbouring EU27 countries (tons) Table 12: Trade Ukraine and Turkey with neighbouring EU27 countries : modal split (% of modes on trade) Table 13: Transport volumes in Turkish port regions, Table 14: Container turnover and capacities in main Black Sea region ports 2007 and in future Table 15: Forecast Container Throughput Capacity in Ukraine in TEU (Source: HPC, 2008b) Table 16: Exports from TRACECA countries in 2006 [million US$] Table 17: Exports and imports of Ukraine in 2008 by continent and by selected countries Table 18: Main trade partner of Azerbaijan 2007 (imports, exports; in thsd. US-$) Table 19: Armenia Exports and Imports (in 1,000 US-$) Table 20: Foreign trade of Moldova (Exports/imports), Table 21: Growth rates of GDP, productivity and employed people (%/year) Table 22: Nominal GDP in when EU27 = in 2007 and purchasing power parity (PPP) GDP in 2007 when EU27 = and (PPP) GDP per capita in 2007 when EU27 = 1000 in Table 23: Export forecasts Table 24: Exports by country/country group as a percentage of whole export Inception Report Annex 3 Part 1 Page 5 of 88

124 Page 6 of 88 Annex 3 Part 1 Inception Report

125 1 TRANSPORT NETWORKS AND MAIN LINKS IN THE BENEFICIARY COUNTRIES 1.1 Overview of the Overall TRACECA Corridor and Related Transport Networks Developing transport is of vital importance for the countries of the Caucasus and Central Asia region interested in exporting or importing goods at the lowest possible costs, and for countries seeking access to the international markets. International trade relations are not conceivable without transport components. The extension of Trans-European Transport Networks to neighbouring countries is one of the objectives set out in the recent Communication of the European Commission (2007). The development of Trans-Asian transport networks that include the combined use of railways, roads, inland waterways, maritime shipping and aviation through the TRACECA Program is responding to that objective. TRACECA In order to facilitate trade and transport in the region and to integrate the Caucasus & Black Sea region into the World economy, it is necessary to organise the movement of non-oil cargo from Asia via the Caucasus to Europe in a more efficient manner. The recognition of priority links (rail, road, sea) and strategic intermodal logistic nodes, organised as a consistent network will serve as an important precondition for the optimisation of cargo flows (import, export, transit) and will contribute to the integration process of the local transport network and its connection to the PAN-TC. TRACECA consists of multi-modal corridors and the participating countries are committed to the optimal development of sound and reliable transportation chains (see Figure 1). In the TRACECA Long-Term Strategy up to 2010, an emphasis is given to ensuring the smooth and uninterrupted flow of freight in the region, across the different modes of transport and across the different countries. Figure 1: TRACECA area and TRACECA transport networks Inception Report Annex 3 Part 1 Page 7 of 88

126 Currently, new roads and railways are being built along the whole length of the TRACECA corridor. New bridges, ports and other transport infrastructure are being constructed, accompanied by simultaneous rehabilitation of the existing roads and railways, as well as bridges and ports. Corresponding unified regulatory basis and tariff rules are being developed. TRACECA countries join the international conventions and agreements. Transport infrastructure necessary for the development of multimodal transport is being established supported by adequate capacity building required for professional international transportation. In the countries of this project, new rail links are being constructed or are planned (Georgia- Turkey, Armenia-Turkey, tunnel crossing the Bosporus, etc.), port development projects are under way (Azerbaijan, Georgia, Moldova), TRACECA road corridors are being upgraded in all countries. This project is confined to the following direct beneficiary countries, as given in Figure 2: Armenia, Azerbaijan, Georgia, Moldova, Ukraine, and to indirect beneficiaries Bulgaria, Romania and Turkey. Table 1 gives an overview on the basic economic feature of the beneficiary countries. The largest economy is Turkey with a GDP of 350m US$, followed by Romania and Ukraine. at the end of the scale are Armenia and Moldova. However, it has to be mentioned, that exchange rates are distorting the picture severely. Therefore, the per capita GDP was ppp adjusted. Bulgaria is the wealthiest country followed by Turkey, Romania and Ukraine, poorest country is Azerbaijan with only 526 $/Inhabitant. Table 1: Basic economic features of the beneficiary countries 2006 GDP GDP/Capita Share on GDP [m US$] nominal ppp weighted Agriculture Industry Services Armenia % 35% 41% Azerbaijan n.a. n.a. n.a. Bulgaria % 31% 60% Georgia % 30% 54% Moldova % 24% 55% Romania % 36% 54% Turkey % 30% 58% Ukraine % 46% 35% Another important indicator is how the GDP is produced. Armenia and Moldova still have a large share of agricultural production amounting to more than 1/5 of GDP. In industrialised countries this value is below 5%. Industrialisation is highest in Ukraine at 46%. The service sector is most developed in Bulgaria, closely followed by Turkey. Ukraine has the lowest share of services on GDP. Page 8 of 88 Annex 3 Part 1 Inception Report

127 Figure 2: Map on beneficiary countries From 2000 to 2007 the average annual growth rates of GDP ranged between 12% for Armenia and Azerbaijan and 5% in Romania, Bulgaria and Turkey. Assuming returning to similar growth rates (well above the average European level) in the future after the present financial crisis, which is discussed later in the text - the GDP would double every seven to 14 years. This implies that demands for goods, especially from highly industrialised countries, as well as exports would grow at the same speed. This necessitates improvements in the logistic transport systems of these countries. Inception Report Annex 3 Part 1 Page 9 of 88

128 1.2 Overview and General Characterisation of the TRACECA Road Network Figure 3 gives an overview on the road networks relevant for this project. In the Caucasus countries, TRACECA corridors are covering the main network, which is complemented by a smaller number of E-Roads. In Turkey and Ukraine the TRACECA roads are confined to major transport corridors and thus comprise only a small share of the national road networks. This implies as well, that the capital cities of these countries, Kiev and Ankara, are not connected to the TRACECA network. Additionally, some direct links to the TEN networks are missing: Turkey - Bulgaria, Turkey -Greece, Ukraine -Romania. Network densities in Bulgaria and Romania, consisting mainly of TEN roads, are much higher than in the remaining countries. Figure 3: TRACECA road corridors, TEN road corridors and E-roads in beneficiary countries Page 10 of 88 Annex 3 Part 1 Inception Report

129 The following figures (Figure 4 to Figure 7) and tables (Table 2 and Table 3) are based on UN- ECE database values for the year The consultants are aware that this base year will not in all cases be accurate for the situation in 2009, as development has happened since then. UN- ECE point out, that the data for 2005 are in preparation; but until now they have not been published. With reservation due to this fact, the following figures and tables shall give an overview on situation and development on the road infrastructure and use in the beneficiary countries in the past. As soon as more up to date data are available from UN-ECE or other sources, they will replace the old ones. The TRACECA corridors in Turkey and Ukraine are mostly identical with E-Roads, with the exception of a section of the D10 road along the Black Sea in Turkey. This holds not true for the Caucasus, where TRACEA corridors form a denser network than the E-roads. The quality of the E-road network is compared to central European standards low. Only a few sections are built with more than one lane per direction (see Figure 4). These sections are mainly located around metropolitan areas (e.g. Kiev, Bucharest, Sofia, Istanbul, Ankara). A similar situation appears with the average design speeds (see Figure 5). Except Turkey, where the design speeds vary between 81 and 120 km/h, the design speeds mainly are between 51 and 80 km/h. Figure 4: E-road census 2000 Number of lanes Inception Report Annex 3 Part 1 Page 11 of 88

130 Figure 5: E-road census 2000 Average design speeds Table 2 shows the length of the E-Roads in the project countries in 1995 and The overall length increases during this period by 25% from 19,924 km to 24,924 km. The largest increase was registered in Ukraine, where the network more than doubled. One third of the road network is located in Ukraine, followed by Turkey (29%) and Romania (22%), while Armenia and Georgia only contribute little to the whole network. Since motorways and express roads only comprise to 2% the network, the biggest parts of the road network are Normal Roads, which are mostly two lanes. This explains the fact - as depicted in Table 3 - that traffic volumes on these roads are fairly low. In Armenia and Georgia, none of the roads registers traffic volumes higher than 10,000 vehicles per day. In Bulgaria 10% of the network carries more than 10,000 vehicles, followed by Romania, where this share amounts to 12% and Ukraine with 14%. The highest traffic volumes can be found in Turkey, where 15% of the road network carries more than 10,000 vehicles. This is the only country where traffic volumes above 50,000 vehicles per day may be observed. It can be assumed, that the low capacity utilisation on the E-Roads may be observed on the remaining parts of the road networks as well. Page 12 of 88 Annex 3 Part 1 Inception Report

131 Table 2: Length of E-roads by type of road (km) E ROADS Armenia Bulgaria Georgia Romania Turkey Ukraine ROUTES E All E Roads (126) 2579 (131) Of which since 1995 have become motorways By number of lanes Normal road 2258 (79) 2231 (83) With 1 lane With 2 lanes (52) (52) 8 - With 3 lanes (11) (11.3) With 4 lanes (15.9) (15.9) - With 5 lanes and over - unknown Express road With 1 lane With 2 lanes With 3 lanes With 4 lanes With 5 lanes and over - unknown Motorway (47.5) (47.9) - With 2 lanes With 3 lanes With 4 lanes (38.8) (38.8) - With 5 lanes and over (8.7) (9.1) - unknown Source: UN-ECE (2003), UN-ECE does not provide information on Moldavia and Azerbaijan Inception Report Annex 3 Part 1 Page 13 of 88

132 Table 3: Length of E-road sections by average annual daily traffic (AADT) (km) Average Annual Daily Traffic Length of road section (km) (AADT) Armenia Bulgaria Georgia Romania Turkey Ukraine Up to and over Unknown TOTAL / Unknown Road sections where no counts were taken (such as in built-up and peripheral urban areas) are inserted under "unknown" in this table. However, where countries have established counts covering the total E Road network, including in these areas, the total of these figures are given. In both case the totals of tables No.1 and No.2 coincide. Source: UN-ECE (2003) Traffic volumes in the beneficiary countries are mainly low, especially in rural areas. Around agglomerations however, volumes increase. In general, the predominant part (50 70%) of the traffic is caused by heavy vehicles especially in Ukraine, Turkey and Bulgaria. This share is higher than in other EU27 countries (e.g. Poland, Hungary). Page 14 of 88 Annex 3 Part 1 Inception Report

133 Figure 6: Annual average daily traffic (AAD) Figure 7: Percentage of heavy motor vehicles Inception Report Annex 3 Part 1 Page 15 of 88

134 1.3 Overview and General Characterisation of the TRACECA Railway Network The rail networks of the TRACECA countries are depicted in Figure 8. Generally, TRACECA railways only comprise a share of the total network. In Caucasus, Moldavia and Turkey, TRACECA railways constitute the backbone of the national railway system. E.g. in Turkey the only East-West corridor is a TRACEA railway. In Ukraine only one corridor passes through the country and it does not connect to the capital Kiev. The density of the network is generally much lower than the TEN networks of Rumania and Bulgaria. Border crossing connections are missing from Turkey to Bulgaria and Greece, from Armenia to Turkey and Azerbaijan. Figure 8: TRACECA rail corridors and TEN rail corridors in beneficiary countries Railway length and density of the beneficiary countries is given in Figure 9. The longest networks may be found in the large countries of Ukraine, Romania and Turkey. Highest Page 16 of 88 Annex 3 Part 1 Inception Report

135 densities are as well in Ukraine and Romania, followed by Bulgaria, Moldova and Armenia. However, these data give no indication about the quality and the maintenance condition of the network. Figure 9: Length and density of railways in beneficiary countries 1.4 Overview of the TRACECA Ports and Maritime Network Table 4 and Figure 10 provide an overview on the maritime ports in the TRACECA countries that are well covering the coastline around the Black Sea. Between the ports, numerous ferry lines are regularly operating. However, it has to be mentioned that inland water ports are not included in TRACECA. High potentials for inland water shipping can be assumed in Ukraine on the Dnepr and in Bulgaria and Romania along the Danube. Table 4. List of TRACECA ports in beneficiary countries Name Baku Burgas Varna Batumi Poti Constantsa Istanbul Samsun Ilyichevsk Odessa Tekirdak Bandirma Giurgiulesti COUNTRY AZ BL BL GE GE RO TR TR UA UA TYR TYR MD Inception Report Annex 3 Part 1 Page 17 of 88

136 Figure 10: TRACECA ports, Black Sea ferry connections and navigable inland waterways in beneficiary countries Figure 11 and Table 5 show the ferry connections in the black sea, their destinations and frequencies. Noticeable is a concentration in the western part. From Turkey, the connections comprise only Ukraine and Russia, but no other TRACECA countries. From Ukraine connections operate to all other black sea countries. There is only one connection between Ukraine and Russia (between Chushka and Kerch), which is a local ferry connection operated several times a day. Page 18 of 88 Annex 3 Part 1 Inception Report

137 The connections are mainly operated once a week. The Russian connections from Novorossysk operate less than once a week; the connections between Sochi and Georgia/Turkey operate more frequent (several connections per week). Information on capacity utilisation of the ferries is not available. Figure 11: Ferry connections in the Black Sea Inception Report Annex 3 Part 1 Page 19 of 88

138 Table 5: Ferry connections in the Black Sea region Travel time (hours) Operation months Origin Destination Frequency Turkey - Ukraine Istanbul Eupatoria (Crimea) 11 1/w 1-12 CF Derince Ilichevsk 36 1/w 1-12 RP Istanbul Kherson 32 1/w 1-12 CF Istanbul Odessa 35 1/w 1-12 CF Ferry type Istanbul Sevastopol (Crimea) 32 1/w 1-12 CF Istanbul Yalta (Crimea) 32 1/w 1-12 CF Turkey - Russia Istanbul Sochi 45 1/w 1-12 CF Trabzon Sochi /w 1-12 CF Georgia - Russia Poti Novorossiysk /m 1-12 F Batumi Sochi 6 1-3/w 1-12 FF / CF Poti Sochi 4,5 1-3/w 1-12 FF / CF Georgia -Ukraine Batumi Ilichevsk 44 1/w 1-12 RP Poti Ilichevsk 41 1/w 1-12 RP / F Georgia- Bulgaria Poti Burgas /m 1-12 F Poti Varna 96 1/w 1-12 F Russia Ukraine Kavkaz Kerch (Crimea) /d 1-12 CF Bulgaria Ukraine Varna Ilichevsk /w 1-12 F / RP Varna Odessa 9 1/w 6-9 FF Bulgaria Romania Varna Constanta 4 1/w 6-9 FF Romania - Ukraine Constanta Odessa 6 1/w 6-9 FF Notes: F = Freight ferry with limited cabin space; FF = Fast ferry, CF = car ferry, RP = RoPax combined ferry, Source: Ferrylines.com (2009). Figure 12 shows the main cargo sea and inland ports as well as the navigable waterways of Ukraine, where the main 7 cargo sea ports and 15 inland water harbours are operating. The small waterway in the south is a section of the Danube Waterway System that connects the Rhine with the Black Sea. Page 20 of 88 Annex 3 Part 1 Inception Report

139 Figure 12: Main cargo seaports and river ports in Ukraine 1.5 Overview of Relevant Logistics Hubs in the TRACECA Network Freight Villages (logistic freight centres), airports and other logistic hubs are depicted on the map in Figure 13. Generally, the distribution of the airports gives an impression of a spatial equilibrium. However, not all of the airports listed may serve as freight logistic hubs, since some of them have no freight handling capacities. Freight Villages seem to be concentrated in Bulgaria. This might be due to fact, that up to date the information on Freight Villages in the beneficiary countries is incomplete. During the short period of Phase 1, it was not possible to verify this issue. Data shall be updated during Phase 2 of the project. Inception Report Annex 3 Part 1 Page 21 of 88

140 Figure 13: Freight villages and airports in beneficiary countries All 19 Ukrainian sea ports on the Black and Azov Seas play a significant role in the regional transport structure. Their total throughput is almost equal to the total throughput of the rest ports of the Black-Azov seas region. The port activities in Ukraine are described in Figure 14, with Odessa being the largest harbour with an annual turnover of some 35m tons. Odessa is followed by Yuzhny and Ilichevsk. However, the remaining ports have a total turnover of some 60m tons, which is nearly double the volume of Odessa. If the development of ports is regarded, an enormous growth took place in the last years. Seven ports increased turnover by more than 10% p.a., and three were above 20%. If this development would continue, where turnover doubles in less than four years, the ports would reach their capacity limits in the near future. Page 22 of 88 Annex 3 Part 1 Inception Report

141 Figure 14: Ukrainian port activities 2008 Figure 15 shows that the turnover of containers in the port has exploded in the past years. Between 2002 and 2006 annual growth rate amounted to more than 40%. Figure 15: Port of Odessa: Handling of containers The graphs Figure 16 and Figure 17 show the activities of the Georgian ports Poti and Batumi. Cargo traffic increased considerably, while containers have nearly tripled since Inception Report Annex 3 Part 1 Page 23 of 88

142 Figure 16: Container Revenues in Georgian Ports Figure 17: Cargo Traffic by Type of Cargo in the Poti Port Port of Constanta had a peak in ship movements and total cargo in 2005, and was able to reach this level again in 2008 (Figure 18). The increase in container handled was about 500% between 2003 and The absolute figure is about ten times higher than Varna. Figure 19 shows the activities of the Bulgarian ports Burgas and Varna. Container movements increased in both ports, whereas ship movements were stable and total cargo decreased in Burgas and increased in Varna. Figure 20 shows the development of the port of Varna from 1999 to Whereas the ship movements and total cargo saw a peak in 2004/05 like Constanta, there is a constant decline since then. The number of containers handled increased continuously with a sharp rise in Page 24 of 88 Annex 3 Part 1 Inception Report

143 Figure 18: Port of Constanta, Romania main cargo handling indicators Figure 19: Ports of Bulgaria main cargo handling indicators Figure 20: Port of Varna, Bulgaria main cargo handling indicators Inception Report Annex 3 Part 1 Page 25 of 88

144 Page 26 of 88 Annex 3 Part 1 Inception Report

145 2 INTERNATIONAL AND DOMESTIC CARGO FLOWS 2.1 Foreign Trade of Beneficiary Countries The total trade volume of beneficiary countries amounted to 404 bn US$ in (see Table 6). 46% is traded by Turkey, 22% by Ukraine and 18% by Romania. With the exception of Turkey and Ukraine, the export - import ratio is negative, i.e. the countries are importing more than they are exporting. Table 6: Trade Volume of beneficiary countries 2006 [m US$] Exports Imports Total Share Armenia 830 1,620 2,450 1% Azerbaijan 7,650 5,458 13,108 3% Bulgaria 14,060 16,460 30,520 8% Georgia 1,822 2,870 4,692 1% Moldova 1,070 2,414 3,484 1% Romania 32,470 42,040 74,510 18% Turkey 77, , ,930 46% Ukraine 45,740 44,350 90,090 22% Total 181, , ,784 As depicted in Figure 21, 43% of the exports from beneficiary countries have EU15 countries as a destination and 13% are directed towards CIS countries (former USSR). If single countries are regarded, the EU share varies between 58% for Romania and 17% for Ukraine and Georgia. Exports to CIS fluctuate between 40% for Georgia and Moldova and 4-5% for Bulgaria and Romania. Georgia, Moldova and Ukraine trade more with CIS countries than with EU15 countries. More data are given in the Annex. 1 As not all data are available for 2007 or 2008, it was decided to show the 2006 values in order to ensure comparability between the countries. Inception Report Annex 3 Part 1 Page 27 of 88

146 Figure 21: Destination of exports from beneficiary countries 2006 The export orientation of the beneficiary countries is given in Table 7, described by the ratio of export values compared to GDP. In 2006, Bulgaria, Moldova and Ukraine had the strongest export orientation. However, strong fluctuations, especially for Moldova distort the picture. Table 7: Export rates: value of exports in % of GDP Armenia Azerbaijan Bulgaria Georgia Moldova Romania Turkey Ukraine TRACECA * * = Average of TRACECA countries Source: World Economic Factbook 2007 (Euromonitor International) As mentioned above, the European Union is the most important trading partner for the beneficiary countries. From January to November 2008, the trade volume between EU27 and the beneficiary countries amounted to 76 million tons. The largest trade partner was the Ukraine, which amounted to 70% of the total volume, followed by Azerbaijan with roughly one quarter of the weight traded. Georgia and Moldova both amount to 2.5% and Armenia 0.2%. Trade patterns show strong seasonal fluctuations, with a considerable increase in the beginning of the year and a massive decrease in August, which again was compensated to November. Page 28 of 88 Annex 3 Part 1 Inception Report

147 Table 8: External Trade EU27 with TRACECA Beneficiary Countries: Development in 2008 (in 1,000 tons) Country EU27 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov ARMENIA 11,31 13,96 13,74 16,59 14,81 11,87 16,10 9,64 12,54 22,14 12,82 AZERBAIJAN 2046, , , , , , , , ,36 985, ,54 GEORGIA 140,48 183,02 188,71 219,31 99,50 207,62 223,45 56,94 192,24 228,40 193,16 MOLDOVA 104,66 144,73 165,21 173,85 175,45 157,76 151,03 174,51 187,67 196,46 156,30 UKRAINE 4571, , , , , , , , , , ,06 Figure 22: External Trade EU27 with TRACECA Beneficiary Countries: Development in 2008 (tons, Jan 08 = 100) The above trade volumes of EU27 with the beneficiary countries, listed in Table 9, amounted to 54 bn Euro in the fist 11 months of % of the value was traded with the Ukraine, followed by 22% with Azerbaijan, while the remaining countries prevail below 5%. Again, a similar annual fluctuation of the trade values was observed as given in Figure 23. Table 9: External Trade EU27 with TRACECA Beneficiary Countries: Development in 2008 (in m EUR) Country EU27 Jan Feb Mar Apr May Jun July Aug Sept October November ARMENIA AZERBAIJAN 1, , , , , , , , GEORGIA MOLDOVA UKRAINE 2, , , , , , , , , , ,759.4 Inception Report Annex 3 Part 1 Page 29 of 88

148 Figure 23: External Trade EU27 with TRACECA Beneficiary Countries: Development in 2008 (Euros, Jan 08 = 100) Total imports to EU27 from the beneficiary countries (Table 10) amounted to 63m tons in 2008, of which 68% stemmed from Ukraine and 29% from Azerbaijan. These goods were transported by all modes. Total exports from EU27 to the beneficiary countries amounted to only 12 m tons in 2008, of which 82% are destined Ukraine, while the remaining countries ranged below 10%. The large difference of exports and imports may be explained by the large share of fuels and gas exported from Ukraine and Azebaijan. These countries have a surplus of exports compared to imports, while Moldova and Armenia have negative ratios. The trade imbalance might entail a larger share of empty cargo trips. Georgia shows a mixed balance since The trade volume developed very positive since 2005, with total EU27 exports increasing by 50%. Figure 24 shows that EU imports from Ukraine were increasing strongest at 70%, while the other countries registered only a slight increase in tonnage. EU exports to the beneficiary countries increased as well at 20%, with Azerbaijan and Georgia doubling their trade volumes. Page 30 of 88 Annex 3 Part 1 Inception Report

149 Table 10: Total exports and imports from EU27 to TRACECA beneficiary countries (tons, all modes of transport) Country Exports from EU27 to ARMENIA AZERBAIJAN GEORGIA MOLDOVA UKRAINE Imports to EU27 from ARMENIA AZERBAIJAN GEORGIA MOLDOVA UKRAINE Figure 24: Exports and imports EU27 beneficiary countries, (in tons, 2005=100) Inception Report Annex 3 Part 1 Page 31 of 88

150 Bilateral trade flows between neighbouring countries are depicted in Figure 25. The biggest flows are exports from Ukraine to Poland, which are mainly done by rail (94%). Imports from Poland amount to less than half of export volumes. 59% of the volume is transported by road and 41% by rail. The second biggest transport volumes are exports to Slovakia from Ukraine, which are predominantly done by rail. Rail transport is the most important mode for the given trade relations while maritime transport is of major importance for trade between Greece and Turkey. Figure 25: Trade Flows between Beneficiary countries and EU27 countries by mode (2008, in 1,000 tons) Trade from Ukraine with neighbouring countries, as given in Table 11, amounted to 16m tons in Biggest trading partner was Poland, followed by Slovakia and Hungary. Trade Volume increased from 2005 to 2008 by 5%, with exports decreasing by -7% and imports increasing by remarkable 72%. However, in 2008 the volume of exports was three fold the import volume. This imbalance increases to more than 6 if only transport by rail is regarded. Rail exports to Slovenia exceed rail imports by the factor 11, which implies a large number of empty trips. For road modes the ratio is inverse and the imbalances are much smaller. In 2008, 79% of the tonnage was transported by rail and 19% by road (Table 12). The rail share of rail was highest Page 32 of 88 Annex 3 Part 1 Inception Report

151 with Slovakia (92%) and lowest with Hungary (64%). Since 2005, rail transport carried the additional transport volume, while the share of road and sea was decreasing. For Turkey and Greece, listed in Table 11 as well, trade volume amounted to 2.6 m tons. Trade volume increased from 2005 by 4%, with imports from Greece decreasing by -46% and exports increasing by 63%. Again, in 2008 the volume of exports was 2.5 fold the import volume. The disequilibrium is enormous for road and rail where nearly nothing is imported. In 2008, 69% of the transport volume was transported by ship. Inception Report Annex 3 Part 1 Page 33 of 88

152 Table 11: Trade Ukraine and Turkey with neighbouring EU27 countries (tons) Ukraine Exports to Imports from Total Country Mode Change % Change % Hungary Rail , , ,8 Road , , ,5 All modes , , ,0 Poland Sea , , ,1 Rail , , ,7 Road , , ,7 All modes , , ,9 Slovakia Sea , , ,2 Rail , , ,4 Road , , ,6 All modes , , ,4 Change % Turkey Exports to Imports from Total Country Mode Change % Change % Greece Sea , , ,7 Rail , , ,5 Road , , ,2 All modes , , ,0 Change % Page 34 of 88 Annex 3 Part 1 Inception Report

153 Table 12: Trade Ukraine and Turkey with neighbouring EU27 countries : modal split (% of modes on trade) Ukraine Exports to Imports from Total Country Change % Change % Change % Hungary Rail 72,3 69,0 35,1 73,3 1,3 31,1 20,1 16,0 30,5-2,0 67,7 63,2 32,1 63,6-6,1 Road 13,8 11,7 39,6 12,6-8,8 66,8 66,6 66,9 55,5-16,8 19,7 18,1 43,9 22,3 13,5 other modes 13,9 19,3 25,3 14,1 1,8 2,1 13,3 17,1 14,0 554,6 12,6 18,6 24,0 14,1 12,0 Poland Sea 0,3 0,1 0,3 0,3-5,4 0,4 0,2 0,1 0,1-73,8 0,3 0,1 0,2 0,2-28,1 Rail 75,5 53,9 92,8 93,7 24,2 35,6 42,9 40,5 40,5 13,5 67,3 50,7 77,7 77,4 15,0 Road 24,2 46,0 6,9 5,9-75,7 61,0 53,5 57,0 57,5-5,7 31,8 48,2 21,4 21,7-31,6 All modes 0,0 0,0 0,0 0,1 400,6 3,0 3,4 2,4 1,9-36,3 0,6 1,0 0,7 0,7 3,3 Slovakia Sea 0,0 0,0 0,0 0,0 116,3 0,1 0,4 0,6 0,2 281,4 0,0 0,0 0,1 0,0 378,3 Rail 98,1 98,3 97,4 97,4-0,7 73,3 67,0 64,9 56,1-23,5 95,5 95,5 93,8 91,8-3,9 Road 1,9 1,7 2,3 2,6 37,8 26,5 32,4 33,8 43,4 64,1 4,4 4,5 5,7 8,1 82,3 All modes 0,0 0,0 0,3 0,0 3021,9 0,2 0,2 0,7 0,3 45,6 0,0 0,0 0,4 0,0 119,3 Turkey Exports to Imports from Total Country Mode Change % Change % Change % Greece Sea 70,6 78,0 78,1 57,2-19,0 77,0 75,4 84,1 99,7 29,6 74,1 76,8 79,9 69,3-6,5 Rail 0,1 0,1 0,1 0,1 17,6 0,3 0,0 0,0 0,0-99,5 0,2 0,1 0,1 0,1-54,3 Road 29,2 21,9 21,2 24,0-17,9 22,6 24,3 15,7 0,3-98,8 25,6 22,9 19,5 17,2-32,9 All modes ,4 0,2 0,3 0,2 0,0-100,0 0,1 0,2 0,5 13, ,6 Inception Report Annex 3 Part 1 Page 35 of 88

154 2.2 Country Analysis of Foreign Trade Patterns General remarks on data To access required data needed for this project, the team investigated in three different directions: 1. To make use of the achievements of completed and on-going TRACECA and TACIS projects, especially the project "Analysis and forecasting of traffic flows for the TRACECA countries and interregional transport integration (referred to as Traffic flows project ). 2. To collect data from stakeholders during meetings and interviews and later on during follow-up. 3. To assess primary / empirical and secondary data publicly available. The efforts of the project team through the first two channels have not led to satisfactory results so far. The traffic flows project was up to date only able to provide preliminary data, which are presented in this report. Nevertheless, the consultants would expect that during the course of the project, the final outputs of the traffic flows project will be available and will provide the necessary input for this project. The second direction did show reasonable results, but mainly in qualitative data. The stakeholders that were contacted are willing to cooperate, but often need more time to deliver than that available in Phase 1. Besides that, the consultants spent reasonable effort in the third direction. The results are shown in the following sub-chapters and will be updated and complemented step by step during the course of the project according to availability of the outputs of the other projects or statistical databases Foreign Trade of Armenia The main trade partners of Armenia are shown in Figure 26. Again, as in Ukraine, Russia is the dominant trade partner. Germany comes after a large gap as second partner, followed by Ukraine, Belgium and China. The graph shows as well the large imbalance between imports and exports. The only exception are the Netherlands, where Armenian exports account for around 90% of the trade volume between the two countries. Figure 26: Main trade partners of Armenia 2007 Page 36 of 88 Annex 3 Part 1 Inception Report

155 Figure 27 and Figure 28 show maps about the trade with neighbouring countries of Armenia. Most of the exports are destined to Russia, while the imports stem as well from other countries of the region. Trade with EU15, which amounts to a large share, is not depicted here. Figure 27: Exports of Armenia to countries in Black Sea region 2007 Figure 28: Imports of Armenia from countries in Black Sea region Inception Report Annex 3 Part 1 Page 37 of 88

156 The Armenian foreign trade developed rapidly since 2003 as given in Figure 29. While the imports exploded during the period, exports could not hold pace and thus the trade deficit increased. Figure 29: Armenia: Exports, imports and trade balance (by quarters, mln US $) (Statistical Yearbook of Armenia, 2008) The export structure (Figure 30) is dominated by raw material and un- or semi-processed goods, such as non precious metal, mineral products and gems. The share of metals and food items increase in the past years steadily. The latter has large requirements on the logistic chains (cold chain) and thus on the logistic centres. The goods transported by the Armenian railways (Figure 33) are typical rail affine goods, such as building material, metal ore, with petrol and chemical produce only transported to a minor extent. Page 38 of 88 Annex 3 Part 1 Inception Report

157 Figure 30: Armenia: Exports by commodity groups (m US-$) Inception Report Annex 3 Part 1 Page 39 of 88

158 Figure 31: Armenia: Imports by commodity groups (m US-$) Figure 32: Armenia: Imports and exports to CIS countries (%) ( ) Page 40 of 88 Annex 3 Part 1 Inception Report

159 Figure 33: Armenia Rail cargo transport: share of commodity groups Foreign Trade of Azerbaijan The main trade partners of Azerbaijan are shown in Figure 34. The three strongest trade ties from Azerbaijan are to Turkey, Russia and Italy. The relationships with a predominance of Export are to Italy, Iran, Israel and Georgia. Almost only imports originate from the United Kingdom, Germany and the Ukraine. Figure 34: Main trade partners of Azerbaijan, 2008 Trade Patterns for imports and exports of Azerbaijan to its neighbouring countries, given in Figure 35 and Figure 36, eflect these data. Main trading partners are Turkey, followed by Russia, Ukraine, Georgia and Iran. Trade with Armenia is practically inexistent. Inception Report Annex 3 Part 1 Page 41 of 88

160 Figure 35: Azerbaijan: Exports to neighbouring countries 2007 Figure 36: Azerbaijan: Imports from neighbouring countries 2007 Page 42 of 88 Annex 3 Part 1 Inception Report

161 Figure 37 shows, that Azerbaijan s exports were dominated by mineral and chemistry products, which are shipped by tankers or pipelines. Thus, for the majority of exports Logistic Centres are not necessary. However, the imports have a large share of machinery, vehicles and electrical equipment and are thus much more relevant for this study. The figure explains as well, why Azerbaijan has unbalanced export/import ratios. Figure 37: Azerbaijan: Imports and exports by commodity groups, Foreign Trade of Georgia The main trade partners of Georgia are shown in Figure 38. In general, imports by far outweigh exports. The main trade partner is Turkey, followed by Ukraine, Russia, Azerbaijan, Germany and the USA. Export to Turkey, to the USA and to Azerbaijan is around the same level. Figure 38: Main trade partners of Georgia, 2008 Main cargo flows from Georgia are destined at the neighbouring countries Turkey, Ukraine, Russia and Azerbaijan (Figure 39 and Figure 40). Inception Report Annex 3 Part 1 Page 43 of 88

162 Figure 39: Georgia: Exports to neighbouring countries 2007 Figure 40: Georgia: Imports from neighbouring countries 2007 Page 44 of 88 Annex 3 Part 1 Inception Report

163 2.2.5 Foreign Trade of Moldova The main trade partners of Moldova are shown in Figure 41. Ukraine, Russia and Romania are the most dominant trade partners, followed by Italy and Germany. There is also an imbalance towards imports, but not as distinctive as in Georgia. Figure 41: Main trade partners of Moldova, 2008 Trade Patterns for imports and exports of Moldova with its neighbouring countries, given in Figure 42 and Figure 43 are fairly similar. Main trading partners are Russia, Ukraine and Rumania Figure 42: Moldova: exports of goods 2008 to neighbouring countries (in thsd US-$) Inception Report Annex 3 Part 1 Page 45 of 88

164 Figure 43: Moldova: imports of goods 2008 from neighbouring countries (in thsd US-$) Moldova s commodity trade structure with EU27 is given in Figure 44. Exports from Europe are dominated by machinery, transport equipments and chemicals. Imports to Europe are textiles and agricultural produce. The large imbalance of exports and imports, already explained in Table 6, is visualised in this graph as well. Figure 44: EU27 Merchandise trade with Moldova by product (2007) Foreign Trade of Ukraine The main trade partners of Ukraine are shown in Figure 45. Russia by far is the most dominant trade partner, with a volume of 35 bn US$, which equals the total of the five following countries altogether. Import and export from and to Russia are balanced, whereas imports from Turkmenistan, China, Germany and Poland outweigh exports to these countries. The only country in this list of 10 main trade partners with higher exports from Ukraine than imports is Turkey. Page 46 of 88 Annex 3 Part 1 Inception Report

165 Figure 45: Main trade partners of Ukraine, 2008 Figure 46 shows the export values 2008 from Ukraine to its neighbouring countries, which is still dominated by the historic relations to Russia, to where the largest share of the transport volume is transported. Second largest partner is Turkey, which is connected through maritime links on the Black Sea. The other neighbouring countries only contribute with a minor volume to total exports. Figure 46: Ukrainian exports of goods 2008 to neighbouring countries (in thsd US-$) Figure 47 shows import values from Ukraine to his neighbouring countries. The patterns are similar to the exports, with the links to Russia, Poland and Kazakhstan even more important, while imports from Turkey are of minor importance. Inception Report Annex 3 Part 1 Page 47 of 88

166 Figure 47: Ukrainian imports of goods 2008 from neighbouring countries (in thsd US-$) Products traded by EU27 with Ukraine are depicted in Figure 48. Machinery is exported from Europe in large numbers followed by chemicals and transport equipment. Imports to Europe are predominantly agricultural produce and energy. Even though trade with EU27 is imbalanced, the strong ties to Russia are compensating for the deficits. Figure 48: EU27 merchandise trade with Ukraine by product (2007) 2.3 Cargo Flows in the Beneficiary Countries Armenia - transport and logistics sector Transport facilitation is of utmost importance for economic growth in land-locked Armenia (see Figure 49). The transport market share in Armenia has been increasing over the recent years, due to progressive recovery of the local economy over the last decade. However, a comprehensive analysis of the entire Armenian transport system may denote several infrastructural and structural weaknesses. The industrial sectors develop and the agriculture and food processing sectors show large export potential. But, to achieve successful growth in Page 48 of 88 Annex 3 Part 1 Inception Report

167 these sectors, affordable and reliable transport and efficient, effective logistics services are necessary. Figure 49: Transport network in Armenia In Armenia freight transport volumes boosted by 40-50% since 2003, similar to Ukraine. In absolute terms, the tonnage transported by roads increased most (see Figure 50). In 2007, the freight modal split for roads was 57%, for rail below 29% and for pipelines above 13%. Air cargo can be neglected. Figure 50: Armenia: Cargo transported by mode Regarding the share of commodity groups on rail cargo transport, Figure 51 depicts a radical decrease of non-ferrous metal ore between 2003 and The major increase has been in mineral building materials and cement. Inception Report Annex 3 Part 1 Page 49 of 88

168 Figure 51: Share of commodity groups on rail cargo transport Azerbaijan - transport and logistics sector Azerbaijan is well situated on the crossroad of major international traffic routes including the Silk Road and the South-North corridor (see Figure 52). Its convenient location emphasises the strategic importance of the transport sector in the country s economy. In terms of share in GDP, transport it generally showing growth. Azerbaijan is well connected in terms of highways, serving international cargo movements. Here, the TRACECA, regional Baku-Alat-Ganja-Kazakh-Georgian Boarder corridor, and the North-South Corridor are of great importance. The rail transport sector is not in optimal performance condition, and freight market share has deteriorated during the last years. Maritime transport plays an important role, especially for the oil industry. Direct maritime connections only exist with Iran, Kazakhstan, Russia and Turkmenistan, but the Volga-Don canal also provides Azerbaijan with maritime access to the high seas, if the licences for the transit can be obtained. Oil products serve as the main maritime transport commodity and shipping in the Caspian Sea. Figure 52: Transport network in Azerbaijan Page 50 of 88 Annex 3 Part 1 Inception Report

169 Political conflicts have kept Armenia and Azerbaijan from fully partaking in peace, stability, and economic development. Some costs of conflict result in limited ability of the region to fully exploit trade and transportation networks. Since 1989, the railways, road and pipelines from Azerbaijan traversing its territory to Armenia are non-operating. Transport and communications obstructions and stoppages affect economic development in Armenia and Azerbaijan and stymied the full utilisation of links on East-West and North-South corridor Bulgaria - transport and logistics sector Five of the ten Pan-European corridors cross at the territory of Bulgaria. These are Corridors IV, VII, VIII, IX and X. With that in mind, the country's potential to become a major transport leader in Southeast Europe and a future EU transportation hub can be assumed as very high. The GIS representation of Bulgarian transport network is presented in the Figure 53 below. Figure 53: Transport network in Bulgaria Georgia - transport and logistics sector Georgia s geographical location holds various advantages for the country. For transport corridor connections of Georgia see Figure 54 below. It comprises a distinctive competitive advantage in terms of transit cargo and also links various economies. It functioned as a natural transport corridor between Europe and Central Asia and also for the North-South transport link, between Russia and Turkey via Armenia to Iran. Offering the shortest transport link for goods and materials from Azerbaijan and Central Asia to the West also highlights its advantageous location. The Georgian railways play a unique role in the country s economy, especially in terms of the Eurasian transit link. This system also provides a direct link between the railway systems of Armenia and Azerbaijan. Railway-ferry transit is also playing an important role, through linking lines from the Batumi and Black sea ports with the Caucasus and Central Asia. Inception Report Annex 3 Part 1 Page 51 of 88

170 Figure 54: Transport network in Georgia In domestic transport, the railways are carrying the largest share of the transport volume, measured in tonne-km 2. The background of this development might be the increasing demand in oil and oil products. Roads only play a minor role in domestic freight transport, with stagnating volumes. Maritime shipping used to be the dominant mode in the 1990s, but a severe dropdown to zero in 2000 ended this. Figure 55: Georgia: Freight turnover by mode Border crossing traffic is depicted in Figure 56 for trucks and in Figure 57 for railways. On border crossing roads transit traffic is dominating, often comprising half the transport volume. Imports are mainly coming in through Poti, Batumi, Scarpi and Vale, while exports only comprise a small share of traffic volumes. 2 The graphs of the other countries used tons Page 52 of 88 Annex 3 Part 1 Inception Report

171 Figure 56: Truck Movement in Export, Import and Transit in 2008 Figure 57: Railway Cross-Border Transportation in Moldova - transport and logistics sector Moldova is a landlocked country - with only an imprecisely defined 500 to 900 meter frontage on the Danube situated between Romania and Ukraine. The Pan European Corridor IX (Moscow- Kiev-Bucharest) crosses Moldova from East to West, traversing the capital city Chisinau. Moldova also lies on the TRACECA East West connection. Moldova is a net importer of transport services. The country's economy relies heavily on trade. Moldova can be considered as a "hub" for the region. Moldova's economy is largely based on agriculture and agro-industry. Inception Report Annex 3 Part 1 Page 53 of 88

172 Moldova s exports are mostly agricultural/food and vegetable products which are sensitive to the cost of transport. It is therefore highly dependent on a well functioning transport industry and a solid transport infrastructure. Figure 58: Transport network in Moldova Romania - transport and logistics sector The Romanian transport network is presented in the Figure 59 below. Key issue for the Romanian economy in years will be the development of transport infrastructure to increase economic competitiveness, facilitate the economic accession to the EU, and contribute to the actual development of the internal market. The operation transport programme is aimed at creating the conditions for increased investment activity, the promotion of sustainable transport and spatial cohesion. Logistics and multimodal transport development is one of the core elements of the programme. Page 54 of 88 Annex 3 Part 1 Inception Report

173 Figure 59: Transport network in Romania Turkey - transport and logistics sector Turkey's geopolitical position as a link between the East and the West makes the transport sector crucial for the economic development of the region. The GIS representation of the Turkey transport network is presented in the Figure 60 below. Turkey is a major player both as a transit country and as an origin and destination of freight. Transport demand in Turkey has grown significantly over the past five decades. Turkey has an advantageous position between Europe and Asia, giving it an important transit function. Transport is primarily carried out by sea and by road mode. The rail system has been neglected for years for cargo transportation. Most logistics service providers have set up their facilities near Istanbul and profit from the generally favourable economic outlook. Figure 60: Transport network in Turkey Figure 61 and Figure 62 give an overview on the traffic on road and rail networks in Turkey, derived from the TINA Turkey project. For both modes, east-west corridors to Caucasus States carry fairly low traffic volumes, while the North-South routes are much stronger used. The turnover on Turkish ports (Table 13) show a concentration in Izmir and Izmit (Kocaeli). Inception Report Annex 3 Part 1 Page 55 of 88

174 Figure 61: Annual daily traffic on Turkish road network 2004 Figure 62: Turkish rail freight traffic flows, 2004 Page 56 of 88 Annex 3 Part 1 Inception Report

175 Table 13: Transport volumes in Turkish port regions, 2004 TINA TURKEY has prioritised a number of rail, road, ports and terminals, only a smaller number of them can be relevant for Logistic Centres in Western NIS and Caucasus Ukraine - transport and logistics sector Ukraine is a major hub in European multimodal transport networks connecting Ukraine westbound to the EU, eastbound to (Central) Asia and north-south with CIS countries. Out of nine international transport corridors that cross Europe, three go through the territory of Ukraine. This makes Ukraine an important transit country for Europe with potentials to accommodate regional logistics hubs. In addition, since the opening of the Black Sea Danube Canal, Ukraine is directly connected to Corridor VII, the Danube. EU TACIS supports the further development of the TRACECA corridor (see Figure 63), eastbound through the Black and Caspian Sea to Central Asia. Ukraine also features prominently on the map of Networks for Peace and Development. Extension of the Major trans- European transport axes to the neighbouring countries and regions. However, the North-South corridor, carrying vast quantities of minerals and energy products is still dominant in volume terms. To enhance Ukraine s competitive position as a transit country and location for regional logistics hub, infrastructure development is a necessary but not sufficient condition. Also trade and transport facilitation and establishment of adequate logistics nodes, contributing to improved level of service and lower transport costs, are of vital importance. Inception Report Annex 3 Part 1 Page 57 of 88

176 Figure 63: Transport network in Ukraine The development of the modal split in Ukraine is given in Figure 64. The picture contrasts to the description of exports given above. While trade is dominated by rail transport, most of the national cargo volumes are dominated by road transport. 53% of tons are transported by roads in 2008, with the volumes increasing strongly over the past years. Railways handle 38% of the transport volumes, with a tendency to increase, but slower than road freight. Pipelines have a modal share of 9%, with stagnating volumes over the past years. Maritime transport, inland waterways and Air freight are not playing a significant role. Page 58 of 88 Annex 3 Part 1 Inception Report

177 Figure 64: Ukraine: Cargo transported by mode Figure 65 shows the development of the transport volumes since The impressing decline of transport volume was caused by the breakdown of the economy in the beginning of the 90s as a consequence of the radical change from central planning to a market economy. Volumes only started to increase after the beginning of this millennium. This explains the volume increases given in Figure 64. Inception Report Annex 3 Part 1 Page 59 of 88

178 Figure 65: Ukraine: Cargo transported by mode (indexed at 1996) Regarding the transit transportation in Ukraine, oil and oil products represent only 10% of the transported volume (Figure 66). Ore, ferrous metals and coal represent 60%, the rest of 30% is chemicals, chemical fertilizers, grain and grinding products and other goods. Figure 66: Structure of transit transportation in Ukraine Page 60 of 88 Annex 3 Part 1 Inception Report

179 2.4 General Remarks on the Impacts of the Financial Crisis Expected growth rates before economic downfall In the past, a positive correlation between GDP growth and logistics development could be observed (Figure 67 exemplarily shows the correlation of GDP growth and air cargo traffic growth). Thus, GDP growth rates are widely used to estimate future development in freight transportation. The growth rates for the beneficiary countries, depicted in Figure 68 were compiled by various sources (see bottom). Figures describe an annual growth rate of GDP of the beneficiary countries between almost 4% (Ukraine) and almost 6% (Armenia), with Azerbaijan topping with about 9.5%. More detailed tables are presented in Annex 1 Part 1 (Table 21 to Table 24). Figure 67: GDP growth and air cargo growth rates Source: Boeing WORLD AIR CARGO FORECAST Those forecasts assume that development takes place continuously. The current economic downfall however, marks a discontinuity in a heavy dimension. This makes it impossible to make further use of these forecasts without adjustments that try to estimate possible effects duration, severity of the current economic situation. The following chapters describe an approach developed by the consultant s team that could form the basis for further project activities. As the current crisis started already during 2008, the expectations of the project team to the traffic flows project would be that the effects would already be included in their forecasts. As soon as the outputs of the traffic flows project are available to this project, they are incorporated in the activities. Inception Report Annex 3 Part 1 Page 61 of 88

180 Figure 68: Annual average growth rates of GDP, productivity and employed people in , percent/year -2 % 0 % 2 % 4 % 6 % 8 % 10 % World EU27 EU15 EU12 USA China India Russia Iran Armenia Azerbaijan Bulgaria Georgia GDP Productivity Employed Kazakhstan Kyrgystan Moldova Romania Tajikistan Turkey Turkmenistan Ukraine Uzbekistan Source: Traffic Flows Project, Scenario paper Discontinuity in business and traffic development The consultant s view is that, because of the global recession, it is impossible to make traffic forecasts based on past trends with any confidence. In our interviews with transport operators we have heard reports that cargo volumes have declined by 30-85%. No respondent has been willing to speculate on when demand is likely to grow again. Page 62 of 88 Annex 3 Part 1 Inception Report

181 But we cannot conduct feasibility studies or formulate business plans without traffic forecasts. To address this problem we have devised a set of scenarios, the purpose being to initiate productive debate, leading to an agreed basis for traffic forecasting. In the following sections we identify the determinants of future traffic over a 20-year period. Then we suggest a set of scenarios, defined qualitatively and then with values applied to each of the variables Determinants of Future Traffic Global Recession The most obvious determinants are the length and depth of the global recession and the strength of the recovery. We share the assumption that all our interviewees have made, explicitly or implicitly: that there will be a recovery of some kind. It may not be rapid and it may not be a return to business as usual. But eventually we can expect consumption and production to rise above today s depressed levels, involving larger volumes of goods moving across international borders. Last year many experts and political leaders were predicting that the global recession would last until the second half of Now the most optimistic predictions are for recovery starting in There is a growing feeling that the global economy is in the early phase of a systemic change. Many respected commentators talk about a deep recession persisting for several years 3. The following questions have to be answered if we are to make a forecast: Has demand for traded goods reached its nadir? If not, how much lower will it go? When will positive growth resume? Will there be a catch-up period of strong growth? If so, how long will that last and how strong will the growth be? How will the global recovery affect demand for freight transport in this project s beneficiary countries? This last question deserves some discussion. It appears from our interviews that freight traffic in the region has declined by more than in the main production and consumption centres in North America, Western Europe, China and Japan. In those centres one hears figures of -30% to -50%. Typically our interviewees have reported decline in the range -50% to -70%. A very broad-brush explanation would be to say that these are marginal economies in the global context. Importers and investors and likely to turn away from them before they turn away from partners that appear more stable, more reliable and more strategically significant. It may be that their above-average decline will be mirrored by above-average growth in the recovery phase. Or it may be that they will be losers in the restructuring of the global economy that will take place. 3 For example, in April 2008 Reuters reported Warren Buffet as saying, My general feeling is that the recession will be longer and deeper than most people think. This will not be short and shallow. He called the recession an economic Pearl Harbor and suggested it would last for five more years. In November 2008 George Soros told a Congressional committee that a deep recession is now inevitable and the possibility of a depression cannot be ruled out." In an interview in March 2009 Soros pointed to fallout in the real economy, which is now gathering momentum. At this point, repairing the financial system will not stop a severe worldwide recession. Inception Report Annex 3 Part 1 Page 63 of 88

182 Long-term Growth Let us assume that within a period of years the global economy resumes a more-or-less stable, sustainable growth trajectory. This is the general expectation. Then the following questions have to be answered: What long-term economic growth rate can be expected? Will this project s beneficiary countries economies grow at the global rate, faster or slower? Will economic growth translate, as in the past, into a higher growth rate for internationally traded goods? Will the recovery phase take the world economy up to the level of demand that would have been attained if the global recession had not occurred? If not, how many years of global economic growth will be lost? Scenarios We suggest three scenarios. These may be crudely described as High, Medium and Low. They might also be called Optimistic, Neutral and Pessimistic. They relate to the following broad assumptions: High/Optimistic The global recession will be short, with no decline in activity below current levels. Recovery will be rapid. The global economy will resume its previous long-term growth trajectory, there being full convergence with the pre-recession trend line. The region will enjoy a rebound proportional to its earlier decline. Medium/Neutral The global recession will last until 2011, with no decline in activity below current levels. The rate of recovery will be modest. The global economy will adjust to a slightly slower long-term rate of economic growth, with the loss of 2 years growth. The region will enjoy a rebound proportional to its earlier decline. Low/Pessimistic The global recession will last until 2013, with a further 5% ndecline in activity below current levels. Recovery will be slow. The global economy will adjust to a significantly slower long-term rate of economic growth, with the loss of 5 years growth. Recovery in the region will be in line with global recovery. The three scenarios are depicted in Figure 69 below. Page 64 of 88 Annex 3 Part 1 Inception Report

183 Figure 69: Three scenarios about future economic developments: (a) high/optimistic (top), (b) medium/neutral (middle), (c) low/pessimistic Inception Report Annex 3 Part 1 Page 65 of 88

184 Page 66 of 88 Annex 3 Part 1 Inception Report

185 3 OVERVIEW OF CARGO FLOWS BETWEEN MAIN LOGISTICS HUBS IN THE BENEFICIARY COUNTRIES 3.1 Cargo Flows Data Cargo flows data on individual infrastructure links, like road sections or rail links, are special data that are not available in standard statistics databases. The effort to develop these data is high, as comprehensive traffic surveys need to be undertaken. Thus, the design of this project does not include activities for surveys or own transport modelling and traffic forecasts, but builds on the results of previous or current projects. The main project in this respect is the ongoing project of the TRACECA program: Analysis and forecasting of traffic flows for the TRACECA countries and interregional transport integration. In the very beginning of this project, in January 2009, the project team contacted the traffic flows project to receive their results. Unfortunately, their progress was not as expected, so that the available data was very preliminary. Especially for this chapter, where cargo flows between main logistics hubs in the beneficiary countries should be described, the data was not sufficient. As soon as new data is available, it shall be presented in the following report. Cargo flows on maritime and to a minor extent air transport are an exception insofar, as turnovers and capacities are partially published. The following chapters describe the situation as far as data is presently available. 3.2 Cargo Flows on Main Maritime Transport Links Constanta is by far the port with the highest turnover of containers (see Figure 70), followed by Odessa and Illichevsk. The other ports show considerably lower figures. Varna, Poti, Constanta and Novorossysk operate close to their capacity, whereas the other ports, especially Odessa and Illichevsk seem to have room for growth on the basis of their current capacities. Plans for further enlargement of the container handling capacities exist in Batumi, Nikolaev, Filyos and especially in Sevastopol. Inception Report Annex 3 Part 1 Page 67 of 88

186 Figure 70: Container ports in Black Sea Region: container turnover and capacities 2007 Constanta, as the by far largest container port in the region, owes its prime position to the exceptional high transhipment activities (Figure 71). Page 68 of 88 Annex 3 Part 1 Inception Report

187 Figure 71: Black Sea region: Container turnover 2007 at main container ports The container handling activities increased particularly since 2004 with highest annual growth rates. Figure 72 depicts the growth to be continued also in the future (please see chapter 2.4 General Remarks on the Impacts of the Financial Crisis on the validity of this forecast). Inception Report Annex 3 Part 1 Page 69 of 88

188 Figure 72: Black Sea region: development of container handling volumes The ports are planning to extend their capacities. Table 14 describes the situation in 2007 and the plans for further extension. Table 15 forecasts the container throughput capacity in Ukraine. Please see chapter 2.4 General Remarks on the Impacts of the Financial Crisis on the validity of these forecasts. Page 70 of 88 Annex 3 Part 1 Inception Report

189 Table 14: Container turnover and capacities in main Black Sea region ports 2007 and in future Port Country Container throughput 2007 Container capacity 2007 (`000 TEU) Future container capacity (`000 TEU p.a.) Burgas Bulgaria Varna Bulgaria Constanta Romania Illychevsk Ukraine Odessa Ukraine Novorossiysk Russia Poti Georgia >1000 Yushny Ukraine >800 Nikolaiev Ukraine (250, 780, 1400)* Sevastopol Ukraine Batumi Georgia Filyos Turkey ??? * Construction planned in three stages Source: HPC 2008 Table 15: Forecast Container Throughput Capacity in Ukraine in TEU (Source: HPC, 2008b) Terminal Capacity units Odessa '000 TEU 740, ,000 1,230,000 1,480,000 2,000,000 thereof HPC '000 TEU 640, ,000 1,050,000 1,300,000 1,600,000 thereof others '000 TEU 100, , , , ,000 Illychevsk '000 TEU 850,000 1,000,000 1,700,000 1,700,000 1,700,000 Yuzhny '000 TEU 300, , , ,000 Nikolaev '000 TEU 125, , , ,000 Total '000 TEU 1,590,000 2,405,000 3,930,000 4,780,000 5,300,000 Market '000 TEU 1,302,357 1,860,929 2,501,338 3,189,938 4,681,505 Potential Ukraine TEU per 1000 Inhabitants Ukraine* TEU * current level in Northern Europe: 144 TEU per thou. inhabitants (Source: Drewry) Comparing the plans for expanding the capacities of the ports in Ukraine and the black sea region with the predicted turnover as in Figure 73 and Figure 74, it becomes obvious, that the capacities will be much higher than the demand. Especially when taking into account the effects of the current economic situation, the plans most likely will have to be reconsidered. As a consequence for this project, the focus is expected not to be on the infrastructure measures but on the operational and technological improvements. Inception Report Annex 3 Part 1 Page 71 of 88

190 Figure 73: Container throughput in Ukraine: Forecasts capacities vs. demand Figure 74: Container throughput in Black Sea ports: Forecasts capacities vs. demand Page 72 of 88 Annex 3 Part 1 Inception Report

191 3.3 Cargo Flows at Main Airports A relatively high number of airports in the beneficiary countries offer cargo handling facilities (Figure 75), but there are only a few that show remarkable volume (Istanbul/Turkey with the highest volume, followed by Gyandzha and Baku/Azerbaijan). In Turkey, Ukraine and Georgia, there is only one airport as the major hub in the country, i.e. Istanbul, Kiev and Tbilisi; in Romania and Bulgaria two airports share the dominant part of air cargo (Bucharest/Sibiu and Sofia/Bourgas). Figure 75: Total cargo turnover at airports in beneficiary countries (in tonnes, most recent year) All airports in the beneficiary countries show considerable growth (Figure 76). An exceptional development has Adana/Turkey, where since 2004 the cargo turnover is 14 times higher than in base year Constanta, Kiev, Bourgas and Istanbul more than doubled their turnover since 2001; all other airports at least recovered from Inception Report Annex 3 Part 1 Page 73 of 88

192 Figure 76: Airport cargo turnover: development Page 74 of 88 Annex 3 Part 1 Inception Report

193 4 REFERENCES CI-Online (2008): Containerisation International. CI-Online. London: CI. Constanta South Container Terminal (2009): Welcome to DP World Constanta. ESRI (2008): Digital Charts of the world. Redmond: ESRI Com. Euromonitor International (2008): World Economic Factbook European Bank for Reconstruction and Development and LABORSTA (2005): TRACECA countries employment: Transition Report Business in transition. ILO. Eurostat (2009): ComExt Database. Online. Luxembourg: Eurostat. Eurostat (2009): Statistical Regime 4. Luxembourg: Eurostat. Eurostat (2009): Modal split of freight transport. % in total inland freight tonne-km. Luxembourg: Eurostat Ferrylines.com (2009): Fähren sind unser Geschäft. HPC (2008a): Main Container Ports in Black Sea Region. Hamburg: Hamburg Port Consult (HPC). HPC (2008b): HPC Market Study. Hamburg: Hamburg Port Consult (HPC). Ifmo (ed.) (2008a): Ost-West-Güterverkehre Analysen, Prognosen und verkehrspolitische Herausforderungen für Deutschland und ausgewählte europäische Länder. Abschlussbericht. Berlin: Institut für Mobilitätsforschung. Ifmo (ed.) (2008b): Ost-West-Güterverkehre Analysen, Prognosen und verkehrspolitische Herausforderungen für Deutschland und ausgewählte europäische Länder. Anlage Länderprotraits. Berlin: Institut für Mobilitätsforschung. Ifmo (ed.) (2008c): Ost-West-Güterverkehre Analysen, Prognosen und verkehrspolitische Herausforderungen für Deutschland und ausgewählte europäische Länder. Anlage bilaterale Güterstromanalysen. Berlin: Institut für Mobilitätsforschung. IMF (2007): TRACECA countries GDP. World Economic Outlook. Spillovers and cycles in the global economy. IMF. Index Mundi (2009: Land Auflistung, Bulgarien und Rumänien. Louis Berger SAS et al. (2008): Analysis of Traffic Flows for TRACECA countries and interregional transport dialogue between EU and NIS. Transportation Demand Scenarios. Draft Paper September Ministry of Economic Development of Georgia (2009): Statistical Yearbook of Georgia Tblisi: Ministry of Economic Development of Georgia, Department of Statistics. Moldova National Bureau of Statistics (2008): Exports and imports of Moldova Moldova National Bureau of Statistics (2009): General Statistical Information on Moldova. National Bank of Moldova, National Bureau of Statistics (2008): Economic growth figures Inception Report Annex 3 Part 1 Page 75 of 88

194 National Institute of Statistics (2009): Online database, Foreign trade, transport, post and telecommunications. Bucharest: INS. National Statistical Service of the Republic of Armenia (2009). General Informationon Armenia. Yerevan: NSS RA. National Statistical Service of the Republic of Armenia (2008). Statistical Yearbook Armenia Yerevan: NSS RA. Odessa Commercial Seaport (2009): Port of Odessa, handling of containers. Odessa. RRG (2009): RRG GIS Database. Oldenburg i.h.: RRG. Republic of Bulgaria, National Statistical Institute (2009). Online Database, Foreign Trade and Transport. Sofia: NSI. Schmöcker, K. (2008): Throughput capacity and investments in development of the Black Sea ports. Container Transport. Presentation Odessa October State Statistical Committee of the Republic of Azerbaijan (2009): Azerbaijan in figures. Baku. State Statistical Committee of the Republic of Azerbaijan (2009): Statistical Yearbook Baku. State Statistics Committee of Ukraine (2009): Statistical Information Online. TINA Turkey Joint Venture (2007): Technical Assistance to Transportation Infrastructure Needs Assessment for Turkey. Final Report. TRACECA (2006): TRACECA Transport Corridor Europe-Caucasus-Asia. GIS Database. Baku: PS IGC TRACECA. Ukraine Port Authority (2009): Ukraine port activities Ukraine State Center of Transport Service (2009): Container and combined trailer trains passing through Ukraine. Liski. UN (2006): UN Trade Statistics Database - ComTrade Database UN-ECE (2003): Combined census of motor traffic and inventory of standards and parameters on main international traffic arteries in Europe in Geneva: UNECE Transport Division. Page 76 of 88 Annex 3 Part 1 Inception Report

195 5 APPENDIX Exports from Traceca counties in 2006 million $US Table 16: Exports from TRACECA countries in 2006 [million US$] Annex 1/1 Export to World EU15 CIS Germany France UK Netherlands Italy USA China India Russia Iran Afghanistan Armenia Azerbaijan Bulgaria Georgia Kazakhstan Kyrgyzstan Moldova Romania Tajikistan Turkey Turkmenistan Ukraine Uzbekistan SUM Index Armenia Azerbaijan Bulgaria Georgia Kazakhstan Kyrgyzstan Moldova Romania Tajikistan Turkey Turkmenis Ukraine Uzbekistan Armenia Azerbaijan Bulgaria Georgia Kazakhstan Kyrgyzstan Moldova Romania Tajikistan Turkey Turkmenistan Ukraine Uzbekistan SUM Index Source: Traffic Flows Project Inception Report Annex 3 Part 1 Page 77 of 88

196 Figure 77: Share of exports going from TRACECA countries to EU15, CIS and other countries in 2006 Source: Traffic Flows Project, Scenario paper Table 17: Exports and imports of Ukraine in 2008 by continent and by selected countries Exports 2008 Imports 2008 thsd.usd in % to 2007 thsd.usd in % to 2007 Balance 2008 Total ,8 135, ,7 141, ,9 CIS countries ,7 128, ,8 131, ,1 Azerbaijan ,5 144, ,2 243, ,3 Belarus ,6 134, ,7 194, ,1 Armenia ,5 122, ,2 71, ,3 Georgia ,4 124, ,6 191, ,8 Kazakhstan ,7 127, ,3 184, ,6 Kyrgyzstan 83650,1 117,1 9119,7 144, ,4 Moldova ,0 129, ,7 100, ,3 Russian Federation ,5 124, ,7 115, ,2 Tajikistan 77673,6 151,8 5355,6 123, ,9 Тurkmenistan ,9 191, ,5 119, ,6 Uzbekistan ,0 171, ,6 388, ,6 Europe ,8 133, ,2 132, ,4 Austria ,1 138, ,7 128, ,6 Albania 80405,6 77,3 407,0 291, ,6 Page 78 of 88 Annex 3 Part 1 Inception Report

197 Exports 2008 Imports 2008 thsd.usd in % to 2007 thsd.usd in % to 2007 Balance 2008 Belgium ,6 192, ,7 129, ,0 Bulgaria ,1 199, ,5 141, ,6 Bosnia and Herzegovina ,1 129, ,2 163, ,0 Greece ,6 153, ,2 146, ,4 Denmark ,0 98, ,4 118, ,5 Estonia ,1 79, ,5 116,3 3765,3 Ireland 28798,7 210, ,5 143, ,8 Iceland 35,5 1, ,9 114, ,4 Spain ,4 156, ,3 153, ,1 Italy ,8 108, ,0 136, ,8 Latvia ,6 108, ,5 95, ,1 Lithuania ,3 119, ,0 190, ,7 Liechtenstein 321,5 250,4 3568,9 707,5 3247,4 Luxembourg 7882,8 510, ,8 107, ,0 Macedonia, the former Yugoslav Repablic of ,5 189,6 7311,7 87, ,8 Malta 53110,2 164,0 2439,0 321, ,3 Netherlands ,1 146, ,1 145, ,0 Germany ,2 111, ,3 122, ,1 Norway ,2 121, ,8 116, ,6 Poland ,7 142, ,8 146, ,1 Portugal 63138,5 78, ,8 165,5 1458,7 Romania ,7 106, ,9 150, ,2 Serbia , , ,2 Slovakia ,2 141, ,6 141, ,7 Slovenia 27472,2 64, ,9 42, ,7 United Kingdom ,7 197, ,8 155, ,1 Hungary ,1 110, ,2 103, ,9 Finland 59100,9 127, ,9 126, ,0 France ,1 105, ,5 126, ,4 Croatia ,3 129, ,3 107, ,0 Czech Republic ,7 156, ,9 119, ,2 Montenegro 2703,5 997,0 1706,5 Switzerland ,9 861, ,6 272, ,6 Sweden ,6 162, ,8 114, ,2 Asia ,2 147, ,6 171, ,3 India ,2 135, ,0 139, ,2 Iraq ,2 487, , , ,8 Iran, Islamic ,4 169, ,3 148, ,2 Inception Report Annex 3 Part 1 Page 79 of 88

198 Exports 2008 Imports 2008 thsd.usd in % to 2007 thsd.usd in % to 2007 Balance 2008 Republic of China ,8 126, ,5 169, ,6 Cyprus ,5 258, ,7 343, ,7 Saudi Arabia ,9 182, ,7 309, ,2 Syrian Arab Republic ,7 122, ,2 285, ,5 Turkey ,2 127, ,8 200, ,4 Japan ,4 127, ,5 198, ,1 Africa ,9 139, ,2 231, ,7 America ,7 154, ,2 185, ,6 United States of America ,5 184, ,9 199, ,3 Australia and Oceania 63960,1 407, ,5 336, ,4 Others 70875,4 119,0 1500,8 192, ,6 Table 18: Main trade partner of Azerbaijan 2007 (imports, exports; in thsd. US-$) Countries Turnover % Import % Export % Trade balance Total Turkey Russia Italy Iran USA Ukraine Germany United Kingdom Georgia Israel ?ndonezia France Kazakhstan Japan China India Republic of Korea Brazilia Finland Greece Malta Chili Netherlands Romania Belarus Other countries Page 80 of 88 Annex 3 Part 1 Inception Report

199 Table 19: Armenia Exports and Imports (in 1,000 US-$) Country Exports imports exports imports exports imports exports imports Total Azerbaijan Belarus Georgia Kazakhstan Kyrgyzstan Moldova Russia Tajikistan Turkmenistan Uzbekistan Ukraine RNK Austria Belgium United Kingdom Germany Greece Denmark Ireland Spain Italy Luxembourg Netherlands Portugal Finland France Sweden Hungary Czech Republic Slovenia Slovak Republic Inception Report Annex 3 Part 1 Page 81 of 88

200 Country Exports imports exports imports exports imports exports imports Poland Bulgaria Romania Malta Cyprus Latvia Lithuania Estonia Other countries Switzerland Iran USA Syria UAE Serbia and Montenegro Lebanon India China Canada RSA Egypt Turkey Israel Another countries Table 20: Foreign trade of Moldova (Exports/imports), % share of total Export, % Import, % CIS Russia Ukraine Belarus Other Non CIS Page 82 of 88 Annex 3 Part 1 Inception Report

201 % share of total Export, % Import, % Romania Italy Germany Poland Turkey Bulgaria France United States Others Source: National Bureau for Statistics Table 21: Growth rates of GDP, productivity and employed people (%/year) Activity rate 2005 World GDP Productivity Employed EU27 GDP Productivity Employed EU15 GDP Productivity Employed EU12 GDP Productivity Employed USA GDP Productivity Employed China GDP Productivity Employed India GDP Productivity Employed Russia GDP Productivity Employed Iran GDP Productivity Employed Armenia GDP Productivity Employed Azerbaijan GDP Inception Report Annex 3 Part 1 Page 83 of 88

202 Activity rate 2005 Productivity Employed Bulgaria GDP Productivity Employed Georgia GDP Productivity Employed Kazakhstan GDP Productivity Employed Kyrgyzstan GDP Productivity Employed Moldova GDP Productivity Employed Romania GDP Productivity Employed Tajikistan GDP Productivity Employed Turkey GDP Productivity Employed Turkmenistan GDP Productivity Employed Ukraine GDP Productivity Employed Uzbekistan GDP Productivity Employed TRACECA GDP (mean of the Productivity countries) Employed Sources: TRACECA countries GDP: World Economic Outlook. Spillovers and Cycles in the Global Economy. World Economic and Financial Surveys. IMF April 2007 TRACECA countries employment: Transition report Business in transition. European Bank for Reconstruction and Development and LABORSTA Internet, ILO EU countries: European Commission > Eurostat home pace > Data navigation three > General Economic Background Page 84 of 88 Annex 3 Part 1 Inception Report

203 Table 22: Nominal GDP in when EU27 = in 2007 and purchasing power parity (PPP) GDP in 2007 when EU27 = and (PPP) GDP per capita in 2007 when EU27 = 1000 in 2007 Real GDP (PPP) Nominal GDP based on exchange rates GDP per GDP capita World EU EU EU US China India Russia Iran Armenia Azerbaijan Bulgaria Georgia Kazakhstan Kyrgyzstan Moldova Romania Tajikistan Turkey Turkmenistan Ukraine Uzbekistan TRACECA * * * = Average of TRACECA countries Source: Traffic Flows Project, Scenario paper Table 23: Export forecasts World Export rate Export index GDP index EU27 Export rate Export index GDP index EU15 Export rate Export index GDP index EU12 Export rate Export index GDP index USA Export rate Inception Report Annex 3 Part 1 Page 85 of 88

204 Export index GDP index China Export rate Export index GDP index India Export rate Export index GDP index Russia Export rate Export index GDP index Iran Export rate Export index GDP index Armenia Export rate Export index GDP index Azerbaijan Export rate Export index GDP index Bulgaria Export rate Export index GDP index Georgia Export rate Export index GDP index Kazakhstan Export rate Export index GDP index Kyrgyzstan Export rate Export index GDP index Moldova Export rate Export index GDP index Romania Export rate Export index GDP index Tajikistan Export rate Export index GDP index Turkey Export rate Export index GDP index Turkmenistan Export rate Export index GDP index Ukraine Export rate Page 86 of 88 Annex 3 Part 1 Inception Report

205 Export index GDP index Uzbekistan Export rate Export index GDP index TRACECA Export rate (mean of the Export index countries) GDP index Source: Traffic Flows Project, Scenario paper Table 24: Exports by country/country group as a percentage of whole export Export from Export to Arme Azer Bulg Geor Mold Roma Turke Ukra Whole export EU CIS USA China India Russia Iran Armenia Azerbaijan Bulgaria Georgia Moldova Inception Report Annex 3 Part 1 Page 87 of 88

206 Export from Export to Arme Azer Bulg Geor Mold Roma Turke Ukra Romania Turkey Ukraine Uzbekistan Source: Traffic Flows Project, Scenario paper Page 88 of 88 Annex 3 Part 1 Inception Report

207 ANNEX 3 PART 2 TRANSPORT INFRASTUCTURE AND MAIN LOGISTICS NODES

208

209 TABLE OF CONTENTS 1 TRANSPORT INFRASTUCTURE AND MAIN LOGISTICS NODES COUNTRY REPORTS - DIRECT BENEFICIARY TRACECA COUNTRIES Armenia Azerbaijan Georgia Moldova Ukraine COUNTRY REPORTS - INDIRECT BENEFICIARY TRACECA COUNTRIES Bulgaria Romania Turkey PRELIMINARY LIST OF SUITABLE LOCATIONS FOR LOGISTICS CENTRES Summary Main determinants of an international logistics centre Results to be achieved Methodology of multicriteria analysis for evaluation of the logistics nodes Country specific justification for macro location APPENDIXES APPENDIX 1 TABLES: STATISTICAL DATA AND INFO - GEORGIA APPENDIX 2 TABLES: STATISTICAL DATA AND INFO - ROMANIA Inception Report Annex 3 Part 2 Page 1 of 207

210 Page 2 of 207 Annex 3 Part 2 Inception Report

211 LIST OF FIGURES Figure 1: Old and New TRACECA Maps of Armenia Figure 2: North South Corridor in Armenia Figure 3: MOTC railway terminal Figure 4: Bulk loading facility Figure 5: APAVEN terminal Figure 6: Share of GDP for Transport Sector Figure 7: Maritime links of CASPAR on the Caspian Sea Figure 8: Rail Ferry at the berth Figure 9: Port of Baku Figure 10: EU financed equipment at the container terminal Figure 11: Container terminal at the Port of Baku Figure 12: Location of the new port of Baku Figure 13: Individual Logistics Terminals and Warehouses Figure 14: Baku Cargo Terminal warehouse handling Figure 15: Road between Zestaphoni and Khachuri in Georgia Figure 16: Senaki Railway station Figure 17: Samtredia railway station Figure 18: Zestaphoni railway station Figure 19: Khachuri railway station Figure 20: Rail ferry operation in Poti Port Figure 21: Access road to the container terminal, Status: February Figure 22: Gate of the container terminal Figure 23: Bert No. 14 Poti Port (the buildings behind do not belong to the port) Figure 24: Aluminium from Central Asia in the Port of Poti Figure 25: Container Terminal Poti Figure 26: Inland Terminal Poti Figure 27: Oil terminal in Batumi Figure 28: Dry Cargo and bulk Berth in Batumi Figure 29: Industrial Free Zone Area Phasing Figure 30: Tbilisi Airport Cargo Handling Facility Figure 31: Tbilisi Airport Cargo Handling Area Figure 32: Land plot near the Tbilisi Airport Figure 33: Land plot near the Airport Tbilisi Figure 34: Cargo Operation at Poti Port Figure 35: Road Network of Moldova Figure 36: Moldovan Railway Network Figure 37: General View of Chisinau Rail Freight Cargo Figure 38: Gantry and Wagons at Chisinau Rail Freight Terminal Figure 39: Control Room at Chisinau Rail Freight Terminal Figure 40: GIFP Master Plan Figure 41: GIFP Oil Terminal Facilities Figure 42: GIFP Container Handling Facilities (Artist s Impression) Figure 43: GIFP Office Facilities (Photo March 2009) Figure 44: Organisational Structure of Moldovan Transport Agency Figure 45: Location of Moldovan Customs Houses Figure 46: TRACECA map 2008 of Ukraine Inception Report Annex 3 Part 2 Page 3 of 207

212 Figure 47: International road network of Ukraine Figure 48: E-road network of Ukraine Figure 49: Railway network of Ukraine Figure 50: TRACECA road and railway corridors in Ukraine Figure 51: Important container and combined trailer train routes passing through Ukraine Figure 52: Viking system Figure 53: Scheme of Odessa Commercial Sea Port Figure 54: Odessa Port Container Terminal Figure 55: Ilyichevsk Port Container Terminal Figure 56: Scheme of Ilyichevsk Commercial Sea Port Figure 57: LISKI Freight terminal in Kiev Figure 58: Railway station Kovel Figure 59: Cargo Terminal Services Figure 60: Pan-European transport corridors crossing Bulgaria Figure 61: Railway line in Sofia Figure 62: Master Plan of Sofia- Location of the planned Intermodal Terminal Figure 63: Varna West- Bulk Cargo Terminal Figure 64: Container terminal at Varna West Figure 65: Varna West- Container Terminal Figure 66: Rail ferry in the Port of Varna Figure 67: Bulk cargo complex in Port of Bourgas Figure 68: Wagon loading station at the bulk cargo complex Figure 69: Cold storage facility at the Port of Bourgas Figure 70: Pan-European Transport Corridors in Relation to Romania Figure 71: Romanian Railway Network Figure 72: CFR Marfă Container Terminal Bucharest Sud (1) Figure 73: CFR Marfă Container Terminal Bucharest Sud (2) Figure 74: CFR Marfă Intermodal Terminal Bucharest Progress (1) Figure 75: CFR Marfă Intermodal Terminal Bucharest Progress (2) Figure 76: CFR Marfă Intermodal Terminal Bucharest Progress (3) Figure 77: Plans of Constantza Port and Satellite Ports Midia and Mangalia Figure 78: General View of Constanza Port Figure 79: Potential Logistics Centre Locations in Romania Figure 80: Locations of BALO Project and TDCC Logistics Villages Figure 81: Old TRACECA route in Turkey Figure 82: Updated TRACECA route Figure 83: Trucks waiting at the border (Turkish side) Mar Figure 84: The Turkish / Georgian Border in Sarp March Figure 85: Railway network of Turkey Figure 86: Industrial lines of Turkey Figure 87: Haydarpasa port Figure 88: Container terminal Haydarpasa, Istanbul. Status: March Figure 89: Congested access road to the container terminal Haydarpasa, Status: March Figure 90: Port of Tekirdag operated by AKPORT Figure 91: Ferry links Tekirdag Bandirma and Gemlink. Rail connection Tekirdag Muratli- Main Railway line Figure 92: Port of Izmir Figure 93: Izmir port Extension area blue marked Page 4 of 207 Annex 3 Part 2 Inception Report

213 Figure 94: Port of Izmir with heavy traffic. Status March Figure 95: Activities within the Izmir container terminal area. Status: March Figure 96: Port of Samsun Figure 97: From the blue ship the grain loaded onto trucks to be transported 200 m to the silo. The queuing trucks loaded with grain Figure 98: Unloading of a truck inside a RoRo ferry Figure 99: The area for future rail ferry operation Figure 100: The railways land plot and the rail connection at Gelemen Figure 101: Port of Trabzon: The port of Trabzon with break water Figure 102: Container Vessel in the port of Trabzon March Figure 103: RoRo ship in Trabzon March Figure 104: Port of Hopa source: port publication Figure 105: Newly built warehouse for logistics service in Manisa Figure 106: MNG Warehouse next to Istanbul airport. Source: MNG presentation Figure 107: Evaluation scheme - Macro locations for logistics nodes project Figure 108: Total Cargo Revenues Figure 109: Railway Cargo Figure 110: Trucking Industry Figure 111: Air Cargo Handling in Figure 112: Cargo Revenues in Georgian Ports Figure 113: Container Revenues in Georgian Ports Figure 114: Cargo Traffic by Type of Cargo in the Poti Port Figure 115: Railway Cross-Border Transportation in Figure 116: Truck Movement in Export, Import and Transit in Inception Report Annex 3 Part 2 Page 5 of 207

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215 LIST OF TABLES Table 1: Contribution of the Transport Sector to GDP Azerbaijan Table 2: Azerbaijan Total Passenger and Freight Traffic Table 3: Freight Volume Handled by ADDY in Table 4: Azerbaijan Maritime Freight Traffic Table 5: Overview Port of Baku Table 6: Cargo handling at Baku Port in Table 7: Azerbaijan Freight Traffic in Table 8: Azerbaijan Road Freight Traffic Table 9: Chisinau Airport: Air Cargo (tonnes) Table 10: Albă Midia Năvodari Channel Technical Parameters Table 11: Constantza Port Characteristics Table 12: Road network surface Table 13: Main Hubs analysed for preliminary list of locations at ports, large cities, cross-roads Inception Report Annex 3 Part 2 Page 7 of 207

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217 1 TRANSPORT INFRASTUCTURE AND MAIN LOGISTICS NODES 1.1 Country Reports - Direct beneficiary traceca countries Armenia Source: UN Map Database Background Information Introduction Armenia is a land-locked country with a population of 3 million people and a territory of about 30,000km 2. Two of the countries borders (with Azerbaijan and Turkey) have been closed since the conflict around Nagorny Karabach shortly after independence in Thus, Armenia is heavily dependent on the road and rail links to Georgia and its Black Sea ports and on a single road connection to Iran. About 65% of the population live in urban centres, the capital Yerevan being the main economic centre with a population of just under 1 million and contributing about 2/3 of GDP. Almost half the population is occupied in agriculture, which generates about 18% of the GDP. The service sector accounts for 32%. Other important sectors are mining, energy and, traditionally, the processing of raw diamonds and other precious stones and jewellery. Armenia is heavily dependent on imported goods. The trade balance reported in 2007 indicates an import-export ratio of 3:1. The main export items are mining products (copper ore concentrate, ferrous metals, etc.), diamonds and foodstuff (including the Armenian brandy, which accounts for about 10% of export revenues). Inception Report Annex 3 Part 2 Page 9 of 207

218 Current Economic Situation After stable and significant average annual growth rates of about 12.6% in , the Armenian economy was hit by several blows in 2008 and Chief among these were falling commodity prices for Armenian mining products, crisis in Russia, causing a downtrend in both remittances and foreign direct investment, and others. As a result, economic activity slowed down dramatically, the trust in the financial system of the country was weakened, causing an outflow of capital. According to the IMF, who provided a US$540 million loan facility to counter the effect of these problems in March 2009, the GDP growth will be negative this year. Current Situation of Freight Transport and Logistics Sector Trucks dominate freight transport (5 million tonnes in 2008 vs. 2,7 million tonnes by rail), although in terms of tonne-kilometres the share of the railway and, especially, pipeline transport is dominant (but the international distance component is included in the statistics). Grain and petroleum products account for more than 50% of Armenian imports by rail via Georgia, mineral ore being the main commodity for export by rail (more than 2/3). Only 1/4 of the traffic volume by rail is generated domestically, cement and other raw materials being the main commodities transported. The development of an efficient transport and logistics sector is still emerging. Most producers and retailers do not refer to logistics services of specialized companies, but organize warehousing, sometimes deliveries and transportation themselves. Sophisticated manufacturing is not developed in Armenia. Consequently, the demand for logistics services from industry is relatively low. International retailer chains have not entered the Armenian market yet. 3PL services are not provided so far. Multimodal transport and logistics are still underdeveloped. The World Bank ranked Armenia 131 st out of 150 countries in its Logistics Performance Index in 2007 Customs and other border control agencies Rank 118 Quality of Transport and IT infrastructure for logistics Rank 143 Ease and affordability of arranging shipments Rank 140 Competence in the local logistics industry Rank 121 Ability to track and trace shipments Rank 113 Domestic logistics costs Rank 8 Timeliness of shipments in reaching destination Rank 122 The Armenian transport sector is heavily affected by the global financial and economic crisis. Imports, exports and local economic activity are on a downward trend since autumn Main stakeholders speak of a 47% reduction in operations in March 2009, in comparison with the same month of Analysis of Transport Infrastructure During the USSR period an extensive transport network had been built in Armenia, based on central planning and dominated by rail. After sovereignty, traffic volumes fell dramatically by over 90%, the whole economy being converted from a heavy industrial to an agricultural/light industry/service economy. Thus, the planned capacity of the inherited existing network is underutilised at current traffic volumes. In 1988, the traffic by road and rail was 320 million tonnes compared to 8,7 million tonnes in 2008 (with the provision that actual traffic is higher than documented in the official statistics). Page 10 of 207 Annex 3 Part 2 Inception Report

219 As a result of the conflict around Nagorno Karabakh, the borders to Turkey and Azerbaijan were closed, including the main rail/road link through Azerbaijan/Nachichevan to Iran, the main highway from Yerevan to Tbilisi and Russia through Azerbaijan, the railway to Turkey (Gyumri- Kars) and the road connection to Turkey (Yerevan-Karakala). After independence, there was virtual standstill in infrastructure capital and maintenance. For almost a decade the Armenian state (for various reasons: conflict with Azerbaijan, lack of funds, structural and social problems, poverty reduction being the main issue, lack of awareness) was not in the position to maintain the inherited network, adjust it to the change of routes, to a new structure of commodities and new trade patterns. Bottlenecks in infrastructure on the new routes (narrow bridge at the border to Georgia at Bagratashen) remained; new challenges (as for instance rapid household motorisation rates in Yerevan) were not addressed. During the last five years, a major maintenance and investment backlog on interstate roads and other transport facilities has been addressed. However, according to a recent assessment of the ADB, it will take Armenia 6-10 years to focus on routine maintenance of the rail and road infrastructure. International financing institutions participated actively in this process in the fields of road and air transportation in the past. Significant projects are ongoing or in the pipeline at present. Reforms in the transport sector towards an open market economy and efforts of the government to promote export and investment (simplifying customs clearance procedures, reducing bottlenecks in the overall business environment, shortening procedures for registration and licensing, etc.) had positive effects. According to stakeholders, cross-border transportation is much less problematic now, in comparison with previous years, although there is still room for improvement. High transport costs are a major problem in the transport sector and an obstacle for the economy of Armenia and the attractiveness of the country for investment in comparison with other countries of the European and Central Asian region. Road Network The total road network of Armenia is about km, with a non-urban network of about 7.700km, of them being classified as interstate. Due to the chronic lack of maintenance funds, poor quality of maintenance work (mainly pothole patching) and postponement of repair work, the condition of the road system in Armenia does not meet international standards. International financing institutions have played an active role in the rehabilitation and upgrading of the Armenian road network and are continuing their activities. The World Bank alone took part in rehabilitation of 900km of Armenian roads after independence (source: website of the World Bank in Armenia). Currently the Bank is financing the improvement of some 100km of the rural roads network ( Lifeline Road Network ) in ADB is contributing to the same programme, financing the rehabilitation of some 213km of the overall rural roads network of about 3.000km. Other projects in the field of promoting rural development (and, subsequently, poverty reduction) by rehabilitation of the rural road network are ongoing (financed by Lincy Foundation and Millennium Challenge Corporation). The ABD provided technical assistance for the elaboration of a Transport Sector Development Strategy for , the results of which were presented at the end of For international trade and transport and the realization of the transit potential of Armenia the road connections between the Armenian capital Yerevan and the Georgian Black Sea ports Poti and Batumi and the road connection to Iran play a decisive role. Within the Transport Strategy the following are named as the three first strategic objectives: Inception Report Annex 3 Part 2 Page 11 of 207

220 1. Upgrade international and interstate road corridors, in phases. 2. Rehabilitate and develop infrastructure to an economically appropriate standard. 3. Institute sustainable maintenance, adequately resourced and effectively managed. (presentation received from the Ministry of Transport and Communication). As a priority project in the road transport sector, a substantial upgrade of the north-south corridor connecting Georgia and Iran via Yerevan is being promoted by the Armenian Government and supported by the ADB as a result of consultation in September 2008, the first step being assistance for developing the Transport Strategy mentioned above. The new routing of the southern part of the corridor (Yerevan/Sevan Iran) has been included in the new TRACECA map, published by the EU-financed Traffic Flow project. Figure 1: Old and New TRACECA Maps of Armenia Source: TRACECA map as on TRACECA-website and the version distributed by the Traffic Flow project The first priority project for the international road network includes upgrading of the road Bavra (Georgian border) Gumri Yerevan (Asian Highway 82) and further through Eraskh, Eghenadzor, Sisian, Goris, Kapan to Meghri (Iranian border). This will entail widening to 4 lanes with 3.65m carriageways and grade separation Further important sections to be newly constructed or upgraded are: By-pass road Yerevan. An alternative road in Tatev region, as the existing is hazardous and time consuming due to difficult mountainous conditions (seefigure 2 ). Page 12 of 207 Annex 3 Part 2 Inception Report

221 Figure 2: North South Corridor in Armenia Source: MOTC of Armenia Besides of the main highways there is a lack of bypass roads around the main Armenian cities. For the Yerevan node two possible variants (East and West) are under consideration, construction depending on availability of funds. On the Georgian side, an upgrade of the road connection from the Armenian Border to the Port of Batumi is planned. Thus a future improvement is foreseen for the whole road transport route for Armenian imports and exports. In spring 2009, the ADB first technical assistance mission for the definition of priority sections of the highway Yerevan Gumri Bavra is planned. The final report is scheduled for June Construction/upgrading of the first section will start in the second half of It is assessed that the upgrade of the whole north-south corridor from Georgia to Iran will take 5-10 years, depending on available funding. Other international financing institutions, such as the World Bank are considering participation in this project. The time schedule for the implementation of the project will probably be postponed as a result of the current international financial and economic crisis. Inception Report Annex 3 Part 2 Page 13 of 207

222 Upgrading is also under consideration for the other road connections to Georgia: Yerevan Sevan Dilijan (118km) - (further to Tibilisi-Poti, Asian Highway 81). But this is not defined as an urgent priority at the moment. Railway Network The majority of the Armenian railway network was constructed during the Soviet era, as part of the Transcaucasian branch of the Soviet Railways, determined by central planning and designed to handle large traffic volumes (30 million tonnes and 5 million passengers in 1988). The whole network is electrified, based on Soviet standards and on technologies of the Soviet period. After independence, traffic collapsed by 1999 to just 1.5 million tonnes and 1.3 million passengers. By 2008, freight traffic had recovered to 3.0 million tonnes, but passenger traffic continued to decline, to 0.7 million passengers. The rolling stock, mostly inherited from Soviet times, is old. Large parts of the 732km route network are in bad condition, little used or not operational (due to border closures, the conflict with Azerbaijan and the earthquake in 1988). The main line is Yerevan - Georgian border. Speeds are low, due to track condition and the mountainous terrain. Many structures (bridges, tunnels) need major repairs. There was rehabilitation work on somelines during recent years, financed by the World Bank (72km of the line Yerevan Gyumri Airum Georgian border). The Government tendered a concession to operate Armenian Railways as a verticallyintegrated system. The Concession Agreement was signed with Russian Railways which has set up a wholly-owned company, South Caucasian Railway (SCR), to operate Armenian Railways. It came into effect on 1 June The concession period is 30 years with an option exercisable at any time after 20 years for a further 20 years. The fee paid was US$5.5 million plus an annual 2% of gross revenue. SCR is obligated to invest US$572 million by 2035, twothirds on infrastructure. SCR has purchased the locomotive fleet and other rolling stock. The Armenian Government still owns the fixed assets and access charges will be defined by the public railways authority. With comparatively small distances to be covered to the Georgian ports (680km by rail), low speed and the rehabilitation of the road network, which has unused capacity, the competitive position of the SCR against truck transport is relatively weak. Additional traffic could develop if closed borders were re-opened or new lines to neighbouring countries (Iran for example) constructed. The most promising project in this regard is the re-opening of the railway line to Turkish Kars from Gumri. It may not lead to an increase in transit traffic: between Georgia and Turkey, with support of Azerbaijan, work is under way to open a new railway line from Georgia to Kars. But some traffic (imports from Turkey, land connection to Europe through the Bosporus tunnel) might switch to this new alternative. As mentioned during meetings with stakeholders, Armenian forwarding companies, together with Turkish partners are preparing for this potential opening by acquiring land plots close to the planned border station (where bogie exchange will be needed). On the other hand, there is a risk, that suitable commodities and containers will be trucked from there to destinations in Armenia. At the moment funds are lacking to do the repair works on the line, including major repair of 8 bridges, as the line was not in use for many years. The World Bank has estimated the necessary investment at about US$30 million (source: World Bank PID of 2006). Another envisaged project to stimulate international traffic is the construction of a 47km railway line between Vanadzor and Dilijan (Fioletovo). This would shorten the distance for domestic traffic and, in the event that the Turkish border is re-opened, provide a potential opportunity for Page 14 of 207 Annex 3 Part 2 Inception Report

223 future transit traffic from Turkey to Azerbaijan. The ultimate potential of this new line is subject to an opening of the border to Azerbaijan (the remaining part from Dilijan to Azerbaijan border is not operational, due to landslides since 1993). This project is currently under consideration with the ADB. The proposed new 470 km railway line from Sevan area to Iran is a very costly project (more than US$1 billion), partly due to its passing through some mountainous terrain, and will not be operating in the foreseeable future. This line would duplicate the closed, but existing, line through Nachichevan. Furthermore, talks are going between Iran, Azerbaijan and Russia about a possiblenorth south railway corridor from Russia to the Persian Gulf, with considerably lower operation and construction costs because of the lower terrain. These factors would hamper international financing for this project. In the future, both railway lines marked on the TRACECA map (from Dilijan to the Azerbaijan border and the formerly main railway connection from Baku along the Iranian border through Nachichevan to Gumri and Kars) could play an important role in the TRACECA corridor. Both are closed at the moment and not operational. Their revival is subject to political decisions and would involve considerable investment. Unfortunately, no meeting could be arranged with SCR during the stay of the experts in Yerevan. The information above was obtained mostly from the MOTC and meetings with the IFIs in Yerevan. Analysis of Main Logistics Nodes The main logistics node in Armenia is the capital itself. There are four intermodal terminals with rail connection in the Yerevan area. One is owned by a closed joint stock company owned by MOTC and the other three are privately owned. Most of the operational multi-modal container handling facilities in Yerevan are located in one area, not far from the Zvartnots Airport and near to Erubeni military airfield, on Aratyan Street, which is running parallel to a railway line connecting this formerly industrial area to the rail network. During the expert mission in February 2009, the following facilities were visited. MOTC Terminal Presently the terminal belongs to the Government. The terminal is eventually going to be privatised but it is not yet decided whether this will be in the form of a JSC. Formerly the container terminal belonged to the Armenian Railways, has not been included in the concession of SCR, and is now a 100% Government enterprise. Although the territory of the terminal generally belongs to this company the container operations area, which had been built by the railways (with un-loading and loading by cranes), is still under the Armenian Railways (the remaining company). During the meeting with the Minister of Transport and Communications it was indicated that this problem will be solved soon. Plans about a (partial) privatisation of the MOTC terminal are under discussion. During the meeting an interest of the SCR was mentioned; there is no clear decision from the MOTC yet. Road access to the terminal is sufficient, the location of the terminal is only 2-3km away from the nearest junction to the highway, and there is a plan to construct a bypass road in this part of Yerevan. There is no possibility for extension of the present terminal area, which currently occupies 5ha. This is considered too small for a possible logistics centre. There are no warehouse facilities at the terminal at present. Inception Report Annex 3 Part 2 Page 15 of 207

224 If the annual turnover is 5,000 containers or more, the terminal will need to find the necessary warehouse space. The required space might be more than 30ha, The traffic figures are to be confirmed by the feasibility study of the project of the new railway line to Iran. Figure 3: MOTC railway terminal The terminal handles mostly containers arriving or departing by rail. In 2008, the turnover of the terminal was 4,500-5,000 containers. The main part of the containers carried by rail wagons goes via Poti, in transit through Georgia. The peak of activities is autumn when harvest of fruits etc. takes place. For 2009 a decrease by 20% is foreseen. Apaven terminal The second container handling terminal in Yerevan, visited during the expert mission, was the terminal operated by Apaven Co. Ltd., historically a freight forwarding company. This is located at Abelyan Street, not far from the MOTC rail terminal. Apaven was founded in 1993 and has offices in Tbilisi, Poti and Batumi. It also has its own trucks, as it owns two trucking companies in Georgia and one trucking company in Armenia. The total fleet is 100 trucks. Road access is sufficient at the moment, see the neighbouring railway terminal. The company is offering full services for its usual customers, the range of goods being broad. Fuel, oil products and liquid gas are the main exceptions. Apaven offers combined rail-road services and moderate storage facilities (3,000m 2., mainly used for customs clearance). Transport routes served are mainly going via Poti port; 90% of the turnover goes via Poti and Batumi. Trucks and rail wagons go directly to Poti (transit through Georgia). The connection to Iran is being developed, in order to send goods by road to/from this direction. The considered future rail connection is seen as a substantial business development option. The company has a 50% market share of containers in Armenia. The turnover in 2008 of Apaven s terminal was 10,000 TEU (outgoing + incoming). Page 16 of 207 Annex 3 Part 2 Inception Report

225 Apaven Company has got a container terminal with two portal cranes (one with a lifting capacity of 55 tonnes). There are 3 railway tracks in the terminal. Other terminal equipment includes 8 fork-lifts and 2 locomotives. The share of container transport by railway and truck respectively is fifty-fifty. For Ro-Ro (trucks with trailers) the turnover in 2008 was 9,800 trucks. Around 50,000 trucks came in from Iran to Armenia in Of these, 9,000 were served in Apaven s terminal. There is also bulk handling and loading to rail wagons (copper ore concentrate, trucked from the mines by the company s own trucks). In 2008, there was 90,000 tonnes carried in 1,250 rail wagons. Figure 4: Bulk loading facility Before the crisis, the terminal was at the limit of its capacity concerning container handling and considering extension (plots on the other side of the railway line, cold-storage warehouse). There is a Customs clearance office located in the terminal area as well, including a customs brokerage service. Negotiation is ongoing with a bank to establish a bank office to facilitate payment of fees etc. related to Customs clearance. After the crisis, the company s revenue went down by 47% (from month in 2008 to month in 2009). The company kept its clients, but they had problems themselves of decreasing revenues. At present the capacity is sufficient and investment plans are on hold. Apaven acquired a land plot near the Turkish border in the Shirak Marz/region, at the first railway station in Armenian territory. In the event that the border is opened, the company plans to have a fifty-fifty joint-venture with a Turkish freight forwarding company, which has bought land at the first railway station on the Turkish side. Inception Report Annex 3 Part 2 Page 17 of 207

226 Figure 5: APAVEN terminal Trans-Alliance Freight Forwarding Company and terminal The head office of Trans-Alliance is in Yerevan. There are offices also in the company s container terminal (in Yerevan) and in Tbilisi, Poti and Baku. The partners for sea transport of containers are Maersk, MSC, and CMA-CGM (French company). The company is mainly dealing with land container transportation between Yerevan and Poti Port. The modal split between rail and road transportation is fifty-fifty. The company mainly deals with combined land transport and cooperates with partners in sea transportation. The company has its own customs container terminal in Yerevan (located in the same area as the rail cargo terminal and Apaven s terminal). Trans-Alliance does not deal with trailers (Ro-Ro) and air cargo. In the terminal, the company has 6,600m 2 of warehouse space. The storage is mainly in the containers, including refrigerated containers, mainly for storage before passing Customs clearance; after this the client must take the goods out only, minor amounts of goods are kept for traditional storage. There is a customs office in the terminal owned by the company. It does not do complete customs clearance as yet, only inspections. However, it is foreseen to have customs clearance fully established in the terminal, including a bank office and customs brokerage services. Trans-Alliance provides some loading/unloading service, with special equipment, for containers. Incoming containers (imported via Poti) contain all kind of goods, including even construction materials. If the volume of construction materials is modest, e.g. only up to 20 tonnes, containers are preferred to bulk transport. The origin countries of containers are EU, China, sometimes US. Bulk cargo is mainly imported via Poti from other CIS countries. The majority of exported goods is scrap (in bulk) going to China and India. Molybdenum concentrate is exported to Europe. Page 18 of 207 Annex 3 Part 2 Inception Report

227 In 2008, the company s throughput of import containers was 10,000 TEU (5,800 containers), i.e. 85% of the total. Exports accounted for 545 containers, i.e. 15% of the total. Around 90% empties returned from Armenia. There is no expansion possibility for the existing terminal location. Due to the global financial and economic crisis activity has slowed down. Throughput in January-February 2000 was 70% lower than a year before. Air Cargo hubs Air cargo has less importance for the Armenian transportation market than other transport modes. There are only two international airports in Armenia: Zvartnots in Yerevan and Shirak near Gumri. The latter is used as a regional airport and an alternate to Zvartnots during bad weather conditions. Erubeni airport, located 3km from Zvartnots in Yerevan, is mostly used by the military, although civil helicopters and general aviation are allowed use this airport too. Nine other local and regional airports, inherited from Soviet times, are not operational at the moment. Both international airports are operated and maintained under a 30-year concession by Armenian International Airports (AIA), which has the right to extend the agreement. The concession agreement for Zvartnots was commenced in The complete operation started from AIA s concession was expanded to include Shirak in Zvartnots has a 3,850m single runway and can accommodate ICAO class E4 aircrafts, B In 2006 a new terminal building was opened. In 2008, 1.5 million passengers and 10,800t of air cargo were handled at Zvartnots. The airport has a modern air cargo centre with 10,000m 2 of warehouse space, fully equipped and with a capacity of 100,000t per year. Reportedly, adjacent land with rail access are included in the concession, to be developed as a multi-modal logistics centre by the concessionaire. During the expert mission there was no possibility to interview the airport operator. Analysis of Stakeholders in Freight Transport and Logistics Sector Ministries and Related Public Authorities Ministry of Transport and Communication The Ministry of Transport is responsible for transport policy, regulation and planning of roads, road transport and railways. The ministry is in charge of development and implementation of transport strategy and implementation of the state investment policy in the field of transport. The main priorities of the transport strategy (among others) are to develop and revive international transport corridors, and to manage demand and balance modal supply to reduce congestion. Armenian Roads Directorate (ARD) The Armenian Roads Directorate (ARD) as a non-commercial state organization assists the MOTC in management of interstate and republican roads (including rural roads redesignated as republican). ARD is organized into divisions for: (i) planning and feasibility studies; (ii) procurement; (iii) construction monitoring; (iv) maintenance monitoring; and (v) safety. The road safety group is also responsible for traffic surveys, analysis and safety audits. ARD also has environmental officers. Railway Authority within MOTC The Railway Authority was created within the new railway law to facilitate the concessioning of the railway. The new organization will have responsibility for concession supervision, ensuring safety and reviewing the audited accounts of SCR. Inception Report Annex 3 Part 2 Page 19 of 207

228 General Department of Civil Aviation Civil aviation is the responsibility of Office of the Prime Minister, through the General Department of Civil Aviation of the Government of the Republic of Armenia (GDCA) which oversees the regulation of air transport. The primary functions of the Department are to: (i) provide safety oversight of the users agencies involved in civil aviation; (ii) interpret ICAO Recommendations and Standards regarding air transport safety, security and facilitation; (iii) establish regulations relating to all manner of civil aviation; and (iv) collect civil aviation statistics and report on air transport activity. State Revenue Committee The Armenian Customs Service has been integrated into the newly founded State Revenue Committee. Given the land-locked situation of Armenia, the closed borders to two neighbouring countries and the country s import-dependence, the removal of customs barriers and trade facilitation are strategic issues. The Customs Service is responsible for cross-border cooperation, namely with Georgia, on customs issues. Logistics Service Providers The market for logistics services in Armenia is currently emerging. The sector (at least as far as container transport is concerned) is dominated by a few freight forwarders, offering some logistics services. There are also a large number of small and micro transportation companies. The national companies mainly concentrate on the typical logistics services: road freight and rail freight. Warehousing and distribution are mostly done by producers or retailers themselves. The main problem is a lack of logistical know-how by the national logistics providers and lack of investment in logistics infrastructure and modern technology. Freight Forwarding Companies The core businesses of the big Armenia freight forwarding companies are import logistics from the Georgian ports and Iran and some export operations. Few are offering customs clearance services additionally. The focus of these companies is on road transportation. The majority of national freight forwarders own private fleets of trucks. The warehouse and storage facilities are limited. The prices of services of freight forwarders in Armenia are very high. The main reasons for this are a lack of competition in the transportation market, and high transportation costs due to lack of adequate infrastructure. Operators of Transport Infrastructure The operation of the railway and main airport infrastructure has been given on a concession basis to private operators. The infrastructure itself remains state property, the concessionaires taking responsibility for the development of infrastructure during the concession period. Operators of Logistics Nodes There are container transhipment facilities, offering some additional services, only in Yerevan at the moment. No significant development of the warehousing sector or logistics parks is evident yet, although some warehouses (most only road-connected) have been built by private companies in recent years. Railway Operators The railway operator is South Caucasian Railways, a 100% subsidiary of Russian Railways. Access of other companies to use the infrastructure is granted by the concession agreements, the tariffs for this potential use being established by public authorities. Page 20 of 207 Annex 3 Part 2 Inception Report

229 Chamber of Commerce During a meeting with representatives of the Chamber of Commerce of Armenia the main transport and logistics issues from the point of view of local entrepreneurs were raised: An International Logistics Centre in Yerevan would be welcomed and some members of the Chamber could potentially be interested in making investments and/or using the facilities of an ILC; the Chamber could be interested in joining the ILC, e.g. as board member. If/when the Turkish border is reopened, an alternative or complementary location could be in Gumri (in the Shirak/Marz region) around 130km from Yerevan. Gumri is located close to the border with Turkey and bordering Georgia. A stronger role of the cheaper railway transport was stressed, as high transport costs are hampering Armenian exports. In this regard a new railway connection to Iran may be promising. Customs services need to be further improved. Missing Links and Bottlenecks in the Transport and Logistics Network The main missing links are the severed cross-border connections to Azerbaijan and Turkey, including the closed TRACECA rail route through Nachichevan; with respect to Turkey, there is visible movement to resolve this issue. Intermodal capabilities and modern logistics are underdeveloped in Armenia. The existing logistics nodes will not cope with future growth, and possibilities for their extension seem to be limited at the moment. The railway is in a difficult competitive position due to relatively short distances, low speed caused by infrastructure conditions, and ongoing improvement to the road network to the main destinations (Georgian ports). At present, there is no blocktrain service from Yerevan to Poti or Batumi. The lack of competition, intermodality and fast and competitive railway connections are the reasons for the extremely high transportation costs in Armenia, which hamper exports and investment. Border control issues need to be further improved, in co-operation mainly with Georgia. Conclusions and Initial Recommendations The interviews with the main stakeholders of the transportation sector and visits to facilities in Yerevan made clear that there is a necessity for an International Logistics Centre (ILC) in Armenia. At the macro-level a location in or near Yerevan is very promising. Yerevan is the main transport node of Armenia. It is located in the middle of the country and thus serves northsouth transport flows well. 75% of the industry is concentrated in the Yerevan area. Railway access is required and offered in the Yerevan location as well. A potential specific location could be in the industrial south-western part of the city, on the way to the airport, where there is railway access. Road infrastructure has to be further improved. In particular the north-south corridor is important for attracting further international traffic to Armenia. There is potential to attract further cargo (previously trucked) to the railway, if the line to Turkish Kars is opened and container flows are synchronised with the Turkish block train schedules. The upgrade of the railway network will result in higher average speed. Recent statements by the Turkish Government indicate, however, that this opening is subject to the opening of the Armenia-Azerbaijan borders. Inception Report Annex 3 Part 2 Page 21 of 207

230 A consolidation of the present container handling in Yerevan in one logistics centre would create sufficient cargo flow to allow regular block train services to compete with trucking. Such a logistics centre could also be used for consolidation of small consignments for export and domestic transportation. Page 22 of 207 Annex 3 Part 2 Inception Report

231 1.1.2 Azerbaijan Source: UN Map Database Background Information Introduction Azerbaijan covers an area of about 86,600 square kilometres on the south-eastern flanks of the Caucasus Mountains bordering the Caspian Sea, between Iran and Russia. Its population was 8,6 million in Azerbaijan is the least urbanised country of South Caucasus, as only 56% of its population lives in urban areas. Azerbaijan is one of the world s oldest oil exporters. The oil industry and transit for regional oil reserves remain central to its economic future.the two major pipelines to the west, the Baku - Supsa (Georgia) and Baku Tbilisi Ceyhan (Turkey) are the most important pipelines for Central Asia and Europe bypassing Russia. Agriculture is also important, with the country benefiting from fertile farmland and a diverse climate that allows the cultivation of a wide range of crops. In recent years, Azerbaijan has faced a major oil boom. Azerbaijan has put into place both the infrastructure needed to realize rapid growth in oil and gas exports as well as a credible framework to effectively manage the increase in resource flows. But the oil boom will not exceed years, and the challenge ahead is for Azerbaijan to ensure growth in the non-oil economy. Inception Report Annex 3 Part 2 Page 23 of 207

232 Current Economic Situation The economy of Azerbaijan has been facing difficulties common to many of the ex-soviet republics since independence. During the late 1990s, in cooperation with the International Financial Institutions (IFIs) and other internationals organizations, Azerbaijan pursued a successful economic stabilization program, with annual growth exceeding 10% since Real GDP rose 10.2% in 2004 and accelerated to 34.5% in 2006 and in 2007 its growth was recorded as 25%. The national statistics analysis of 2008 data shows 10.8% growth in the economy. The latest IMF assessment of performance of the Azerbaijani economy against the backdrop of the global recession took place in December According to IMF, the economy maintained a very strong growth performance over the first 10 months of Growth in the oil sector is estimated at 10 percent. The non-oil sector, namely construction, services and agriculture, grew at about 15 percent responding to the fiscal stimulation programme. The outlook for 2009 was quite uncertain. Current Situation of Freight Transport and Logistics Sector Azerbaijan is well situated on the crossroad of major international traffic routes including the Silk Road. The TRACECA, regional Baku-Alyat-Ganja-Kazakh-Georgian Border corridor, and the north-south corridor from Russia via Baku to Iran are of great importance. The international road network is generally well developed and is being constantly upgraded. The rail transport sector is not in optimal condition but workable. Maritime transport plays an important role, especially for the oil industry. There are direct maritime connections with Iran, Kazakhstan, Russia and Turkmenistan. The Volga-Don canal also provides Azerbaijan with maritime access to the high seas, if the licences for the transit are obtained. Oil products are the main maritime transport commodity in the Caspian Sea. There is also scattered containerized transportation for the oil industry: equipment spare parts, machinery, chemicals or food supplies. Logistics Performance Indicator The World Bank logistics performance indicator ranks Azerbaijan 111th out of 150 countries analysed. Within this overall ranking are the following rankings for individual components of logistics performance: Customs - rank 95 Infrastructure - rank 116 International shipments - rank 90 Logistics competence - rank 128 Tracking & tracing - rank 96 Domestic logistics costs - rank 87 Timeliness - rank 124 In 2008, the freight transport sector accounted for 5% of Azerbaijani GDP. Its share of GDP started to decrease in 2005 and levelled at the amount of 5% due to the rising share of the oil sector in the economy. Table 1: Contribution of the Transport Sector to GDP Azerbaijan Year % of GDP 7,3 7, ,3 4,7 5 Page 24 of 207 Annex 3 Part 2 Inception Report

233 Figure 6: Share of GDP for Transport Sector 2008 Table 2: Azerbaijan Total Passenger and Freight Traffic Passengers, , , , , , ,346 Freight, 000 tonnes 33,798 40,563 53,756 65,122 76,131 82, Passengers, , , , , ,713 1,041,732 Freight, 000 tonnes 92,779 99, , , , ,320 Source: Ministry of Transport, Azerbaijan Current demand for LCs At meetings conducted with freight forwarders, transportation firms, importers and exporters, representatives favoured the idea of a regional logistics centre to consolidate and organize more efficient distribution of cargoes. The respondents also elaborated on the features of a logistics centre (a) to be established in a free trade zone, (b) to provide bonded warehouse facilities and (c) to function as a distribution centre. Most interest was expressed in the first and third of these possibilities Analysis of Transport Infrastructure The reduction in investment in the transport sector, combined with strong traffic growth in recent years, has caused a steady deterioration in the condition of the infrastructure and rolling stock. This has yet to be fully addressed. The public road network (25,013km) is sufficient in terms of both length and coverage for interregional road transport in Azerbaijan, as well as for international connections with neighbouring countries. However, as with rail, the condition of road infrastructure is close to critical (61% of roads in poor condition). Road Network Azerbaijan occupies a key location in the regional transport network of the southern Caucasus. The country s east west road routes carry traffic between the Caspian and Black Seas on a section of the TRACECA corridor linking Asia to Europe. Inception Report Annex 3 Part 2 Page 25 of 207

234 The country s north south road routes connect the Russian Federation and Iran. Road links are disrupted with Armenia because of the unresolved issue of Nagorno-Karabakh. Travel between the mainland and the detached enclave of Nakhichevan is by air or by road through Iran. Nakhichevan has a 33-kilometre strategic border with Turkey. Like other sectors, Azerbaijan s roads are facing the challenges of the transition from a centrally planned to a market-based economy. Although many important laws, regulations, and procedures are in place, the major challenge is related to implemention. In this regard, a number of issues need to be addressed, particularly in the areas of road maintenance, axle-load control, and road safety. The public road network in Azerbaijan comprises 25,013km of roads, out of which 4,498km are in the Nagorno-Karabakh area. The total length also includes 2,078km of roads in the Nakhichevan Autonomous Area. The public road network in mainland Azerbaijan (excluding Nakhichevan) falls under the jurisdiction of the Road Transport Service Department. Nakhichevan has its own road agency, named Nakhavtoyol. In terms of ownership, roads in Azerbaijan are divided into state, municipal and private roads. The state roads are divided into four classes: M - Major arterial roads; R - Collector roads; K - Minor arterial roads; Y - Local roads. Eight roads are classified as M-roads, and sixty-six as R- roads. The M-roads are the following: 1. Baku - Guba - Russian Border (Ml- 199km); 2. Baku - Alyat - Yevlakh - Georgian border road (M2-498km); 3. Alyat - Astara - Iranian Border (M3-243km); 4. Baku - Shamakhi -Yevlakh (M4, 180km); 5. Yevlakh - Zagatala - Balaken (M5); 6. Hajiqabul - Ali Bayramli - Saatly - Zangilan (M6); 7. Ordubad - Nakhichevan (M7); 8. Nakhichevan - Sadarak (M8). Approximately 52% of the roads are paved (all M roads are paved), 47% gravel, and the remainder are earth tracks. The road network was primarily developed under the former Soviet Union for higher than current traffic volumes. Due to lack of resources for maintenance, about 75% of the network is in poor condition. Based on the road condition data available, 61% of the east west and north south highways, 76% of other national roads, 66% of secondary roads, and 76% of rural roads require rehabilitation. Only 191km are four-lane highways. In recognition of the importance of improving the road network to facilitate socioeconomic development, the Government embarked on a transport development program ( ), starting with the east west and north south highways. The Government is also finalizing a program for improving secondary roads. Potential for improvement Azerbaijan has developed regulations to limit vehicle axle load to 13 tonnes, but enforcement is still weak. As a result, vehicle axle overloading is prevalent. Surveys conducted shows than around 20% of 4-axle trucks, 5-axle trucks, and buses exceeded the axle-load limit. Heavy vehicle weights are one of the primaries causes of rapid pavement deterioration and damage to bridges. Most technical standards and specifications for road design, construction, and maintenance date from the Soviet era. Although the standards are based on sound technical principles, they contain rigid criteria for upgrading road capacity that are based on traffic volumes and do not Page 26 of 207 Annex 3 Part 2 Inception Report

235 consider the level of services or economic viability. The inappropriateness of such standards for a market-based economy is widely recognized; they need to be updated to reflect the needs and economic resource base in the country. Railway Network The current network of railways is about 2,122km, of which 805km are double tracked and 1,317km are electrified on the overhead system at 3kV DCThe railway network is over 30 years old and around 40% of the track length needs to be rehabilitated. The locomotive fleet has been heavily-used and is technically obsolete: about two thirds of the fleet requires replacement and modernization. In general, the main railway assets are about 60% life-expired. Azerbaijan State Railway (ADDY) is the sole main line rail operator in the state of Azerbaijan. ADDY is a state owned enterprise that operates under the direction of the Ministry of Transport of the Republic of Azerbaijan. The main routes consist of a west-east link from the Black Sea ports of Georgia and the Georgian capital Tbilisi to Baku on the Caspian Sea, where there are connections to train ferries operating to Aktau in Kazakhstan and Turkmenbashi in Turkmenistan. There is also a north-south link operating from the Russian border near Makhachkala to the Iranian border at Astara, and an east-west line linking Baku to Nakhitchevan that is currently non-operational. In addition, there are a number of small branch lines radiating from the main routes and an intensive rail network in the Apsheron peninsula surrounding Baku. While passenger services are profitable in terms of surplus of passenger revenue over direct operating costs, they are not based on long term profitability, measured in the ability to fund capital renewal or refurbishment of locomotives and rolling stock. ADDY is in discussion with international banks regarding the provision of capital to fund the purchase of new equipment and repair facilities to allow them to embark on renewals. ADDY s freight statistics is shown below: Table 3: Freight Volume Handled by ADDY in HUNDRED THOUSAND ('000,000) TONNES PER ANNUM Internal 5, , ,333.5 Import 3, , ,755.7 Export 2, , ,104.7 Transit 9, , ,327.7 Total 20, , , , , ,391.6 Much of the volume of rail traffic is represented by a crude oil volume, for which rail remains the most significant transportation mode. Oil traffic represented 75% of all traffic in 2008, however the transportation of other goods by rail started to increase. This implies growth in transport of steel products (140% growth), cement (64% growth), foodstuffs (266% growth) and chemicals (82% growth) has had a major impact on the overall carryings. Much of this traffic is imported into Azerbaijan by rail from Georgia and Russia. It should be noted that there has been a shift in emphasis between transit and export traffic. The draft railway law proposes an EU type railway structure with separate operating and infrastructure companies and transparent accounting arrangements. This will go a long way to making future financing requirements clear. The east-west line between Baku and Tbilisi carries the most traffic (20 to 25 train pairs per day), with the line north from Baku to the Russian border carrying the second highest (about 10 Inception Report Annex 3 Part 2 Page 27 of 207

236 trains per day). These lines are double tracked and electrified. The remaining lines are single track and diesel operated. All of ADDY s main lines were designed to be operated at 80km/h for freight and 100km/h for passenger services. ADDY s infrastructure has seen limited investment in the last 15 years, and significant sections are due for rehabilitation. Much of the rail track and rolling stock is in need of repair or replacement. Of the total track length 70% is electrified, while the other 30% is operated by diesel traction. 1,512km of the railway routes are equipped with full automatic block signalling giving high route capacity on single and double line sections, while 479km of the rest is equipped with semi-automatic block control by a centralised dispatcher with no intermediate signalling between passing loops. The railways has 176 stations, 2 of which Bilajari and Shirvan are big automated sorting stations. 12 stations have container depots with the necessary handling equipment for 20 containers, 3 stations Keshle, Gandja and Khirdalan can handle 40 containers. ADDY s two main lines are electrified at 3kV DC. ADDY has 204 two-section electric locomotives in its fleet, of which 96 are in active use. Some 46 of these are under 15 years old. The remaining units are VL-8 locomotives of more than 35 years of age. The VL-8 locomotives are beyond their design life and are experiencing a high level of failures: roughly one failure per locomotive per month. These locomotives will need to be rehabilitated or replaced soon. 3kV DC electrification is not widely used, although it exists in Georgia, Armenia and some parts of Russia. ADDY has identified a manufacturer of new 3kV locomotives and a number of options exist for renewing and modernizing the 3kV locomotive fleet. ADDY would like to convert its electrification to the more general European standard of 25kV AC, but has recognized that the capital cost of convertinon is likely to be prohibitively expensive. Deelectrification and using diesel power is also a potential option. ADDY s freight wagon fleet is also aging. ADDY has more wagons in aggregate than it needs, with 7,771 wagons in the working fleet, another 10,162 wagons that are usable and spare, and a further 5,655 wagons could be rehabilitated if they were needed. ADDY, however, anticipates shortages of semi-wagons and tank wagons in the near future. Maritime sector Sea and and inland waterway cargo transportation is of vital importance for the country. Azerbaijan has direct maritime connections only with other Caspian littoral states (Iran, Kazakhstan, Russia, and Turkmenistan). However, it can reach the high seas via the Volga-Don canal or through Georgia by rail or road to the Black Sea. Azerbaijan has also limited shipping activities on other basins. For the coming future it is essential to develop the maritime infrastructure and fleet to satisfy growing demand, in terms of both volume and quality of service and including intermodal containerised cargos. This demand is coming mainly from the oil industry in the Caspian basin. Table 4: Azerbaijan Maritime Freight Traffic Year Freight ( 000 tons) The Government has decided to relocate the existing International Seaport in Baku to Alyat, 65km to the south at the intersection point of TRACECA and north-south corridor road and rail corridors. This decision is under execution and the masterplan for the new port should be ready by June 2009 including a land plot for a logistics centre. Page 28 of 207 Annex 3 Part 2 Inception Report

237 Air network The domestic air network links regional centres. The demand is relatively high (up to 50% of the air passenger traffic) due to the specific situation of the Nakhichevan. Azerbaijan has 22 airports, of which only five are fully operational: Heydar Aliyev International Airport at Baku and the regional airports at Ganja, Lenkoran, Zaqatala and Nakhichevan. Heydar Aliyev International Airport is located 25km east of downtown Baku. Being the busiest in the Caucasus, the airport is the home of Azerbaijan Airlines, the national flag carrier. During 1998 and 1999 the airport was almost completely renovated. The airport has two runways, Heading 16/34 which is 8,858 feet long and heading 18/36 which is 10,498 feet long. The rehabilitation of Nakhichevan Airport was completed in May 2004 and can now receive 300 passengers per hour. The project included a new cargo terminal and runway. Project cost was estimated at US$54M. The other three airports are of minor importance for cargo operation. Analysis of Main Logistics Nodes Sea Ports General The maritime industry of Azerbaijan consists of state owned companies with a monopolistic behaviour. These are Maritime Administration and Caspian Shipping Company: The Maritime Administration of Azerbaijan is the national regulatory body for implementation of State policy in the maritime sector. It is responsible for safety of navigation, help to navigators, service of waterways and channels, management of ship movements and pilotage, as well as hydrographic services. The Caspian Shipping Company (CASPAR) is a biggest ship owning company of the region. Its basic activity is the transportation of freight, with a prevalence of petroleum and petroleum products. CASPAR carries out its commercial operations in an independent way and contributes to the Government and general funds through taxes on revenues and payments to the social fund. The company determines its tariffs for freight and passenger transport. It is active mainly in the Caspian Sea, the Black Sea and the Mediterranean, and to a lesser extent in the Sea of Marmara. The General Director of the Company is appointed by the President. Some freight is brought to the Caspian Sea from the ports of the Baltic and the Black Sea and Mediterranean basins through the Volga-Baltic and Volga-Don navigable systems of Russian inland waterways. This is mostly destined for the ports of Iran. More than 70% of CASPAR s activities are in the Caspian Sea, where it faces hardly any competition. Kazakhstan, Russia and Iran are carrying out shipping activities at a lower level. Turkmenistan is not involved in commercial shipping. Inception Report Annex 3 Part 2 Page 29 of 207

238 Maritime links of CASPAR on the Caspian Sea Figure 7: Maritime links of CASPAR on the Caspian Sea CASPAR owns a fleet of 86 vessels, of which 41 are tankers (including 1 water-carrier), 35 are universal dry cargo ships, 2 are Ro-Ro type and 8 are marine railway cargo-passenger ferries. The total deadweight tonnage of the fleet is 443,782 tonnes. The volumes of non-oil cargo transported by CASPAR are low (12% of the total) and the number of passengers transported dropped drastically in recent years, to 18,400 in 2005 in comparison with 1,122,000 in CASPAR s operations were criticised for unreliable departure and arrival schedules, and for high freight rates. The International Sea Trade Port of Baku (ISTPB) In the former Soviet Union all of the ports of the Caspian Sea, except the Iranian ports, were part of CASPAR. Nowadays, the ISTPB functions as an independent State Own Enterprise. The berth facilities at the Dubendi Oil Terminal belong to ISTPB but are rented out to the company Middle East Petrol. Page 30 of 207 Annex 3 Part 2 Inception Report

239 Figure 8: Rail Ferry at the berth Baku is the largest port in the Caspian Sea. Spread along the seashore of Baku Bay, Baku Port mainly comprises a ferry terminal, a container terminal, the fishery port and the oil terminals with refineries. The former timber terminal was converted in 2000 into a modern oil handling facility. The port and port facilities are owned by the public sector and managed by ISTPB, which had a near-total freight handling monopoly in the past. Competition comes from operations of the former timber terminal, now oil terminal, operated by AZPETROL; the Dubendi Oil Terminal operated by Middle East Petrol; and the supply port of Sahil operated by oil companies. Inception Report Annex 3 Part 2 Page 31 of 207

240 Figure 9: Port of Baku The ISTPB operates 365 days per year, 24 hours per day. Port, facilities and equipment are suitable for handling all major commodity groups including containers. Some of the equipment requires total replacement or is in need of repair. The new container handling equipment financed by an EU TACIS project appears to be in good condition, however rarely used due to very low volumes of containers. In the framework of the said EU project one warehouse was completely refurbished and dedicated as a container freight station. The construction of an internal container yard (however without direct connection to berths) as well as the supply of relevant handling equipment, as part of the EU TACIS programme exceeding US$3.0 million, was finalized in The first small container depot for shipping agencies has been established. Page 32 of 207 Annex 3 Part 2 Inception Report

241 Figure 10: EU financed equipment at the container terminal The port was also used as a station for switching cargo between the road and rail transport modes. The administrative departments as well as the operational staff of the terminals can now communicate and exchange data via an EDP network. Figure 11: Container terminal at the Port of Baku The proposed EBRD financing of the rehabilitation of the ferry terminal, costing around US$20 million, was rejected by Port Authorities in Inception Report Annex 3 Part 2 Page 33 of 207

242 However, with the assistance of the EU TACIS TRACECA budget (US$1 million) ISTPB has refurbished its navigational aids equipment in Baku and Dubendi terminals. The port has seventeen berths, of which five are dedicated to crude oil and petroleum products, two are used for passengers, and the remaining ten handle timber and other general cargo. The port can accommodate vessels up to 12,000 tonnes, and its facilities include portal cranes, tugboats, and equipment for handling petroleum and petroleum products. The port area has 10,000m 2 of covered storage and 28,700m 2 of open storage. Table 5 gives the technical details of the port. Table 5: Overview Port of Baku Particulars Baku 1 Position: ϕ = 40,0 23,0 N; λ = 49,5 51,0 W 2 Nautical details Protected /Bay 3 Depth (depends on wind direction) Draught alongside 6 to 9 m 4 Anchorage two inside the bay, one outside 5 Pilots Available, compulsory only for foreign vessels 6 Customs In the port 7 Maintenance and repair facilities Available, also shipyards 8 Railway connection Adequate 9 Shore-based railway ramp Existing 10 Road connection Adequate 11 Cranes 18 cranes of 6 to 40 t Since 1990, cargo handled in the Port of Baku dropped dramatically. The figures for 2003 and 2004 show a recovery compared with the level of throughput in The results were mainly due to a large increase of the handling of liquid cargo reaching a level of 4Mt. In the past about 85% of the cargo handled in the port of Baku consisted of dry transit cargo. At present there is hardly any dry cargo in the Port of Baku. Container traffic via Baku is also very modest. Table 6: Cargo handling at Baku Port in Port total 000 tonnes 7,250 7,860 Oil terminal 000 tonnes 3,843 4,228 Dry cargo terminal 000 tonnes Container terminal 000 tonnes Containers (TEUs) 1,000 1,500 Ferry terminal 000 tonnes 3,265 3,412 Rail cars (number) 43,665 45,487 Cars (number) 3,000 3,252 New port of Alyat Azerbaijan is located at the crossroads of north-nouth and east-west corridors. The physical crossing point for road and rail links is the Alyat region. Some 30km North of Alyat is the oil terminal of Sangachal and on the road between them are many well established oil industry service companies. In 2007 the Government decided to move the current port facilities out of the capital city Baku. The new port will be built within 5-6 years on a completely new site 70km south of Baku, near Alyat settlement, thus giving easy and fast access to both rail and road connections on east- Page 34 of 207 Annex 3 Part 2 Inception Report

243 west and north-south corridors. 1 st Phase development will include the construction of following facilities: dredged areas such as access channel, turning/manoeuvring basin and harbour basin; reclamation area; coastal revetments; breakwater; quay walls and jetties as required in the first phase: - one standard finger pier for ferries (one berth at either side); - three dry cargo berths inclusive of container berth; - one port fleet service berth (tugboats, pilot vessels etc.); - one Ro-Ro berth. Onshore facilities (buildings, communications and utilities, roads, etc.); Near to Alyat there are a number of industrial sites including rail sleeper manufacture, a rail wagon washing facility for Thermo wagons, a rail repair facility for Thermo wagons, and operating chemical and cement factories. About 30km south of Baku there are privately owned commercial logistics centres operated by the forwarding companies Murphy and Bertling. The basic business of these companies is to serve the oil industry, but they are also in the process of expanding their activities to encompass other freight movements in Azerbaijan and neighbouring countries. Already many private enterprise companies have established a base in that region. Figure 12: Location of the new port of Baku The Ministry of Transport envisages that the new port will be the real hub for all transport and logistics. A logistics centre is included in the master plan of the new port. Inland Hubs and Terminals Transport facilitation is an important requirement for Azerbaijan seconomic growth and part of this requirement is the need to generate greater efficiency and coordination between all transport modes. Inception Report Annex 3 Part 2 Page 35 of 207

244 Private enterprises have recognised the potential of the country and are developing facilities for their own strategic needs (for example Murphy Shipping terminal, Baku Air freight Terminal). The overall coordination and integration of the regional transport system is not being considered. In October 2001, the EBRD received a business plan and a set of technical documentation from AZERTRANS for the creation of the first logistics centre for motor transport in Azerbaijan, located at their motor transport terminal in Binaghadi, near Baku. It was planned to offer services like customs-free storage, packing, labelling of various goods, consolidation, distribution etc. The proposed facilities would include a 2-way warehouse, multi-store storage premises, container yard, rail link to the terminal, hotel, unloading and loading equipment, parking area for trucks, vehicle service centre etc. It was planned to purchase trucks for long haulage and city distribution to provide future customers with distribution services. The total estimated cost of the project was US$1.6 million. This project has never been implemented. The list below depicts various individual logistics centre initiatives in Azerbaijan: Baku Airport area Lenkoran Airport area Gandja Airport area Baku Port Complex and Dry Freight Terminal Samur/Yalama area (Russian border) Astara area (Iranian border) Qazakh area (Georgian border - road) Beyuk Kesik area (Georgian border - rail) Zakatala/Balaken area (Georgian border road) Gandja TIR terminal Baku TIR terminals Yevlakh, new terminal for Murphy Bertling cargo terminal Alyat, at the point where the N/S and E/W road and rail corridors cross The potential new port complex in Sangachal/Alyat area Sangachal Azerpetrol terminal Sangachal fruit and vegetable consolidation point Baladoak rail terminal Kischli container rail terminal plenty of room for expansion TransGlobal distribution points Panalpina distribution points M&M distribution points All road and rail border crossing points in Azerbaijan along the two main transport corridors Page 36 of 207 Annex 3 Part 2 Inception Report

245 Figure 13: Individual Logistics Terminals and Warehouses Air Cargo hubs The air freight transport sector in Azerbaijan is relatively small in volumetric terms when compared to the other modes of transport, but it represents more than 20% of transport income (2005). It provides a vital service support role in the development of trade in the region and its role is expected to grow rapidly within the strategic planning period. This is due to the projected increase in higher technology industrial activity and greater presence of overseas joint venture companies, both of which are expected to be major users of airfreight services. Airfreight should be considered as the premium transport mode, in terms of both cost and the services being offered. The main requirement for Baku Airport to increase its penetration of the air freight market is to improve its facilities and equipment in order to retain existing airlines and attract new carriers. Baku Cargo Terminal Baku Cargo Terminal to the north of Baku is an international airport with a modern cargo terminal. Here private and state-owned cargo offices provide air freight forwarding and air logistics activities as a regional hub for deliveries to Azerbaijan and for transit to many locations including Pakistan, Dubai and China Baku Cargo Terminal was opened in March 2005 and it is the largest one in the CIS. Equipped to international standards, the terminal will allow servicing such cargo planes as Boeing 747 and Antonov 124. The terminal was built by local Khazar Construction Company. Construction Inception Report Annex 3 Part 2 Page 37 of 207

246 materials were delivered from the USA, Great Britain and Canada. The new facility is among the top 10 terminals in Europe. The total investment was US$19.5M. The terminal building area is 12,000m 2. The total apron area is 163,000m 2. The apron area provides space for handling 9 B-747/AN-124 aircrafts or up to 15 IL-76s. The 3,500m CAT-3 certified runway can land aircraft in close to zero visibility. Daily turnover of cargo at the terminal is tonnes, which is far below its capacity. The warehouse is equipped with modern facilities for handling large dimension cargo, and perishables. There are coolers and freezers, a safe room for valuables, and special facilities for all types of dangerous goods ranging from explosives to radioactive items. It operates as a hub and transit consignments are being transported through the country to the United States, Great Britain, France, Germany, China, Afghanistan and Ukraine, as well as Central Asia. The volume of cargo transported via the airport increased by 25% in The figure was 10% in regional countries and 8% around the world. The most important strategic carriers from a freight perspective are CargoLux (Luxembourg), Lufthansa (Germany) and Silkway Airlines (Azerbaijan). Table 7: Azerbaijan Freight Traffic in Year Freight ( 000 tonnes) Analysis of Stakeholders in Freight Transport and Logistics Sector Ministries and Related Public Authorities The Ministry of Transport and Communications The Ministry is supervising the project of reallocation of the Port of Baku to Alyat, and supporting the establishment of the international logistics centre within the territory of the Alyat port. This is already envisaged by the Port Master plan. Port Administrations The Administration of the Port of Baku is involved in the development of the Port Master Plan. The Administration supports the idea of creation of the logistics centre at Alyat. Logistics Service Providers Murphy Shipping Murphy Shipping and Commercial Services is a private enterprise JV that operates a modern logistics area some 30km south of Baku, near Sangachal. This logistics centre is only used for Murphy Shipping clients cargo. At this location it operates an intermodal rail/road and warehouse storage facility with a bonded warehouse service and can also provide airfreight and maritime links for clients based on complementary services provided by other companies in Azerbaijan. The site started as a speculative venture based on existing contracts and contacts in the oil industry and has slowly branched out into other transport areas as demand is identified. Additionally, Murphy has developed another logistics centre in Yevlakh on similar lines as this Baku site, but on a smaller scale, for road and eventually rail transit traffic to and from Georgia. Murphy compete in an open market with all other freight forwarders such as Blue Water, Transglobal, K&N, Bertling and Panalpina and have also to compete against the small, unregistered companies in the market that need to be better controlled by the government. Page 38 of 207 Annex 3 Part 2 Inception Report

247 Figure 14: Baku Cargo Terminal warehouse handling Trucking Companies The environment for road transport services is competitive in Azerbaijan. The private sector accounted for more than 95% of freight and passenger transport in The state-owned road transport operators were largely privatized and foreign road transport operators are allowed to set up their businesses. Freight charges for domestic road transport are determined based on market conditions, though the Government sets tariffs for cross-border and international transit vehicles. No vehicle licensing has been required since September 2003, but the Government introduced it at the end of 2005 to enhance axle-load control and improve road safety, which is implemented to limited extent. Table 8: Azerbaijan Road Freight Traffic Year Freight ( 000 tonnes) 40,430 50,463 53,738 59,070 65,214 69,518 74,384 81,622 87,989 Operators of Transport Infrastructure The National Railway Company (ADDY) is the main railways infrastructure operator. Azerbaijan Airlines (Azeri: Azərbaycan Hava Yolları - AZAL) is an airline based in Baku, Azerbaijan. It is the state-owned national airline operating scheduled passenger and cargo services from Baku to the CIS, Europe, China and the Middle East. Its main base is Heydar Aliyev International Airport (BAK). Inception Report Annex 3 Part 2 Page 39 of 207

248 Shippers and Consignees State Oil Company (SOCAR) Being one of the major player in the oil industry in Azerbaijan, SOCAR is also active in shipping and operates its own fleet. However the operations are limited to transportation of its own materials and products within Azerbaijan s territorial waters to supply its offshore installations. This company has the potential to become a client of a logistics centre since some equipment supplies, chemicals for explorations and machinery for oil industry arrive to Azerbaijan in containers. AZPETROL (Oil Terminal Baku) & AZERTRANS (Sangachal Oil terminal) From the time of its establishment in 1997 to mid-2005 Azpetrol has been a national company operating a network of state-of-the-art petrol and LPG stations, meeting international standards and providing high quality services to its clients on the country's fuel sale market. It controls more than 50% of the domestic fuel market. The company had an oil depot and a fleet of trucks fitted out with modern foreign-manufactured electronic equipment, a reliable fire safety system, and an alarm and safety system, all of which comply with the international requirements. Azpetrol's facility in Baku has the capacity to handle 10 million tonnes of oil and oil products per year. The recently-built Sangachal terminal of Azpetrol, managed by AZERTRANS, has a similar capacity and will handle transhipments of oil from Kazakhstan. Azertrans, which is a member of the Azpetrol group of companies, with its Baku and Sangachal terminals is involved in transportation of oil and oil products from Kazakhstan and Turkmenistan (totalling 3.3 million tonnes in 2005). At the dnd of 2005 the construction of the second 30-inch (76cm) pipeline connecting the oil terminals of Azertrans Ltd. and British Petroleum-Azerbaijan in Sangachal has been completed. Putting the pipeline into operation demonstrates Azerbaijan s readiness for the transit of Kazakh oil to world markets through the BTC pipeline, which starts from the Sangachal terminal at the Caspian seashore. The supplies for oil industry could be handled and distributed via a proposed logistics centre in the vicinity of Baku. Missing Links and Bottlenecks in the Transport and Logistics Network The transit corridors (TRACECA and north-south) need improvement in order to ensure future growth of traffic. Up to 45% of regional and local roads, which play an important social role in rural areas, are deteriorated. In country areas the poor road condition hampers all-year access. The condition of the rural roads also causes vehicle damage and increases the volume of emissions. The most significant bottleneck is the ferry connection to Turkmenistan for trucks. The visa regime is very complicated and time consuming. Consequently road traffic to Central Asia via Turkmenistan is practically non-existent. Intermodal traffic, especially container traffic to Central Asia, is underdeveloped. One of the major reasons is the lack of a liner service across the Caspian Sea with sufficient capacity. The International Seaport of Baku is situated in the centre of the city of Baku. All transport via this port has to cross the city, causing congestion. Road transport regulations allow a maximum axle load of 13 tonnes, but about 20% of all heavy vehicles exceed this limit causing deterioration of roads and bridges. Page 40 of 207 Annex 3 Part 2 Inception Report

249 Even having improved the custom procedures at border crossings at the point of final custom declaration, trucking and freight forwarding companies still report cases of irregularity. It was also reported that the EU standard documents are not always accepted. Conclusions and Initial Recommendations Achieving Azerbaijan s potential as a transit country is essential for non-oil economic development. There are a number of reasons to expect that the long-anticipated regional transit corridor will take off over the next few years: Growth of the regional economy lead by two of Azerbaijan s biggest and fastest growing neighbours: Russia and Kazakhstan. Implementation of the EU Neighbourhood Policy (ENP) including the three South Caucasus countries will likely bring closer trade links within the region and with Europe. The specific situation of Azerbaijan on the Caspian Sea ensures Baku s becoming a regional logistical trade hub. International organizations studies project a dramatic rise in transit cargo volumes, in line with oil and non-oil related investments. In 2008, the transit cargo through Azerbaijan (around 37Mt) rose by 2,5% and more than 55% of these cargoes were transported by rail. Oil and oil products are dominant, with up to 75% of the total transit traffic). Therefore transit conditions on the territory of the republic should be improved, developed and continuously made competitive with alternative international transport corridors. Reinforcement of the two transit corridors has to acommodate growing trade between Europe, the Russian Federation and Asia. The Transport Sector Development Strategy was elaborated to face this and other long-term challenges. Establishment of the new Port of Aylat is an important component of the strategy. The problem of the visa regime with Turkmenistan is being handled at high political level to find a solution. The first trials have been made with Volga Balt type vessels carrying containers. This type of vessel can carry about 100 TEU. These initiatives are recommended for further development. The Government of Azerbaijan is recommended not only to focus on the adoption of regulations and rules but also on enforcement, execution and control procedures. This goes hand-in-hand with improving socio-economic status of the staff of the execution authorities. Regular public consultations with stakeholders on implementing policies are recommended. The shipping business is recommended to explore the potential for regular container services to the other Caspian ports to link the Caucasus with Central Asia. The potential ILC is recommended to be located within the new port of Alyat, as envisaged by the port master plan. The location meets all the prerequisits of the international logistics centres. Further investigations and coordination with stakeholders will be needed at phases B and C. Inception Report Annex 3 Part 2 Page 41 of 207

250 Page 42 of 207 Annex 3 Part 2 Inception Report

251 1.1.3 Georgia Background Information Introduction Georgia's geographic location makes it an important transport link between East and West (the Black Sea and the Caspian Sea) and North and South (between Russia and Turkey). The location of Georgia as entrance to the Southern Caucasus and TRACECA corridor with its ports of Poti, Batumi, Kulevi and Supsa gives the country a superior position in transportation of oil, and oil products from Central Asia and Azerbaijan. The pipelines from Baku to Supsa and the Baku-Tbilisi-Ceyhan (BTC) pipeline are of strategic importance in the world energy policy. With its gates Georgia is the beginning of the transit corridor from the Black Sea to Armenia and Azerbaijan. Current Economic Situation Georgia is natural resource rich. In addition, the country s Black Sea coast, mountains, and cultural history offer strong tourist potential. The economy of Georgia is dominated by tourism at the Black Sea coast; tea, citrus fruits and wine production; and the mining of copper and manganese. In addition, the industrial sector produces machinery, chemicals, textiles and metal ware. Georgia has to import most of its energy in the form of natural gas and oil products. However, recent investments in oil exploration have indicated oil and gas potential. Inception Report Annex 3 Part 2 Page 43 of 207

252 The only energy reserve currently exploited is hydropower for electricity. Consumer goods and food stuffs are also imported to a major extent. Transport plays a significant role in the economy of Georgia. Regional trade offers a window of opportunities for the Georgian economy, especially realising its potential as a transit country. According to IMF, real economic growth suffered a dramatic decline from 12½ percent in 2007 to an estimated 2 percent in 2008, after a sharp contraction in the second half of the year. Current Situation of Freight Transport and Logistics Sector General Overview The share of road transportation has increased in Georgia in recent years. Most import cargo is transported by truck to the final destinations in Georgia. The fleet of trucks has been consequently modernised during the last years. The trucking industry works predominantly on behalf of the forwarding industry, but sometimes their services are in competition with the forwarders. Figure 15: Road between Zestaphoni and Khachuri in Georgia In fact, combined services are not well developed in Georgia. The main obstacle is a lack of intermodal infrastructure and cooperation between the transportation companies. The only combined operation in place is handling from ship or rail to truck or to inland terminals and final destinations. In almost all cases the forwarding industry is involved in the hinterland transportation. The single transport document is very rarely used. The main players on the Georgian transportation market are the freight forwarding companies. The service portfolios of the freight forwarders are very limited. Their core business is import/export logistics. There is a big demand for complex logistics service providers, which the Page 44 of 207 Annex 3 Part 2 Inception Report

253 Georgian logistics companies are not able to meet due to their lack of know-how and experience. There are underdeveloped warehouse facilities in Georgia. The existing warehouses are characterized by poor infrastructure conditions, outdated equipment, low service levels and extremely high storage prices. Logistics Performance Indicator The results of the recently completed World Bank study are not covering a logistics performance indicator and ranking for Georgia. Analysis of Transport Infrastructure Road Network The total road network in Georgia has about 20,300km, thereof about 7,900km 1 are paved and in a very good technical condition. With the help of the International Financing Institutions the improvement process continues. Presently negotiations are ongoing with the Japan Bank of International Cooperation (JBIC) for a loan to finance the Kuisi, a Zestaphoni Samtredia road section with a length of about 60km. The project is to start in Negotiations are ongoing with the ADB to finance a feasibility study for the Ajara bypass road, including the Kobuleti and Batumi bypasses. The total construction budget is estimated at more than US$100 million. The WB funded projects include: East west highway improvement from Againi to Igoeti 43km-55km (Phase 1). East west highway improvement from Igoeti to Sveneti km55-km80 and up to Gori (Phase 2). East west highway improvement from Gori up to Tanu Sveneti-Ruisis km80-km95 (Phase 3). This phase will also include rehabilitation of the existing Rikoti tunnel. The phase will not include a widening of the existing 2-lane cross section, but widening to 4 lanes (e.g. in the form of two tunnels with 2 lanes each) will be included in future plans. Presently there is only one short section of toll-road (on E60 between Kashuri and Tbilisi). As from 2020, proposals for concession contracts (PPP) are to be presented (e.g. in the form of a BOT model). So far this is only in the conceptual stage. Railway Network The railway network consists about 1,600km, mostly broad gauge and electrified 2. The main railway network predominantly lies on a west-east axis, connecting the Black Sea ports to Tbilisi via Samtredia, Zestaphoni, Khachuri and Gori, From Tbilisi a line go east into Azerbaijan and to the Caspian Sea at Baku. Two more lines go south into Armenia, one of which then branches west into Turkey. 1 CIA The World Factbook Georgia (2006) 2 CIA The World Factbook Georgia (2006) Inception Report Annex 3 Part 2 Page 45 of 207

254 Figure 16: Senaki Railway station Figure 17: Samtredia railway station Page 46 of 207 Annex 3 Part 2 Inception Report

255 Figure 18: Zestaphoni railway station Figure 19: Khachuri railway station Inception Report Annex 3 Part 2 Page 47 of 207

256 From Poti to Senaki the line has single track, from Senaki to Samtredia double track. From Batumi to Samtredia a single track line is in place, from Samtredia to Zestaphoni double track. From Zestaphoni to Khachuri only 4km are single track while the remaining section is double track. There is a double track from Khachuri to Tbilisi, from Tbilisi to the Azerbaijani Border (Gardobani) and from Tbilisi to the Armenian Border (Sadakhlo). The new Azerbaijani financed railway line to Kars in Turkey via Akhalkaluki is under construction. Finalisation is planned for The J-Park in Poti (enlargement of the shunting facilities) including new office facilities for booking, paying, custom clearance will be finalised by the end of 2009 There are projects planned to be realised in the short term with an investment of US$500 million. The main one is the railway bypass of Tbilisi to the north of the city. Financing is expected to come equally from the EBRD and the EIB. Further, mainly in connection with the Poti Industrial Free Zone project, the railway line from Senaki to the junction Poti/Kulevi should have a second track. Another project is the link between Zestaphoni and Khachuri. It is foreseen to have the line with double track and improved geometry: in places the radii are only 200m and there are gradients of 2.9% in the mountain section. The railway authority intends to tender a concept and feasibility study. The Railway indicated at the meeting that the assistance from Europe Aid would be appreciated. Analysis of Main Logistics Nodes The findings below are based on the field missions. This included site visits to the major ports of Poti and Batumi as well as various locations around Tbilisi. Reports on the capacities, facilities and the overall condition have been prepared. These reports also contain information on the bottlenecks identified. The summary information of the analysis is presented below. Sea Ports The ports of Poti and Batumi are the main hubs for goods coming to Georgia by sea. The information below is a summary of the site visit to Poti and Batumi. Poti Sea Port The operation and management of the Seaport of Poti has been concessioned to RaK Georgia, a 100% daughter company of the Ras-al-Khaimah UAE member-state. The new management is to improve the operations and also to invest in port modernization. Poti is the biggest container port in Georgia with about 220,000 TEU per annum. The turnover and the detailed ports descriptions are outlined in the annex. Page 48 of 207 Annex 3 Part 2 Inception Report

257 Figure 20: Rail ferry operation in Poti Port The two most urgent investment projects are the access road to the port and the rehabilitation of berth no.14 to be used as a multipurpose terminal. The access road is in the ownership of the Poti municipality. RaK Georgia has offered to take over the rehabilitation provided that Municipality of Poti sells the access road and a land strip 2m wide along the road to allow it to be widened. However, no result has been achieved so far in this respect. The photos in Figure 21 and 22 show the access road and the entrance gate to the container terminal. Inception Report Annex 3 Part 2 Page 49 of 207

258 Figure 21: Access road to the container terminal, Status: February 2008 Figure 22: Gate of the container terminal Page 50 of 207 Annex 3 Part 2 Inception Report

259 Berth no. 14 has not been used for more than a decade. Its technical condition is badly deteriorated. Figure 23 below gives an impression of the situation. During the last 10 years the Port of Poti has made some investments. The breakwater has been rehabilitated and a tug boat has been bought. Inside the port no major repair or investments in the field of dry cargo operation have been made. Several areas of the port are rented out to private companies for their operations. The new owner of the port only owns the land where these companies operate. The investment for the rehabilitation of the berth no. 14 is estimated at up to US$4 million and should be finalized by the end of This berth should be operated as a multi purpose terminal with a water depth of 11m. For cargo handling mobile equipment will be purchased. Figure 23: Bert No. 14 Poti Port (the buildings behind do not belong to the port) The infrastructure investments sponsored by the European Commission i.e. the rail ferry ramp and the parking area next to this ramp are still in good condition. It is planned to build an industrial free zone to the North of the Port of Poti. This project is initiated by RAKIA Georgia, a consortium managed by Ras-al-Khaimah. In Poti Sea Port the storage of goods in covered and uncovered areas is possible, but limited. Inception Report Annex 3 Part 2 Page 51 of 207

260 Figure 24: Aluminium from Central Asia in the Port of Poti Weaknesses The present practice of container operation at the port is costly and time consuming. This is caused mainly for lack of storage facilities in the port. So, due to absence of storage areas in the port the inland terminals have to be used. The arriving containers are directly loaded on truck and transported to one of the eight inland terminals in the vicinity of Poti. Page 52 of 207 Annex 3 Part 2 Inception Report

261 Figure 25: Container Terminal Poti Figure 26: Inland Terminal Poti Inception Report Annex 3 Part 2 Page 53 of 207

262 Sea Port Batumi The seaport of Batumi has been rented out to two different entities. The port of Batumi is the biggest port in liquid cargo handling. More then 9 million tonnes of oil and oil products are shipped annually via Batumi. Figure 27: Oil terminal in Batumi The oil terminal and the conventional cargo and bulk berths, excluding dry cargo berth no.6 and the rail ferry ramp, is on a lease contract for 49 years with a Kazakhstan based company. Page 54 of 207 Annex 3 Part 2 Inception Report

263 Figure 28: Dry Cargo and bulk Berth in Batumi The container terminal, ferry ramp and berth no.6 is leased by the Manila based ICTSI Group for almost the same period of time. While the container terminal is completely renovated and new mobile equipment has been purchased (see detailed report) the conventional port is still not in good condition. A mobile crane with 36t capacity was purchased a year ago. In Batumi Sea Port the storage of goods in covered and uncovered areas also is possible. The size and dimension of the storage facilities are described in the appendix. Weaknesses In the port the operational areas of the berths nos 6 and 7 are used to marshal the rail cars before leaving the port. In fact, the operation areas are used as a shunting yard. In addition, the access rail is crossing the main road of the TRACECA corridor from Turkey to Azerbaijan and causes congestion. The issue of absence of modern equipment is acknowledged by the port management. It is planned to invest in total US$15-20 million for new gantry cranes and renovation of tugboats. In the next 2 years up to US$5 million are planned to be spent. Conclusion Ports of Georgia Both ports are in working condition. They can still be operated as the entrance gates to the Caucasus states and the transit route to Central Asia. Nevertheless, investment is needed. The project Industrial Free Zone with its new port in Poti will attract traffic to the corridor. Inception Report Annex 3 Part 2 Page 55 of 207

264 Figure 29: Industrial Free Zone Area Phasing Inland Hubs and Terminals Dry cargo destined for Georgia is carried in mainly by trucks. More than half of the freight is directed then to warehouses at Tbilisi and to Kutaisi, Rustavi and several smaller cities. The cargo arriving in Tbilisi is scattered around the city at several locations, but the dominant terminal is Lilo-1. Lilo-1 Ltd is a private company and the biggest customs and warehouse terminal in Georgia, located in Tbilisi 5km east of the International Airport. There is also an old railway terminal in Tbilisi operated by Intertrans, which has a road connection. Tbilisi also has an opportunity to become the country s inland hub. To a certain extent the warehouse LiLo-1 could be seen as inland hub. However, from a connection and operation point of view this warehouse is nearly 100% truck oriented. Most of the cargo to be distributed is unloaded in the warehouse. (The facilities could not be visited.) In other Georgian cities, e.g. Kutaisi and Rustavi, the same operation is practiced. If goods are not directly delivered by truck the final destinations, they are directed to warehouses. The ports of Batumi and Poti possess storage capacity for general cargo but not for containers. The containers are handled outside the port in inland or hinterland terminals. Weaknesses Both Intertrans and LiLo-1 inland terminals in Tbilisi are old and in need of investment. The LiLo-1 terminal needs major repair of warehouse and storage facilities. The usage of Intertrans terminal is only based on a ten-year lease contract, of which 6 years are left. The terminal is located in the middle of the city. This causes traffic congestion and impacts the environmental amenity of the city. The access road to the terminal is unpaved and in very poor condition. The terminal is very small and there are no expansion possibilities. According to Page 56 of 207 Annex 3 Part 2 Inception Report

265 the plan of the city municipality the railway network should be relocated outside of the city. In this case the existing terminal will become less important. Air Cargo hubs Georgia has three international airports: Batumi, Kutaisi and Tbilisi. The airports of Batumi and Kutaisi are of minor importance for air freight. The main airport with 90% of the total air cargo is Tbilisi International Airport, operated by TAV, a Turkish company. The air cargo is handled by specialised companies. These companies are situated within the airport with direct access to the airfield. They have to have special storage facilities and custom bounded areas. The air cargo handling companies also organise distribution for air cargo. The total cargo handling was approximately 17,000t (including humanitarian goods) in 2008, of which 500t was for exort. However, because of the global financial and economic crisis these figures are decreasing. A 25% decrease is expected this year. Air cargo handling is outsourced to two companies, which lease equipment from the airport owner as well as having some of their own. Both companies have storage areas and custom bonded facilities. They also possess truck fleets for the distribution of cargo. The split of air cargo between the two companies is 85%/15%. The larger company is completing construction of a new cargo handling facility and has indicated its interest in participating in a logistics centre provided it is located close to the airport. It was pointed out that their own and rented land plots could be made available for a logistics centre. Currently there are three land plots, each of about 30ha, under consideration for a logistics centre. However, the access road to this location is not paved. The railway line is also not maintained. But the land plots are very close to the airport and the trunk TRACECA railway line. The main highway to the east on the TRACECA route is at a distance of an about 3 km. Figure 30: Tbilisi Airport Cargo Handling Facility Inception Report Annex 3 Part 2 Page 57 of 207

266 Figure 31: Tbilisi Airport Cargo Handling Area Figure 32: Land plot near the Tbilisi Airport Page 58 of 207 Annex 3 Part 2 Inception Report

267 Figure 33: Land plot near the Airport Tbilisi Analysis of Stakeholders in Freight Transport and Logistics Sector Ministries and Related Public Authorities The principal governmental body related to the transport sector in Georgia is the Ministry of Economic Development. The responsible unit is the Transport Administration. There are also sector specific authorities: the Road Agency and the Maritime Administration. For import of cargoes the Customs Department is involved too. Regional and Municipality Authorities The overall planning of infrastructure especially in urban areas is stipulated in the city development plan (Transport and Traffic Master Plan). Freight Forwarding Companies Almost all cargo shipments to Georgia are organised via the forwarding industry. These companies have their corresponding facilities on the place of destination, contracts with the trucking industry and the possibilities of direct booking with the railway companies. Railway Operator Georgian Railway LLC is a state-owned corporation, but the government wishes to privatize it with separation of the ownership/management of infrastructure from the operation of passenger and freight services. The railway has concentrated on three core activities: 1. Passenger service via a Branch Company 2. Infrastructure, Electric, Track dealing with Planning Financing Maintenance Inception Report Annex 3 Part 2 Page 59 of 207

268 New construction 3. Freight services Traction Rolling Stock Freight Terminals Stations Dispatching Schedules All other activities are outsourced already or going to be outsourced. Shippers and Consignees Currently, there exist only a few regular services from or to the ports of Georgia. Batumi has the MSC Container Vessel line twice a month and the Rail Ferry with two calls per month to Burgas and Ilyichevsk. All other calls are shipped with chartered tonnage. Figure 34: Cargo Operation at Poti Port Trade facilitation institutions Several donors are looking at methods to improve Georgia s transport and infrastructure. hey include the EU via national programmes and via TRACECA: the USA via USAID, Millennium Challenge Corporation, Overseas Private (OPIC) and EXIM Bank; the World Bank; EBRD; and the Japan Bank for International Cooperation (JBIC). The Millennium Challenge Georgia (MCG) has allocated over US$100 million for construction and reconstruction of roads in Georgia for a multi-year programme. Page 60 of 207 Annex 3 Part 2 Inception Report

269 In the classical way trade facilitation is under the jurisdiction of the chamber of commerce and the associations of transport and forwarding firms. In addition, the City Governments or the National Government are facilitating transport sector with their targeted development plans. Missing Links and Bottlenecks in the Transport and Logistics Network As mentioned before, the main bottleneck of the Port of Poti is the access road to the container terminal. The rail connection is also problematic. However, a second rail track has been built by Georgian Railways to connect the port to the rail network. The Batumi Sea Port and the container terminal with the rail ferry ramp share the same railway access. Conclusions and Initial Recommendations Tbilisi It was not possible to meet the management and to visit the largest terminal and warehouse LiLo-1 in Tbilisi. This will be done during further investigations. Storage and distribution functions are managed in several locations in Tbilisi mentioned above. There are several land plots, owned by different companies near the airport, which could qualify for the development of an International Logistics centre. Ports The project Industrial Free Zone with its new port in Poti will open opportunities to develop logistics facilities and add container handling capabilities, which are limited in the existing ports, provided that the project will be realized as planned before the economic crisis. Currently, the forwarding industry is not aware of the advantage of logistics facilities used in common in a logistics centre. Their main concern is that several competitors are supposed to be allocated at the same centre and customers may switch to a competitor. Therefore, a follow up on increasing awareness of the advantages of the logistics centres will be provided. Inception Report Annex 3 Part 2 Page 61 of 207

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271 1.1.4 Moldova Inception Report Annex 3 Part 2 Page 63 of 207

272 Background Information Introduction Moldova is a small south-east European country comprising one-third of the territory of the former principality of Moldavia plus a narrow strip of land to the east of the River Dniestr. This strip is now known as Transdnistria 3 and is under the de facto control of a separatist movement. The rest of Moldavia now forms parts of Romania, whose border with Moldova follows the River Prut, and Ukraine. Moldova s population of 4.3 million (July 2009 estimate) is 78% Moldovan/Romanian, 16% Ukrainian/Russian and 6% other ethnic minorities. The population has declined due to a low fertility rate and large-scale temporary emigration to find employment. The Moldovan language is very close to Romanian. Russian is also widely used and has a special status; for example laws are written in both Moldovan and Russian. The terrain is rolling steppe with a maximum elevation of 430m. The climate is mild, giving Moldova comparative advantage in agriculture, with 77% of its territory under cultivation. The country is landlocked except at its southern tip, where it has access to the River Danube 134km from its mouth through the new Port of Giurgiulesti. A TRACECA link was recently added on the new TRACECA map. It connects Giurgiulesti to the capital, Chisinau, supplementing the two preexisting links numbered 17 (14 before the most recent changes to TRACECA map in December 2008): Ilyichevsk Odessa Tiraspol (main city of Transdnistria) Chisinau Ungeny (across the border from Yassy, Romania). Klimentovo (Ukraine) Rybnitsa Ungeny. In addition the following non-traceca corridors pass through Moldova: Pan-European Corridor IX (Moscow-Kiev-Bucharest) passing through the capital Chisinau. TEN Corridor 9 (highway). TEN Corridor 7 (rail/river). Current Economic Situation Agriculture accounts for 17% of GDP and 40% of employment. The country is well-known for its wine and brandy. Vegetables, fruit and tobacco are also important crops. Manufacturing, much of it agriculture-related, accounts for 22% of GDP and 16% of employment. There are no major mineral deposits and the country is dependent on imported energy. A disproportionate share of manufacturing industry is located in Transdnistria, including power generation, cement, textiles, machine tools and steel milling. Its control by the separatist regime is a serious loss to the Moldovan economy. Heavy dependence on the Russian economy, in particular its wine market and energy supplies, has been a serious problem. In 1998 Moldova was hit hard by the Russian financial crisis. Then in 2005 Gazprom cut off gas supplies; a Russian-owned power station in Transdnistria cut off 3 Also referred to as Transnistria and in Ukraine, as Pridnestrovie. Page 64 of 207 Annex 3 Part 2 Inception Report

273 electricity supplies; and the Russian Federation banned imports of Moldovan wine and other agricultural products because of alleged contamination. The Moldovan economy is heavily import-dependent and suffers a wide trade imbalance. Imports were equivalent to about 64% of GDP in 2007 while exports were only 24%. Much of the difference is made up by remittances: 25% of the population of working age are abroad. Average per capita income in 2008 was equivalent to about US$1,420 (PPP US$2,440). Rural poverty is a serious problem, reflected in the disparity between agricultural production (17% of GDP) and employment (40%). 30% of the population officially lives below the poverty line. This had fed the emigration and trafficking referred to above. Moldova s economic performance has been encouraging, however. By 2007 it is thought to have regained the 50% drop in GDP that it suffered in the 3 years following the dissolution of the USSR. Average economic growth was 6%pa during , before the interruption of energy supplies and agricultural exports to Russia. It was about 5% in 2007 and forecast to exceed 7% in 2008, buoyed by gross fixed capital formation equivalent to 36% of GDP. But, like every other country in the region, Moldova has been hit hard by the global financial and economic crisis. No authoritative recent statistics are available, but interviewees reported a 70-90% drop in transport volumes, which suggests a significant economic contraction. The collective GDP of all CIS countries was estimated to have declined by 11% between January 2008 and January 2009, and it is almost certain that Moldova fared worse than the average. The main component of Moldova s economic development strategy is the establishment of nine free economic zones (FEZs) around the country. It is hoped that emigrant workers will be tempted back by new employment opportunities associated with the FEZs, bringing with them skills learned abroad. Continuing expansion and development of Giurgiulesti International Free port (GIFP) is considered to be an important contributor to the FEZ project. Current Situation of Freight Transport and Logistics Sector General Overview The freight transport sector is small but has experienced rapid growth. In 2007 (the latest year for which official statistics are available) the total freight transport volume was 40.8 million tonnes. The road and rail shares were respectively 71% and 29%. The total freight transportation services was 5,865 million tonne-kilometres, with rail accounting for 53%. The air and river modes together accounted for less than 0.5% of total freight transport volume and total freight transportation services. Since 2000 the road freight freight transportation services increased by 152%, the rail freight transportation services task by 106%. However road freight operators report a 70% decline since 2007 as a result of the global financial and economic crisis, and rail freight volumes have reportedly declined by 85-90%. Private Moldovan operators carry 65% of the road freight and another 18% is mixed public/ private. Foreign operators carry 12%. Transit traffic accounts for 40% of road freight movements in Moldova and Moldovan hauliers are active in TIR traffic, travelling as far as China. According to AITA Moldova ranks 4 th in the CIS for TIR activity, with 8,500 TIR trips in Inception Report Annex 3 Part 2 Page 65 of 207

274 Logistics Performance Indicator The study of the World Bank suggests the overall rank of Moldova as 106 out of 150 studied countries. The rank is combined of the following performance evaluation results: Customs rank 110 Infrastructure rank 128 International shipments rank 105 Logistics competence rank 112 Tracking & tracing rank 86 Domestic logistics costs rank 79 Timeliness rank 111 Analysis of Transport Infrastructure Road Network The motorway network is essentially cruciform (see Figure 35 below) with Chisinau at the centre of the cross. From Chisinau the M14 runs north past Beltsy; the M3 runs south to Giurgiulesti; the M1 runs west in the direction of Bucharest; and the M21 runs eastward through Transdniestria and into Ukraine to join the M5, which links Kiev to Odessa and Ilyichevsk. The top investment priorities in the roads sector are as follows, in order of importance: Rehabilitation of the M3 from Chisinau to Giurgiulesti. A feasibility study has been completed, with TRACECA funding and detailed engineering design is under way. The estimated cost of the rehabilitation works is 750 million. The northern half of the road (Chisinau Comrat) is to be funded jointly by the Moldovan Government and the EBRD; the southern half (Comrat Giurgiulesti) by the Millennium Challenge Corporation (MCC, an US Government agency) from a total budget of $300 million for the Moldovan roads sector. Improvement of the M13 from Beltsy to Chisinau, a distance of 135km. This is the busiest highway in Moldova, carrying 15,000 vehicles per day. The improvement works are expected to be financed by EBRD. For the longer term, consideration is being given to developing a road transport link through Moldova linking western Ukraine to the ports of Odessa and Ilyichevsk, offering a more direct route than via the Ukrainian city of Vinnitsia (240km south-west of Kiev). Investment in road rehabilitation and improvement is constrained at present, because the EBRD and World Bank halted their involvement in road projects in Moldova due procurement irregularities. However, the EIB and MCC are still active in the roads sector. The condition of Moldova s road network is far from uniform. Some links are good and others are bad or very bad. The problem of road maintenance has been addressed in previous reports. For example the World Bank s Moldova Transport Strategy Update in 2002 classified most of the network as either poor or extremely poor ; reported that annual funding for maintenance was equivalent to only 1% of the value of road assets. Another World Bank report in 2004 and background information for a road sector support project in 2007 indicate that the problem has persisted. Page 66 of 207 Annex 3 Part 2 Inception Report

275 Figure 35: Road Network of Moldova Kiev o Bălţi M14 M5 M21 M1 M3 Bucharest Giurgiulesti Note: The A marker at Beltsy (Bălţi in Moldovan language) is superfluous. Railway Network The Moldovan railway network is shown in Figure 36 on the following page. Moldovan Railway has a total of 1,138km of track, mostly of the CIS gauge (1,520mm). However, since 2006 it has built 14km of standard gauge (1,435mm) track; and at GIFP there is dual-gauge track allowing goods going through the port to arrive or depart to either of its neighbouring countries without subsequent bogey exchange or unloading/reloading. For other traffic a bogey exchange operates at Ungheni, near the Romanian border. There is capacity to handle 20 containers at Ungheni and Chisinau, but currently no container trains are operated for transit cargoes and there is virtually no intermodal movement. Inception Report Annex 3 Part 2 Page 67 of 207

276 Figure 36: Moldovan Railway Network New Cahul-Giurgiulesti link There are three railway lines that cross Moldova east-west: Northern: from Ungheni on the Romanian border through Baltsi (Moldova s second city) to Slobidka in Ukraine. Central: from Ungheni through Chisinau and Tiraspol (in Transdniestria) to Odessa and Ilyichevsk in Ukraine. Page 68 of 207 Annex 3 Part 2 Inception Report

277 Southern: from Kantenir on the Romanian border to Bessarabia on the Ukrainian border, and thence to Ilyichevsk and Odessa from the south. The third of these is significant as a route to the Ukrainian ports of Odessa and Ilyichevsk that does not go through the separatist territory of Transdniestria. The route via Tiraspol was closed for many years but opened in 2008 through EU mediation. It was reported to us that it is closed again now. We have added the latest addition to the network to the railway map in Figure 36: extension of the Cantemir-Cahul line south to Giurliulesti. This provides Chisinau with a direct connection to the Giurgiulesti International Free Port (GIFP). Only one major infrastructural development is planned: conversion of the line from Chisinau to Ungheni to standard gauge. Analysis of Main Logistics Nodes There are no logistics centres as such in Moldova. There is a railway freight terminal in Chisinau, with the potential to take on an expanded role; AITA has bought a small industrial site from Chisinau Municipality to develop as a logistics centre; two transport companies, one of them an IATA member, have nearby sites; a new customs facility is being on a 2ha site on the outskirts of Chisinau; and individual wholesale and retail companies have their own warehousing operations. Railway Freight Terminal, Chisinau The terminal is extensive and reasonably well-equipped (see Figure 37 to Figure 39 below). It has gantry cranes capable of lifting 20 containers. Some are inoperable at present but could be repaired or replaced. There is a Soviet-era warehouse with a rail line entering to allow goods to be loaded onto and unloaded from railway wagons. There is no special provision for temperature controlled cargoes or hazardous cargoes. Inception Report Annex 3 Part 2 Page 69 of 207

278 Figure 37: General View of Chisinau Rail Freight Cargo Figure 38: Gantry and Wagons at Chisinau Rail Freight Terminal Page 70 of 207 Annex 3 Part 2 Inception Report

279 Figure 39: Control Room at Chisinau Rail Freight Terminal Before the global financial and economic crisis the Chisinau terminal loaded/unloaded several trains per day. Now the volume can be counted in wagon-loads. During our 2-hour inspection we saw a single wagon being loaded with wine; several bundles of timber that had been unloaded recently; and some stacked containers. There were no train movements or container movements during that time. With a population of about 700,000 Chisinau is probably the only centre in terms of population and economic activity in Moldova that could support a substantial logistics centre. Giurgiulesti International Free Port (GIFP) GIFP has a territory of 120ha and the status of a free economic zone (FEZ). It consists of a petroleum terminal, cereal cargo handling and storage facilities and an industrial free zone. As yet only the petroleum terminal is operating. Other facilities, including grain and other bulk materials handling, container terminal, warehouse are being constructed according to a phased master plan. Due to its location on the Lower Danube with available water depths of up to 7m, GIFP is capable of receiving both inland and sea going vessels (up to about 10,000DWT). It is promoted as: The only direct sea/river-borne transshipment and distribution point to and from the Republic of Moldova. A regional logistics hub on the border of the EU with access to road, rail, river and sea. a good location for business development, because of its strategic location, tri-modal transport infrastructure, low-cost environment and a unique customs and tax regime. The port is situated at km (nautical mile 72.2) of the River Danube in the South of Moldova, sandwiched between Romania (and therefore the European Union) and Ukraine. GIFP benefits from its location on international trade and transportation routes such as the Rhine-Main-Danube waterway corridor. This connects the Black Sea to 14 European countries and the North Sea; the European standard and Russian railway systems; and the international Inception Report Annex 3 Part 2 Page 71 of 207

280 road network. It lies close to and provides feeder services to the Commercial Sea Port of Constantza (Romania), the leading port of the Black Sea for transshipment cargo. The master plan (see Figure 40 below) forms the basis and guidelines for the further planning and development of GIFP. There will be four different functional areas: Oil terminal (operating now). Dry cargo terminal and storage. Industrial Free Zone. Administration centre. The Oil Product Terminal (see Figure 41 on the following page) consists of one berth, a tank farm consisting of eight tanks; tanker truck loading facilities; and, from mid-2008, rail tank car loading/ unloading facilities. The berth can accept sea vessels and river barges with draughts of 7m and can load/unload up to three different types of oil products simultaneously. Technical parameters: Tri-modal transport infrastructure consisting of a jetty with water depth of a minimum of 7m, road access and a planned railway link. Total storage capacity of 63,600m 3, divided between 8 tanks with capacities ranging from 4,200 to 12,600m 3. Maximum transshipment capacity in excess of 2 million tonnes per annum. Figure 40: GIFP Master Plan Page 72 of 207 Annex 3 Part 2 Inception Report

281 Figure 41: GIFP Oil Terminal Facilities In Danube Logistics plans to construct a multi-purpose Dry Cargo Terminal, consisting of up to six berths, capable of handling typical bulk cargo such as grain and construction material as well as containers. Gantry cranes will be used for the transshipment of bulk cargo and containers. In 2007 Danube Logistics business partner Trans Cargo installed specialized equipment to load grain onto vessels as well as grain cargo storage facilities with a total storage capacity of 45,000 tonnes. The water depth at the six berths will vary one berth with a water depth of 7m will be dedicated to sea vessels and the others with a water depth of 3-5m will be dedicated to river vessels. Technical parameters: Tri-modal transport infrastructure consisting of up to six berths, road access and railway links to CIS and standard gauge railway systems Storage capacity with a warehouse of 2,000m 2. Bulk Cargo open storage area 160m x 35m = 5,600m 2. Container and general cargo open storage area 60m x 45m = 2,700m 2. Inception Report Annex 3 Part 2 Page 73 of 207

282 Figure 42: GIFP Container Handling Facilities (Artist s Impression) The customs regime and services are designed to be attractive to potential users: Exports Goods originating from GIFP 4 and exported from GIFP to the rest of Moldova or abroad are exempt from any form of customs duties, except for a nominal customs procedure fee. Imports Goods imported to GIFP from the rest of Moldova or from abroad are exempt from any form of customs duties, except for a nominal customs procedure fee. Autonomous Trade Preferences From March 1st 2008 Republic of Moldova has benefitted from the new scheme of trade preferences granted by the European Union, known as Autonomous Trade Preferences (ATP). ATP allows virtually all products originating in the beneficiary countries to enter the EU without quantitative restrictions and customs duties, the only exemptions being imports of wine, veal and some fishery products to which tariff quotas apply. Custom services at the Port have been reported as being highly professional, efficient and transparent. Danube logistics will offer a range of optional services to its clients, including residents of the planned Industrial Free Zone: Logistics Transshipment, storage, distribution and other transportation services for oil products, bulk dry cargo, containerized cargo and general cargo. Port services Vessel Services include but are not limited to the supply of potable water and food, agent services, tug boat services, piloting services, communications services and waste removal services, etc. 4 Goods originating from GIFP mean any goods fully produced or sufficiently processed within GIFP, provided that they have changed their position according to the classification code at the level of one of the first four figures, or the final value of the goods exported from GIFP exceeds the initial value of the goods imported to GIFP by at least 35%, due to the value added. Page 74 of 207 Annex 3 Part 2 Inception Report

283 Land and office leasing Short- to long-term leases of land within GIFP, which is connected to electricity, gas, water, telecommunications, road infrastructure as well as in close proximity to rail and port infrastructure. Administrative services Short- to long-term lease agreements for fully furnished or unfurnished office space (see below). Figure 43: GIFP Office Facilities (Photo March 2009) The port management recognizes the need for the highest health, safety, security and environmental standards. It complies with all relevant EU Conventions, Regulations and Directives, which are strictly enforced by the Company s security personnel 24 hours per day. The visiting consultants were shown: Comprehensive Security Response Plan. Comprehensive Fire and Disaster Response Plan (the whole area and offices are a nonsmoking/open fire restricted area). 3 rd Tier Environmental Disaster Response Plan (in progress). In-house training programmes for all employees (in progress). Chisinau International Airport Chisinau has the country s only international airport. It has an air cargo facility but volumes are small: less than 2,500t in 2008 including mail (see Table 9 below). The trend is strongly upward, however. Even in 2008, when the global financial and economic crisis was being felt, there was an increase in volume. Table 9: Chisinau Airport: Air Cargo (tonnes) Exports Imports Total cargo Mail Total including mail , , , , , , , , ,468.8 Source: Chisinau Airport administration Inception Report Annex 3 Part 2 Page 75 of 207

284 The cargoes mainly comprise high-value and/or urgent items, for example equipment, spare parts and pharmaceuticals. There is no transit cargo. No international air cargo operator has located at Chisinau as yet. There is a warehouse and associated handling equipment, dating from Soviet times, in a secure 0.8ha compound beside the passenger terminal. Part of the compound is used by a private company for warehousing, not exclusively for air cargo. The usage of air cargo facilities is well below their capacity. However the airport administration expects strong growth to continue, so that expansion and modernization will become necessary. An additional 3.5ha of land is available for expansion. EBRD/EIB funding is expected for this purpose. EBRD already financed the upgrading of the passenger terminal to cope with a 20% average annual growth rate of passenger numbers, driven by European tourism and Moldovans travelling abroad for work. The loan was repaid 4 years ahead of schedule. Analysis of Stakeholders in Freight Transport and Logistics Sector Ministries and Related Public Authorities Transport Agency There have been several recent governmental restructurings in the transport sector. At the moment there is no Ministry of Transport, but a Transport Agency responsible for policy-making, legislation, research and monitoring in the fields of terrestrial transport (road and rail), water transport and aviation. Its organisational structure is shown in Figure 44. Figure 44: Organisational Structure of Moldovan Transport Agency Customs Service Source: Transport Agency of the Republic of Moldova website The Customs Service is defined as a central public administration body. It is independent of any ministry. Its role and work are prescribed in a number of laws passed during Page 76 of 207 Annex 3 Part 2 Inception Report

285 In furtherance of its mission the Customs Service operates eight customs houses: three on the Romanian border, one on the Ukrainian border and four serving major urban centres (see Figure 45 on the following page). According to our interviews with representatives of the private sector, the Customs Service fulfills its mission well. Electronic data interchange (EDI) is operating successfully, with e- declarations routinely made; there is a traffic light risk management system in place; clearance times are reasonable; and operational meetings between the Customs Service and private operators representatives ensure that any problems are dealt with quickly. However a special report by Transparency International indicates that corruption is widespread and frequent, albeit at an affordable level. A fuller summary appears in Annex 4 to the Inception Report. Figure 45: Location of Moldovan Customs Houses Source: Customs Service of the Republic of Moldova website Hauliers and Freight Forwarding Companies International Association of Road Hauliers (AITA) Moldovan road hauliers which operate internationally are represented by AITA, which has 400 members operating 6,000 trucks with a capacity of at least 20t. AITA is a member of IRU, the international body responsible for managing the TIR carnet system. The Association engages in Inception Report Annex 3 Part 2 Page 77 of 207

286 training managers and drivers, vehicle testing and insurance (with 50% shareholding in an insurance company). Association of Forwarders and Customs Brokers (AEM-TRANS) AITA works closely with AEM-TRANS which has only five members, all of them AITA members too. They are large firms engaged in railway freight forwarding and customs broking. The Association drafted a new law on freight forwarding, which is yet to be passed, and is engaged in lobbying and training activities. Operators of Transport Infrastructure Ministry of Construction and Territorial Development The Ministry of Construction and Territorial Development is responsible for constructing and maintaining roads, except within the urban area governed by Chisinau Municipality; and for developing the road network to accommodate demand and to support the Government s economic and spatial development policy. Railway of Moldova The railway system is owned and operated by Railway of Moldova (CFM), a state-owned enterprise. As one would expect, it predominantly carries bulk commodities: coal, petroleum products, building materials including cement, iron ore and scrap, fertilizer etc. Operators of Logistics Nodes The only significant logistics node in the present context is Giurgiulesti International Free Port (GIFP), which is operated by the private company Danube Logistics SRL. Danube Logistics shareholders are the Dutch EASEUR Holding BV and the European Bank for Reconstruction and Development, holding 80% and 20% of the shares respectively. In December 2004 Danube Logistics signed an investment agreement with the Government of Moldova for the construction of Giurgiulesti International Free Port. The company was closely involved with formulating the legal framework for the port. Both company and Government are committed to realizing the master plan. Shippers and Consignees There are no dominant shippers/consignees. Missing Links and Bottlenecks in the Transport and Logistics Network Now that the railway link from Chisinau to Giurgiulesti is complete, there are no significant missing links in Moldova s transport network. There is an absence of high-quality logistics facilities and services, which should be addressed at some time by developing a logistics centre in the vicinity of Chisinau, but in the present depressed economic climate this lack is not a brake on economic activity. The road network is in need of rehabilitation and ongoing adequate maintenance, and this is well recognized. Upgrading is necessary or will soon be necessary on the north-south motorways (M13 Belsty-Chisinau and M3 Chisinau-Giurgiulesti). Again, these needs are recognized and projects have been formulated and partially funded. The cancellation of World Bank and EBRD funding of road projects in Moldova, mentioned above, is a significant setback. A major botteleck is the separation of Transdniestria, cutting off some of the most developed regions of the country and cutting traditional road and railway connections to Ukraine. The solution of this problem is subject to political decisions. Page 78 of 207 Annex 3 Part 2 Inception Report

287 Conclusions and Initial Recommendations The Consultant agree with the Government of Moldova that beside of Chisinau region GIFP is the most significant asset in the transport and logistics network, capable of further expansion, development and promotion. It lacks a hinterland that would provide a sufficiently strong production/consumption base to support a full-scale ILC and at the moment no significant nonoil cargo volumes will be handled. But it has other advantages: It is the only port directly serving Moldova, which should ensure it a certain base-load of demand. Petroleum products are already flowing through the port and which are expected to continue producing a reliable revenue stream. It can accommodate both river- and sea-going ships (up to about 10,000DWT) and effect transshipment between them. The Danube offers the possibility of very cheap transport into a very large hinterland, extending to the North Sea. Giurgiulesti can transship directly onto either railway gauge (standard or CIS) for onward transport in any direction, and there is a bogey exchange facility within the port. Since completion of the rail link, the railway travel time to or from Chisinau is 17 hours. Giurgiulesti now lies directly on a TRACECA corridor. It is already a mature example of PPP with substantial private investment and private management, and a master plan for its future development. Therefore the Consultant recommend that GIFP should be considered for further investigations in the next project phases with promising potentials as a regional logistics centre in the TRACECA based international network of ILCs. The Chisinau region provides due to its concentration of population and economic potentials as well as transport node of two international transport corridors promising opportunities for a future regional logistics centre.the Consultant also recommend to include the Chisinau region for further project investigation and evaluation. Inception Report Annex 3 Part 2 Page 79 of 207

288 Page 80 of 207 Annex 3 Part 2 Inception Report

289 1.1.5 Ukraine Source: UN Cartographic Section Background Information Introduction Ukraine is the second largest country in Europe (after the European part of Russia, before metropolitan France) in terms of area (603,700 sq. km) and fifth in Europe in terms of population 46,2 million people). It is the world's 44th-largest country. Ukraine is bordered by Belarus to the north, Russia to the east, the Sea of Azov and the Black Sea to the south with a coastline of 2,782 kilometres, Moldova and Romania to the southwest, and Hungary, Slovakia, and Poland to the west. In the far southeast, Ukraine is separated from Russia by the Kerch Strait, which connects the Sea of Azov to the Black Sea. Ukraine is subdivided into twenty-four oblasts (provinces) and one autonomous republic, Crimea. Additionally, the cities of Kiev, the capital, and Sevastopol, both have a special legal status. The 24 oblasts and Crimea are subdivided into 490 rayons (districts), or second-level administrative units. Inception Report Annex 3 Part 2 Page 81 of 207

290 Current Economic Situation Overview Ukraine is a lower middle-income country with significant economic potential as a result of its well educated labour force, fast growing domestic market, access to a variety of resources including some of Europe's best agricultural land, significant coal and some oil and gas reserves, and a strategic location connecting Europe, Russia, and Asian markets 5. In the south of Ukraine at the coast and on the Crimea there is wine production and fruit cultivation. In the remainder of the country the predominant crops are wheat, potato and sugar beet. In former times Ukraine was well-known as the granary of Europe due to its black, fertile soil. At the time of independence 55% of the Ukrainian territory was cultivated for agriculture. The Agro-industrial complex produced about 40% of the national income in Ukraine has raw materials in the form of metals and coal. About 5% of the world-wide iron ore deposits lie in Ukraine. In addition the country has bauxite, lead, chrome, steatite, gold, mercury, nickel, titanium, uranium and zinc. At the shelf of the black sea oil and natural gas reserves were discovered. In the regions of Krywyj Rih, Dnipropetrowsk and Saporischschja iron ore is mined and processed. In addition there is mechanical engineering, building of electrical appliances as well as an extensive shipyard industry. In the Donets Basin are many mines. Further main economic regions are Kiev, Kharkov, Donezk, Nikolajevsk, Odessa and Lviv. Economy growth By the time of the crisis, Ukraine s GDP had fallen to less than 40 percent of its level before the USSR s collapse in Ukraine has experienced a solid recovery since then, with growth averaging above 7% p.a. between 2000 and 2007, and industrial production growing more than 10 percent per year. By 2006 GDP had recovered and slightly exceeded its 1991 level. Nominal GDP (in U.S. dollars, calculated at market exchange rate) was estimated at $198 billion in 2008, ranked 41st in the world. Its GDP per capita in 2008 according to the CIA was estimated at $6,900 (in PPP terms), ranked 83rd in the world. By July 2008 the average nominal salary in Ukraine reached 1,930 UAH ($420) per month. The industry and services sectors accounts for 39.3 and 43.8 percent of GDP respectively. Agriculture accounts for 16.9 percent of GDP and is a sector with strong potential. The Ukrainian economy's dependence on steel exports made it particularly vulnerable to the effects of the global financial and economic crisis of According to the Cabinet of Ministers of Ukraine, Ukraine's GDP will grow by 0.4% in 2009, however International Monetary Fund lowered its forecast for Ukraine's GDP growth in 2009 to minus 5% in December The IMF approved a stand-by loan of $16.5 billion for the country. International trade In 2008 Ukraine s visible exports amounted to $67.0 billion (+35.9 per cent over 2007), the imported goods $85.5 billion ( per cent). Traditionally, the most important Ukrainian export goods are metallurgical products, chemical goods, machines, food and textiles 6. Ukraine exports mainly raw materials to the EU: metal (~30%), fuel and energy (~20%), textiles (~10%), agricultural products (10%) and minerals (~9%). 5 The World Bank 6 Federal Foreign Office of Germany Page 82 of 207 Annex 3 Part 2 Inception Report

291 The main import products are equipment, vehicles and chemical products which account for two-thirds of the total volume 7. To a large extent Ukraine depends on Russia as an energy supplier, although lately Ukraine has been trying to diversify its sources. Russia by far is the most dominant trade partner, with a volume of $35 billion. Import and export from and to Russia are balanced, whereas imports from Turkmenistan, China, Germany and Poland outweigh exports to these countries. The majority of Ukrainian exports are marketed to the European Union and CIS. Current Situation of Freight Transport and Logistics Sector General Overview Ukraine is a major hub in European multimodal transport networks connecting Ukraine westbound to the EU, eastbound to (Central) Asia and north-south with CIS countries. EU TACIS supports the further development of the TRACECA corridor, eastbound through the Black and Caspian Sea to Central Asia. Ukraine also features prominently on the map of Networks for Peace and Development. Extension of the Major trans-european transport axes to the neighbouring countries and regions. However, the North-South corridor, carrying vast quantities of minerals and energy products, is still dominant in volume terms. To enhance Ukraine s competitive position as a transit country and location for regional logistics hubs, infrastructure development is a necessary but not sufficient condition. Also trade and transport facilitation and establishment of adequate logistics nodes, contributing to improved level of service and lower transport costs, are of vital importance. Enterprises of freight transport and logistics sector play an important role in the Ukrainian economy. These companies have a 39% share of the services market, produce 12% of GDP and pay 15% of all payments to State budget from production industry 8. The road transport sector is 100% privatized. This fact speeds up development of the road transport system and promotes service improvement. The sector is still rather open and its competitiveness is now developing. Road transport has a 22% share of the cargo market in Ukrainian 9. In January-September 2008 Ukraine s logistics market grew by about +8%. But in result of the global crisis the Ukrainian logistics market is considerable negatively affected. The main task for Ukraine s road transport sector until 2015 is to provide necessary terms for Ukrainian international carriers to enter the European transport system. Currently Ukraine has built up relations in international road haulage with 48 countries 10. The most recent EU project in Ukraine, inter alia dealing with logistics and intermodal services, is the recently commenced project Support to the Integration of the Ukraine into the Trans- European Transport Network TEN-T. Logistics Performance Indicator The World Bank logistics sector performance indicator suggests the rank number 73 out of 150 for Ukraine. The overall rank is composed of the following components: Transport & Logistics Report 2006, Logistics Platform LLC Transport & Logistics Report 2006, Logistics Platform LLC Transport & Logistics Report 2006, Logistics Platform LLC Transport & Logistics Report 2006, Logistics Platform LLC Inception Report Annex 3 Part 2 Page 83 of 207

292 Customs - rank 97 Infrastructure - rank 74 International shipments - rank 83 Logistics competence - rank 90 Tracking & tracing - rank 80 Domestic logistics costs - rank 21 Timeliness - rank 55 Analysis of Transport Infrastructure The Ukrainian infrastructure mainly has a north-south traffic orientation (Moscow - Kiev - Odessa, Moscow - Kharkov - Crimea) which is a legacy from times of the former Soviet Union. However, since independence, the country has tried to reorganize the infrastructure into a westeast orientation with connections to Poland, Slovakia and Hungary to intensify links to Pan- European Corridors III and V. Out of ten Pan-European Transport Corridors that cross Europe, three go through the territory of Ukraine: Corridor III Berlin/Dresden-Wroclaw-Krakow-Lviv-Kiev Corridor V Venice-Trieste/Koper-Ljubljana-Budapest-Lviv Corridor IX Helsinki-St. Petersburg-(Moscow)-Kiev-Odessa Ukraine is an important transit country for Europe with potential to provide the shortest transit routes between Europe and Asia as well as accommodate regional logistics hubs. In addition, since the opening of the Black Sea - Danube Canal, Ukraine is directly connected to Corridor VII, the Danube. Figure 46: TRACECA map 2008 of Ukraine Page 84 of 207 Annex 3 Part 2 Inception Report

293 In Ukraine the main mode of transport is the railway, followed by road traffic and inland navigation on the Dnepr. Ukraine transport system and possibilities in relation of the TRACECA corridor and logistics centres network, e.g. new terminals in Ilyichevsk and Odessa ports, Ro-Ro ferry fleet are a good basis for the Logistics centres network on the TRACECA corridor development. Today Ro- Ro Shipping lines are going to Georgia, Turkey and Bulgaria transporting road and railway wagons, trucks and cars. There is an increasing volume of container transportation via Ukraine ports. However a decline is expected in 2008 and 2009 due to the global financial and economic crisis Ukraine transport system has ongoing plans and programs for transport system development, some of which need update and review. Every transport sector has its own development program. Two main planning/policy initiatives are in preparation: the National Transport System Strategy and a new Port Law, which is in Parliament now for adoption. Road Network Ukraine has a total road network of about 170,000km, of which about 165,000 kilometres 11 are paved roads. Most of the Ukrainian road system has not been upgraded since the Soviet era, and is now outdated. A coherent motorway network does not exist yet and the quality of the motorways is not satisfying. However there are motorway-like upgraded freeways and national routes. Figure 47 shows the international road network of Ukraine with a total length of about 8,100 km. It comprises E-prefixed roads that cross international borders, numbered by UNECE; and 23 roads with M prefixes, some of which are also numbered in the E series. Figure 47: International road network of Ukraine 11 CIA The World Factbook - Ukraine Inception Report Annex 3 Part 2 Page 85 of 207

294 The M 06 from Hungary to Kiev was reconstructed in the last years and is now continuous in a very good condition from the border over the Carpathians to Lviv. The Ukrainian government has pledged to reconstruct and build some 4,500 km of motorways by The TRACECA road corridor in Ukraine from Yagodin to Odessa/Ilyichevsk is mostly identical with the E-Roads (see Figure 48): Yagodin (M07, E373) - Kovel (M19, E85) - Lutsk - Ternopil (M12, E50) - Khelmnytski - Vinnytsa - Nemirov - Uman (M05, E95) - Odessa - Ilyichevsk (M22) Figure 48: E-road network of Ukraine The three Pan-European Transport Road Corridors crossing Ukraine also are mostly following the E-Road network: Corridor III Berlin/Dresden-Wroclaw-Krakow-Lviv (E40,M11)-Kiev (E40,M06) Corridor V Venice-Trieste/Koper-Ljubljana-Budapest-Lviv (E471,M06) Corridor IX Helsinki-St.Petersburg-(Moscow)-Kiev (E95,M01/E101,M02)-Odessa (E95, M05) Railway Network Until the break-up of the Soviet Union, the Ukrainian railways were an integral part of its broadgauge network with the exception of a few standard-gauge links across the western borders. Since independence in 1991, it has evolved technically and operationally in accordance with the changing national political and economic framework, in which road competition has increased significantly, and some minor rail services have been withdrawn. Nevertheless, the rail network remains an important part of the national transport infrastructure, and investment continues, notably in renovating major stations. Rail transport in Ukraine plays the role of connecting all major urban areas, port facilities and industrial centres with neighbouring countries. The railway network in Ukraine extends for 22,473 kilometres, of which 9,250 kilometres is electrified (42% of the total) CIA The World Factbook - Ukraine Page 86 of 207 Annex 3 Part 2 Inception Report

295 Railway density of Ukraine is one of the highest among other CIS countries and is close to France, Italy and Romania. The heaviest concentration of railroad track is located in the Donbass region of Ukraine. The railway network of Ukraine is depicted in Figure 49. Especially the Western part of the country is well integrated in regional rail networks. Figure 49: Railway network of Ukraine Source: In Ukraine only one TRACECA railway corridor passes through the country, from Yagodin to Odessa/Ilyichevsk, and it does not connect to the capital Kiev (see Figure 50): Yagodin - Kovel - Rovno - Zdobulnov Shepetovka Kazatin - Vinnytsa - Klimentovo - Odessa - Ilyichevsk Inception Report Annex 3 Part 2 Page 87 of 207

296 Figure 50: TRACECA road and railway corridors in Ukraine Inter-modal train services are operating with simultaneous transportation of universal and specific containers, trucks, detached automotive bodies and semi-trailers. Privately operated container and combined transport services use the routes shown in Figure 51. Extensions of this network are planned which connect Odessa/Ilyichevsk with Dnipropetrovsk and Khmelnytsky, further extensions to Central Asia ( New Silk Routes ) are also in the planning stage. Page 88 of 207 Annex 3 Part 2 Inception Report

297 Figure 51: Important container and combined trailer train routes passing through Ukraine Inception Report Annex 3 Part 2 Page 89 of 207

298 The combined container-trailer train system Viking (see Figure 52) links the ports of Klaipeda Odessa Ilyichevsk as well as logistics and intermodal centres in Klaipeda, Vilnius, Minsk and Kiev. This railway route crosses Lithuania, Belarus and Ukraine enabling a connection of the Pan-European Transport Corridor IX with the TRACECA Corridor. Figure 52: Viking system In the context of the EU "Tacis" programme, various studies are being made of possible trans- European routes consisting of new or upgraded railway infrastructure between St-Petersburg and Odessa. Inland Waterway Network The inland waterway network consists of about 1,670 km (of which most is on the Dnepr River), but technically it is possible to carry goods from Ukraine sea ports up to the Belarusian port of Mozer. However since 2005 no cargo was carried on this route. In Ukraine 15 inland harbours are in operation. The main cargo on inland waterways is construction materials, some steel and other bulk cargoes. At the end of May 2007 navigation by channel to the River Danube was reopened. Russia s inland waterways transport policy allows only Russian-flagged ships on its inland waterways. This has stopped inland waterway activity for ships of other nations on the Volga Don inland waterway system. Analysis of Main Logistics Nodes Sea Ports Ukraine possesses the most powerful seaport potential among the countries of the Black Sea region. Along its Black Sea and Sea of Azov coastline there are 19 merchant sea ports. All of Ukraine s major merchant ports are state-owned enterprises. This status is prescribed by the Merchant Shipping Code of Ukraine. The most important are the two ports of Odessa and Ilyichevsk (container terminal ports), situated not far from each other on the north western part of the Black Sea coast. Page 90 of 207 Annex 3 Part 2 Inception Report

299 These two ports and the port of Yuzhniy account for about 57% of the total cargo turnover in Ukraine sea ports and offer the best sea approaches, accommodating large vessels with a draft from 11,5m to 14,5m while other Ukrainian ports can only accommodate vessels of considerably lesser drafts. Moreover there are a number of ports and terminals/berths locations not subject to the control and management of the Ministry of Transport of Ukraine, working in fields such as fisheries, metallurgy, shipbuilding and repair and oil and gas exploration operations. According to GOSKOMSTAT and UKRMORRECHFLOT of Ukraine, all merchant sea ports, river and sea fishery ports and other port complexes handled 158 million tons of cargo in 2006, an increase of 2,9% over In the first months of 2009 the container handling of the Ports of Odessa and Ilyichevsk decreased by about 60% 13. In recent years political instability in Ukraine has been accompanied by frequent rotation both in the transport ministry s headship and in administration of merchant sea ports. This situation is still valid today and as a consequence has hampered the main ports competiveness and cargo volume growth substantially. Odessa Commercial Sea Port The Port of Odessa has good possibilities in relation of the TRACECA corridor and Ro-Ro lines linking Odessa port with other ports in the Black sea region. New terminals have been developed. The port turnover in 2008 was 34,6 million t, comprising dry cargo 17,4 million t and liquid cargo (mainly oil and oil production) 17,2 million t. 13 Meeting with Executive Director of HPC Container Terminal in March 2009 Inception Report Annex 3 Part 2 Page 91 of 207

300 Figure 53: Scheme of Odessa Commercial Sea Port The Port of Odessa has a container terminal (HPC) and a small Ro-Ro ferry terminal. A Ro-Ro passenger shipping line links Odessa with Istanbul (3 calls per week). The annual capacity of the container terminal is more than 700,000 TEU (572,170 TEU in 2008) and there are plans for the improvement of the container terminal. Also there is an area for the simultaneous storage of 580 reefer containers. Hamburg Port Consultant (HPC) Container Terminal rented a concession from the Port Authority and cooperates on the basis of an informal JV agreement with the Page 92 of 207 Annex 3 Part 2 Inception Report

301 privately owned LLC Euro Terminal outside of the port area 14. Until 2015 are planned investments of about 220 million EUR, 30 % of which is planned as foreign investment capital. The main target of the port is container transhipment. Figure 54: Odessa Port Container Terminal Overview of cargo handling volumes in 2008: Containerised cargo 572,170 TEU Raw materials 17,196,000 t (oil) Bulk cargo 5,751,500 t Heavy industrial products 5,994,600 t (metals) Light Industry, automotive 5,000 t Consumer products 24,000 t Reefer goods 342,500 t Food products 34,460 t Others 159,590 t The biggest port operated container vessels are PANAMAX type with container loading capacity of 4,500 TEU (length 286m). About 50% of the containers are transcontinental containers. The average container storage time at the terminal is days. About 60% of the containers are opened and physically inspected by the Customs Service. About 88% of the containers are to or from the Ukraine market and about 12% are in transit. About 70% of the outbound containers from Ukraine are empty. The Port of Odessa has a development program and feasibility studies up to 2015, which include container terminal extension, construction of a dry port ( logistic centre ) outside the city with a road link to the public road network to allow heavy vehicles to avoid crossing the city. This work should be finished in end of There are bottlenecks at the Port of Odessa in relation to the TRACECA logistics centres network. These mainly involve road and railway access to the port and terminals. In addition there is limited space for containers and other goods storage, a very complicated port organization structure (typical of a Soviet-era commercial port, with no HPC container terminal). Railway access at the moment is useful, but in case of increasing cargo flows, especially containers, it will be necessary to improve it. According to Ukraine Railway Authorities, the utilisation of the railway access in Odessa direction already has exceeded its capacity. 14 Meeting with Executive Director of HPC Container Terminal in March 2009 Inception Report Annex 3 Part 2 Page 93 of 207

302 Ilyichevsk Commercial Sea Port Through the commercial sea port of Ilyichevsk Ukraine maintains trade relations with 100 other countries. It is also a crucial TRACECA node in the northern Black Sea. The Port of Ilyichevsk is a modern, international, highly mechanized, multipurpose transport node specialized in transhipping general, dry and liquid bulk cargoes. It occupies a key position at the interface of the main transport routes between Europe and Asia, the North and the South, Central and Eastern Europe and is at the heart of the Motorways of the Sea network. A number of international transport corridors pass through the Port of Ilyichevsk: TRACECA transport corridor Pan-European transport corridor IX Baltic-Black Sea transport corridor It is planned to include the Port of Ilyichevsk into the route of a circular corridor to be formed around the Black Sea, which will link the countries of the Black Sea Economic Cooperation Organization. The principal part of the TRACECA transport corridor is formed by the railway ferry lines crossing the Black Sea: Ilyichevsk Varna Poti/Batumi and Ilyichevsk Derince. A favourable factor for the development of freight traffic through the Port of Ilyichevsk is its immediate proximity to the motorway Kiev-Odessa through which access to Pan-European transport corridor III (Berlin/Dresden Wroclaw Lviv Kiev) and V (Trieste Ljubljana Budapest Chop Lviv) is gained. Port of Ilyichevsk has Container terminal and Ro-Ro ferry terminal. The capacity of the container terminal is about 1,000,000 TEU (670,556 TEU in 2008). After renovation the projected capacity should be up to 4 million TEU. The total cargo turn-over of the port in 2008 was 18,9 m t, thereof: General cargo 10,88 m t incl. containerised cargo 670,560 TEU = 4,51 m t Dry (bulk) cargo 6,59 m t Liquid cargo 1,44 m t Page 94 of 207 Annex 3 Part 2 Inception Report

303 Figure 55: Ilyichevsk Port Container Terminal The biggest container vessel which will regular call at Ilyichevsk is the PANAMAX type with a container capacity of 4,200 TEU. The usual movement per container ship is between 300 and 2,000 TEUs. The average container storage time at the terminal is from 12 to 14 days. More than 20% of the containers are physically inspected by the Customs Service. As at Odessa, about 90% of the containers are to or from the Ukraine market. Ilyichevsk Port Ro-Ro terminal was constructed for the railway Ro-Ro ferries, and is now used for both Ro-Ro railway and road transport purposes. Its capacity is about 5,5 million t per year. There are plans at the Port of Ilyichevsk to: renovate quay walls 3 and 4; construction a yard for the container terminal; and renovate quay walls No. 1 and No. 2 for the POSTPANAMAX type of ships (mainly for container traffic). Inception Report Annex 3 Part 2 Page 95 of 207

304 Figure 56: Scheme of Ilyichevsk Commercial Sea Port The Port of Ilyichevsk consists of: facilities with a handling capacity of over 32,0 million t of cargo annually quay of 6,000m with modern berths No.1-29 storage facilities which can accommodate 1,5 million t of different cargoes. Total open storage area 575,000 m 2 ; warehouse area 28,000 m 2 navigable depths: - in outer roadstead up to 21m - in approach channel 16m - in port water area 7,5 14m transhipment techniques for unique heavyweight and oversized cargoes up to 400 t with application of floating cranes railway infrastructure 6 rail entrances for moving wagons into the port and to the berths, with 10 railway tracks to enable wagon turnover up to 1,800 wagons per day a developed network of internal roads, allowing the entrance of motor vehicles through 5 port checkpoints The Port of Ilyichevsk is a member of the Black and Azov Seas Port Association (BASPA) recognized by the European Commission, Intergovernmental Commission TRACECA and Black Sea Economic Cooperation Organization. Bottlenecks of the Port of Ilyichevsk are road access (construction of about 25km to the public road network is required) to the port and terminals, especially to the Ro-Ro terminal (from the terminal to the public transport network); limited space for containers and other goods storage; Page 96 of 207 Annex 3 Part 2 Inception Report

305 and a very complicated port organization structure (typical of a Soviet-era commercial port) and procedures for vessels and cargo. It will be necessary to expend the area for cargo storage cargo by using Dry port or use ILC is required 15. Weaknesses of Ukrainian Sea Ports The main weaknesses can be summarized as follows: A new Merchant Maritime Law on Port Administration is still a draft (since 2006), whereby the Ministry is seeking a still tighter grip on the administration of Port matters. This draft law is according to insiders a further step back from more liberal port policies and planning, development and privatization as well as more transparency in all port matters Current Port Rules and Regulations and Inspection regimes (customs, port state control, port health and environmental inspections, as well as a port tariff system that is complicated and not transparent), has given the most important ports in Ukraine a poor reputation in the world of ship owners. A vessel s port turn-around time is very long due to port cargo handling inefficiency and tedious (physical) custom inspections. Container dwell times in Ukrainian Ports are ranging from 12 to 15 days after discharging, which increases port cargo congestion. Ship owners are complaining of high penalties for minor, non- or ill-specified deficiencies recorded during inspections by the several inspection agencies on board visiting vessels. The Port Management Agencies have no or little authority to manage their own affairs and are often in conflict with one another. There is a lack of in-depth and detailed knowledge of Port Management, e.g. operations, administration, maintenance, efficiency and quality control, at the top and middle management levels. Lack of intermodal terminals and logistics centres in relation to the main transport junctions creates additional problems for increasing existing capacities in ports terminals. Inland Hubs and Terminals In Ukraine there is still a lack of intermodal terminals and logistics centres with comparable international standards and capabilities. In recent years the Ukrainian Government has expended 48,7 million UAH on upgrading the six LISKI logistics centres. There are many privately operated logistics centres (warehousing facilities or distribution centre) in Ukraine (mainly in the Kiev region), but mainly they have road access, only. In Odessa region there is the currently still port related LLC (Limited Liability Company) Euro Terminal. The Port of Ilyichevsk intends to acquire about 80ha land for a dry port outside the city, but at the moment it is agriculture land. LLC Euro Terminal - Odessa The LLC Euro Terminal is a 100% private owned company. The Euro Terminal was established in 2005 and has a total area of about 50ha (currently using 45ha). The area is situated outside of Odessa city and approximately 5km from the Odessa Port. The overpass road (viaduct), which links Odessa port and the Euro Terminal should be ready in September Currently, the Euro Terminal only stores empty containers and 5,5 ha is being used for truck parking area. Regarding the further development of the site, a master plan with storage areas and warehousing facilities has already been prepared. Additional land for expansion is available just outside the dry port (total approx. 700ha). 15 Meetings with Port Authorities of Ilyichevsk Commercial Sea Port in March 2009 Inception Report Annex 3 Part 2 Page 97 of 207

306 By 2010 Euro Terminal is planning to extend the area for customs clearance from the current 6,5ha to 10ha. Furthermore warehouse facilities of about 20,000m 2 will be constructed in Currently Euro Terminals and Hamburg Port Consultants are working on the basis of an informal JV agreement which will be an official legalized JV company in the near future, for the stuffing and stripping of containers on the Euro Terminal (Dry Port Area). LLC Euro Terminal co-operates with Logistic operators which will use the LLC Euro Terminal on a JV basis 16. LISKI Freight Terminal - Kiev The state-owned LISKI Freight terminal in Kiev was established in 1995 and is operated by Ukrainian Centre of Transport Service. The USCTS LISKI is a structural subdivision of the State administration of the Ukrainian Railway Transport (Ukrzaliznytsya). There are in total 6 terminals throughout the country in Kiev, Chop, Odessa, Kharkow, Lugansk and Donetzk. The opening of a new terminal in Dnepopetrovsk is planned in LISKI is situated in the eastern part of Kiev (adjacent to railway station Kiev-Liski) and has an area of about 27ha, but no available extension areas. This is the only road/rail freight terminal serving Kiev. In 2008 a total of 193,500 TEUs were handled and transported by railway. The terminal is equipped with two container sites with a technical processing capacity of 500 containers per day. Now, because of the recession, only 100 per day are handled and the working day is 8 hours instead of There is an open bonded warehouse of 2,000m 2 as well as a covered general warehouse (total area of 6000m 2 ) with railway tracks input for 34 carriages, end ramp for arranging piggyback trains. There is an open area to store 1,100 TEUs. There is no refrigerated storage, but reefers (refrigerated containers) can be plugged in. A special area exists for hazardous cargo containers. The terminal has 9 cranes, of which 3 are for container handling. The fleet consists of about 3,700 container cars (20 and 40 ), 730 specialised railway wagons for cars (rented to clients) and 80 trucks. At the terminal it is possible to carry out loading-and-unloading works, related to handling of containers and other cargo, with subsequent delivery by road transport. Most deliveries are in the Kiev area with an average haul of 100km, maximum 150km. At the moment no international logistics service providers are established on the LISKI. The zone of customs examination, which is situated within the terminal, is able to carry out all the necessary operations of customs registration of the cargo, including change of means of transport. 16 Meeting with Director of LLC Euro Terminal in March Meeting with Head of Technology Department of LISKI Freight Terminal Page 98 of 207 Annex 3 Part 2 Inception Report

307 Figure 57: LISKI Freight terminal in Kiev In 1996 the through container train Ukraine-Express, connecting ports of Hamburg and Bremerhafen (Germany) with Ukraine (Kiev-Liski station), was founded. In prospect there is transportation of perishable goods in refrigerated containers with technical servicing at terminal facilities: Port Hamburg (Germany) terminal Slawkow (Poland) USCTS Liski (Ukraine). The terminal transports cargo in container trains on several routes: Budapest Moscow ( Chardash ), Odessa-Moscow ( Odessa ), Gdansk-Odessa/Iliechevsk ( Baltica ), Nikolaev- Moscow. Over 90% of the containers are carried on special container trains (block trains), including the Viking train to/from Belarus and Lithuania (Klaipeda). A standard container train is 57 wagons long. Rail transit times: Kiev-Odessa 24 hours (this is long because of many stops), Kiev-Kovel 10 hours (but there are no dedicated container trains on this route yet, mixed trains take 3 days because of frequent stops and shunting). Cargo in large-tonnage containers takes three days from the Black Sea ports of Ukraine to stations of Moscow railway junction. The container train Baltica delivers cargo from Gdansk/Gdinya (Poland) to Odessa/Iliechevsk in 72 hours. Additional trains to Poland and a new railway route to China are projected. From 1998 the LISKI terminal Kiev provides the possibility to transport cargo by piggyback trains. From Slavkov (Poland) to LISKI terminal Kiev piggyback train needs less than one day. Inception Report Annex 3 Part 2 Page 99 of 207

308 Railway station Kovel The city of Kovel is located in north-west Ukraine close to the border with Poland (70km) and Belarus (90km). The city has 68,000 inhabitants and is well connected to the international road and railway network. It is directly situated on the TRACECA Corridor and the important traffic axis Berlin Warsaw Brest Kovel Kiev. Figure 58: Railway station Kovel The railway node Kovel is directly linked to the European standard-gauge and Russian broadgauge networks. The railway station of Kovel was built in 1907 and covers a total area of 240ha. There is no available area for spatial extension. The main use of Kovel is the axle-gauge changeover between the different gauge networks. To change one train (40-45 wagons) takes about 8 hours. There are no cargo transhipment or container handling activities at the railway node. The main functions and location characteristics of the railway node Kovel are as follows: Operating personnel in the goods traffic sector approx. 120 persons. 24 hours per day operation, throughout the year. Residential zone borders directly on the station area, limiting possibilities for expansion. The goods being transported today are mainly bulk cargo: coal, iron ore, metal scrap and construction material. Containers constitute less than 5% of transit volume. About 90% of all cargo flows through Kovel are crossing from Ukraine to border stations in the west, about 10% Page 100 of 207 Annex 3 Part 2 Inception Report

309 are incoming from the West. About 90% of the outbound goods through Kovel go to Poland, about 10% to Brest/Belarus 18. Before the global crisis 3 to 4 trains per day (with wagons each) were carried from Kovel to Ysov (in Poland, close to the Ukrainian border). One train per day went to Yagodin (in Ukraine, close to border to Poland) and one train per two days went to Brest (Belarus). The travel time of a freight train from Kovel to Yagodyn is about 2-3 hours. In Soviet times, there was one train per hour to Brest. Currently Kovel railway station has lost the importance that it once had as a railway node and interface between the two railway systems. This is mainly attributable to the opening of the borders in Europe, free choice of the modes of transport and the consequent change in modal split favouring road. Kovel also is a customs point. Goods coming from or going to Poland are customs cleared in Kovel (average duration: 12 hours). Air Cargo hubs All important large cities in Ukraine have international airports. Ukraine s international airlines, Aerosvit airlines and Donbassaero, are the most well-known airlines in Ukraine. The airport of Kiev (Borispol), airport Odessa and airport Dnipropetrowsk are the most important international airports of Ukraine. International Airport Kiev - Borispol The International Airport Borispol is by far the biggest airport in Ukraine, accounting for 62% of passenger transportation and 74% of cargo and mail handling in Ukraine. The cargo throughput of Borispol airport was 33,500t in 2007 and 36,100t in The first quarter 2009 shows a decrease of 35% in comparison with same period 2008, but the overall decrease in cargo for 2009 is estimated at 20%, as Ukraine International Airlines has opened the first regular cargo flight to Vienna for which a second cargo plane will be obtained by this airline soon 19. The cargo handling facilities (a secure temporary customs storage area of 5,072 square metres with automated cargo processing) are sufficient at the moment. This complex includes specialist warehousing for: dangerous, bonded, valuable, chilled and frozen foods with temperature control down to -18C if required. They will be extended in 2011, when the new passenger terminal D is operational. This terminal is currently under construction, financed through the Japan Bank for International Cooperation (JBIC). The Cargo Terminal provides handling, storage and clearance services for all forms of general and special cargo. The cargo handling is mainly done by the airport, with a small share to Swissport Ukraine. 18 Meeting with Deputy Station Manager of Kovel Railway Station in February Meeting with Management of International Airport Borispol in April 2009 Inception Report Annex 3 Part 2 Page 101 of 207

310 Figure 59: Cargo Terminal Services A new low-cost terminal building is planned as well. Till 2011 it will be used as a low-cost terminal for charter-flights. Afterwards, the building will be internally redesigned for use as a cargo terminal. The airline Aerosvit has its own cargo handling facilities, but is not specialising in the field. DHL and TNT have offices at the airport and have distribution centres outside the airport territory to which cargo is taken after collecting it from the airport cargo centre or directly from the plane. The airport Zhulhany, located within the city perimeter on the other bank of the river Dnepr, is much smaller although the runway allows A-320 planes to operate. There is no substantial passenger or cargo traffic at the moment. Odessa International Airport Odessa International Airport is one of the biggest airports in Ukraine, ranked third with respect to volume. It is connected by air lines with most of the cities in Ukraine and CIS countries, as well as countries of Western Europe, Asia and Africa. The Airport is located in the southwestern part of Odessa at a distance of 1.2km from the built-up area of the city. This is convenient for both passengers and air cargo carriers. Page 102 of 207 Annex 3 Part 2 Inception Report

311 Analysis of Stakeholders in Freight Transport and Logistics Sector Ministries and Related Public Authorities The Ministry of Transport and Communications of Ukraine Ministry of Transport and Communications (MoTC) of Ukraine is the leading authority in the central executive authority system of Ukraine. It is responsible for implementation of state policy in the field of road, railway, maritime and inland water transport. The MoTC is responsible for developing and implementing the activities aimed at establishing interoperability and coordination of all transport modes. The activity of the State Road Administration of Ukraine and of the State Aviation Administration of Ukraine are directed and coordinated through the Minister of Transport and Communications of Ukraine. Within MoTC, the Directorate of Transport and Communication System Development and Coordination (DTCSDC) is responsible for transport policy formulation. The following other departments and administrations are integral or linked to the MoTC: Ukravtodor for the road network (infrastructure) Ukravtotrans for road transport (vehicles) Road Transport Department State Road Transport Inspectorate Ukrzaliznytsia for the rail transport sector The State Department for Maritime and Inland water transport The State Aviation Administration of Ukraine for the airports and air transport sector. The overall management and coordination of the sector is made at the highest level of the MoTC. The road transport inspections are carried out by the State Road Transport Inspectorate of the Ministry of Internal Affairs and the Service of International Road Carriage. Customs Service An overview of the Customs Service in Ukraine is described in Annex 4. Freight Forwarding Associations There two freight forwarding associations in Ukraine the Association of International Freight Forwarders of Ukraine (AIFFU) and the Association of International Freight Forwarding Organizations of Ukraine Ukrzovnishtrans Association of International Freight Forwarders of Ukraine The Association of International Freight Forwarders of Ukraine (AIFFU) was established by the initiative of more than 100 freight forwarding Ukrainian enterprises of all kinds of ownership on 27 September It is a professional voluntary non-profitable union of international freight forwarders. AIFFU is a national association of FIATA (International Federation of Freight Forwarding Associations). AIFFU represents more than 170 freight forwarding companies, 47 of which are also individual members of FIATA. AIFFU expresses and protects interests of members and the industry as a whole and therefore is directly involved in developing freight forwarding activity and the country s transport potential. The members of AIFFU work in all regions of Ukraine and abroad, with all kinds of transport and goods; and render services that relate to foreign trade operations (customs regulation, logistics, Inception Report Annex 3 Part 2 Page 103 of 207

312 insurance, tracing etc.) associated with the transportation of export, import and transit goods. AIFFU members are involved in about 50% of Ukrainian exports and imports and 70% of transit movements. Association of Freight Forwarding Organizations of Ukraine "Ukrzovnishtrans" The Association of Freight Forwarding Organizations of Ukraine "Ukrzovnishtrans was established in Since 1994 it has been a FIATA National Member, and from 2006 it received Observer Member Status. The main association activities are: representation and lobbying for the legal interests of association members; adaptation of international and implementation of domestic standards of freight forwarding services by association members; development of business and professional relations with carriers and their organizations; development of proposals on simplification of customs procedures, related with exportimport and transit cargoes transporting via Ukraine; improvement of transport and forwarding activity. The Association consists of 30 companies, 20 of which are the individual FIATA members, and covers 14 regions of Ukraine: Dnepropetrovsk, Transcarpathian, Kiev, Poltava, Odessa, Donetsk, Zaporozhye, Crimea and Nikolaev. Logistics Service Providers The market for logistics services in Ukraine is not yet well developed. The majority of companies positioning themselves as logistics operators (about 100) actually provide storage and transporting services, but in some cases they provide delivery to regions. In fact according to different sources there are between 20 and 30 true logistics operators in Ukraine. According to UVK (logistics operator) data the turnover of each key operator is about $50-60 million per year. The main logistics operators in Ukraine are international companies (Kuehne & Nagel, FM Logistics, Revival Express, ІСТ GmbH, Raben Ukraine, Schenker Ukraine, FM logistics, Revival Express, Maersk Logistics Ukraine, DHL Logistics Ukraine) and national operators (Komora- S/SAV-service, UVK Ukrainian Vantazhni Couriers, Ost-West Express, REWICO). The majority of logistic centers of A, B+ and B class in Ukraine (about 85%) are based in the Kyiv region. As at January 2009, the stock of modern warehouses in Kiev stood at approximately 735,000 sq.m. In 2008 there was a tendency towards development of logistics centers in the major Ukrainian regional cities including Odessa, Dnipropetrovsk, Kharkiv, Zaporizhzhya, Donetsk and Lviv. Freight Forwarding Companies At the moment the Ukrainian market for freight forwarding services is developing spontaneously. It is characterized by a large number of freight forwarding companies, providing low qualitative services; a large number of companies providing only one service; and considerable differences in the servicer charges. Due to these reasons there are no exact statistics on the number of freight forwarding companies in Ukraine. In March 2009, in order to strengthen the state control of transport and forwarding companies and decrease the number of low qualified forwarders the MoTC drafted the Law On amendments to some Laws of Ukraine (as regards licensing of the enterprises providing transport and forwarding activity. Page 104 of 207 Annex 3 Part 2 Inception Report

313 Among the leading freight forwarding companies providing high quality services are Intertrans JSC, PLASKE JSC, GAL-GeneralTrans, Trans-Magister Ltd, T-Trans Ltd and Transservice. Railway Operator Railway transport is controlled by the Government-owned company Ukrzaliznytsia founded in Ukrainian Railways cooperate with the railways of 7 neighbouring countries at 56 border crossings and with 13 sea ports of the Black and Azov seas. The Ukrainian railway network consists of six regional divisions: Lvivska (western part of Ukraine), Pivdenno-Zakhidna (central and northern part), Odes'ka (southern part), Pivdenna (north-eastern part), Donetska (eastern part) and Prydniprovska (south-eastern part). The Ukrainian government is continuously developing plans for restructuring in the railways to improve efficiency. The MoTC is planning to make Ukrainian Railways (UZ) a separate unit. UZ has submitted to the Ministry of Transport its 10-year commercialisation strategy, which describes a phased unbundling of state regulation and business management functions once the new company is established with a proposal for its conversion from a state administration to a state joint stock company ( SJSC ). Transport activities will be separated from the ownership and management of infrastructure; freight and passenger services will be run independently; rolling-stock and other assets will be re-organised. Railway infrastructure shall remain in state ownership and control and separated from ownership of train operations. The restructuring plans create the basis for the subsequent unbundling and partial privatisation of some activities of the railways at a later stage. In result of the global crisis the rail freight volume is down by 35%. At the moment there is no projection or expectation of the rate or timing of recovery. Missing Links and Bottlenecks in the Transport and Logistics Network The main bottlenecks of the Ukrainian transport and logistics network regarding the future development of international logistics centres along the TRACECA corridor are the following: No coherent motorway network and limited traffic capacities Poor quality of road conditions Lack of intermodal hubs and logistics nodes Poor or overloaded road and railway access to the Sea Port Terminals of Odessa and Iliychevsk Limited infrastructure and service facilities on the crossing border points Conclusions and Initial Recommendations Relevant location factors for the establishment of an International Logistics Centre (ILC) are beside of the location situation, the market potentials and logistics added values, the integration in the international, national and regional transportation network as well as integration of the location into intermodal transport systems. Therefore a location for a ILC is considered as optimal, if promising sustainable market potentials, having good access links to the longdistance traffic network (in particular road and railway network) and a favourable intermodale interface. International logistics providers and container terminal operators have entered the logistics and transportation market of Ukraine, mainly in Kiev region and close to the main Ukrainian ports. Some of them have investment plans for the future. On basis of the Terms of References (geographical area to be covered) and these criteria, the following regions for ILC locations are the main candidates: Inception Report Annex 3 Part 2 Page 105 of 207

314 South part of Ukraine Odessa region; Central part of Ukraine Kiev region; West part of Ukraine Lviv region. These regions also were stated and recommended in interviews from national and international logistics providers as well as stakeholders of the transport and logistics sector in Ukraine. South part of Ukraine Odessa region The Ukrainian ports have a very large potential to become important nodes in the network of the logistics centres. The main challenge is to bring the operation of these logistics centres into the synergy and to promote the best for their development in the interregional concept. Currently rail and, to a lesser extent, road access to port terminals is the main transport bottleneck with regard to the logistics centres network and TRACECA. On average about 85 90% of the ports inbound and containers are carried by road transport and just 10 15% are carried by railway. There are several private sector initiatives in the port region of Odessa, Ilyichevsk and Yuzhniy, which is a clear indicator of the attractiveness of this region: Ilyichevsk region - already planned dry port, Odessa region - LLC Euro Terminal. At the junction of the rail links to the three ports of Odessa, Ilyichevsk and Yuzhniy, LISKI Odessa Intermodal terminal is under construction nearby the village and railway station of Usatovo, with direct road link to three ports. This location might be of future importance and will be elaborated during the next Phases of the project. Central part of Ukraine Kiev region Kiev is the capital and with about 3 million inhabitants it is the largest city in Ukraine. Kiev is home to the centre of government administration, the steel industry, machine building, aircraft construction, the chemical industry, the food and food processing industry (Roshen) and the solar industry, among other economic and administrative activities. Kiev is not directly located on the TRACECA Corridor, but is an important traffic node and linked with the three Pan-European Transport Corridors III, V and IX. The state-owned LISKI Freight Terminal is situated in the eastern part of Kiev and has a limited area of about 27ha, but no available extension areas. There are several privately operated logistics centres (warehousing facilities) in the Kiev region, e.g.: Logistics Centre nearby the village of Chaika, nearby and in the west of Kiev close to highway E40 (the main road to Zhytomyr). The LC is operated and owned by the privaet company Fordor Logistics. The site has railway access and also a customs terminal for railway cargo. The warehouse area is about 140,000m 2 on a site of 50 60ha. Raben Ukraine operates about 40,000m 2. of warehousing in Brovary. The site is private owned and located near Kiev to the northeast, with access to mainroad E95 and the railway. In 2008 the EBRD also launched a project for the development of a logistics centre of international standard in Brovary. Logistics Centre Gostomel is located in the North-West of Kiev (outskirts) on the road M07 (E373) and operated by Kuehne & Nagel Ltd (K & N). The K & N operates about 44,000 sq.m. of warehousing and logistics facilities in Kiev. In the Kiev region there is a significant lack of modern and high quality warehousing facilities (A- Class) as well as special warehousing (refrigerated and temperature-guided). However there is Page 106 of 207 Annex 3 Part 2 Inception Report

315 initial interest shown by interviewed international freight forwarding companies (Kuehne & Nagel, Willy Betz, M&M Militzer & Muench, Panalpina) to invest in Kiev region in a future logistics centre. Potential ILC sites should be located in the west and south-west of the Kiev Region, because of imports of containerised high-value consumer goods as well as machinery and equipment from Poland and Western Europe. West part of Ukraine Lviv region The city Lviv in lies in the west of Ukraine approximately 80km from the eastern border of Poland. It is the district capital of the Oblast of the same name. The city has 735,000 inhabitants (2007) and has a favourable connection to the international road and railway network. The Lviv International Airport (LWO) is situated 6 km from the city centre. As host city for the UEFA EURO 2012 it will benefit from investment in the road and railway infrastructure (EURORAILWAY) as well as modernisation of the airport. Two Pan-European Transport corridors are crossing the city of Lviv: Corridor III Berlin/Dresden-Wroclaw-Krakow-Lviv-Kiev Corridor V Venice-Trieste/Koper-Ljubljana-Budapest-Lviv Lviv is an economic and industrial centre in the region. In 2007 there were direct foreign investments of about $580 million in the city s economy. Major industries are machine building, metal industry and food processing. Furthermore there is bus production (marshrutkas) in Lutsk (north-east of Lviv) and fertilizer production in Kalush (south of Lviv). There is already a strategic project for the development of the logistics node YavirCentre in the north-west of Lviv. The project developer is KAMENYAR Co., Ltd. YavirCentre intends to offer a wide range of opportunities for transport service companies, warehousing, distribution services in farming and industry as well as export-import services. Based on many years of experience in Europe with logistics centres and freight villages, Lviv appears to be a potential location for a logistics centre. It has substantial manufacturing activity and trade with a high volume of containerised goods. North-West part of Ukraine - Kovel The region Kovel region is only thinly settled: Kovel city has about 68,000 inhabitants and Oblast Wolhynien has about 1 million. There are few industries and no significant cluster of industrial enterprises. There is little potential export cargo from the region, which might be transported through Kovel, nor is there high demand for imported goods either for intermediate processing or for final consumption. Transit cargo flows are large, but they are mainly bulk commodities which do not create demand for value services such as would be found at a logistics centre. The modernisation and further development of the railway station at Kovel to become a regional distribution hub and rail terminal could enhance the region s development potential. The railway station could serve as a future regional hub for the distribution or collection of goods by road transport to/from Ukraine regions. However, the development potential of the site as a promising logistics centre with international significance is limited, due to its location, the low level of economic activity in the region, and the low volume of containerised cargo. The shifting of cargo volumes from the road to railway transport is not yet evident, because of poor railway competitiveness and operating efficiency. Road cargo from abroad will continue to be carried directly to their destinations in the Ukrainian market without stopping in Kovel, and Inception Report Annex 3 Part 2 Page 107 of 207

316 vice versa. Currently block trains from the Kiev region are going to directly to Poland and Slawkow. Page 108 of 207 Annex 3 Part 2 Inception Report

317 1.2 Country Reports - INDirect beneficiary traceca countries Bulgaria Background Information Introduction Bulgaria is situated in south-east Europe and occupies the eastern part of the Balkan Peninsula. To the north it borders on Romania, to the west on the Republic of Macedonia and the Federal Republic of Yugoslavia, to the east on the Black Sea, to the south on Greece and to the southeast on Turkey's European part. Bulgaria has a favorable geographical location, which provides good conditions for bridging West and Central Europe with the Near East, West and Central Asia, as well as the north and the south of Europe. Five Trans-European Transport Corridors (corridors: ІV, VІІ, VІІІ, ІХ, and Х) pass through the territory of Bulgaria, which make a country a natural transit hub for Eastern Europe. Current Economic Situation The global financial and economic crisis has negatively influenced Bulgaria s economy. After a successful development in the first three quarters of 2008, Bulgaria s economy slowed significantly in the last quarter of The economic slowdown reduced the external demand and affected the abilities of Bulgarian companies to export. According to statistical data from the Inception Report Annex 3 Part 2 Page 109 of 207

318 Bulgarian National Statistical Institute, Bulgaria's gross domestic product (GDP) grew by a preliminary 3.5% in the last quarter of 2008 to an estimated BGL 18,69 billion (9,5 billion EUR). According to the available statistics, Bulgaria's GDP increased by 6% in 2008, slower than the 6.2% growth recorded in The Bulgarian Finance Ministry and Central Bank forcast 2-2.5% growth of Bulgarian GDP in The IMF forecast 2% growth. Current Situation of Freight Transport and Logistics Sector General Overview The Bulgarian transportation and logistics sectors are undergoing immense changes. The importance of logistics is increasing. An entrance of international manufacturers and retailers (Metro, Praktiker, Gorenje) into the Bulgarian market resulted in growing demand for complex logistics services in the country. International logistics providers Shenker, Rhenus, DHL have already entered the Bulgarian market and are providing for their customers contract logistics services. The demand for sophisticated logistics facilities in Bulgaria continues to be strong. As in the previous period it is mostly driven by Third Party Logistics (3PL) providers and FMCG retailers and distributors. The most important logistics locations for the development of logistics real estate are Sofia, Plovdiv, Russe, Varna and Bourgas. Due to the relatively underdeveloped railway system and inflexibility of rail, road transport has taken a greater proportion of the freight task in recent years. Trucks are clearly the preferred way to move goods around Bulgaria. The Bulgarian freight transport market is very fragmented and mostly occupied by small sized national freight forwarders, which are mainly concentrating on typical transportation services. Usually the 3PL services are provided by international logistics providers. The Bulgarian transportation market is very negatively influenced by the global financial crisis. According to personal interviews with the stakeholders of the transportation sector the cargo volume decreased by 25% in the first quarter of The port system of the Republic of Bulgaria has a strong impact on the economy of the country. The system comprises two types of ports river and sea ports. The river ports are situated along the Bulgarian sector of the Danube River, which is the northern border of the country. The sea ports are situated on the Black Sea shore, which is the eastern border. Logistics Performance Indicators Unlike in Western NIS and Caucasus TRACECA countries, Bulgaria scored in the upper 30% of the countries in terms of the logistics performance indicator. The overall rank of the country in 2007 was 55 out of 150. Below this cumulative indicator is presented in its composing dimensions. Customs - rank 66 Infrastructure - rank 64 International shipments - rank 59 Logistics competence - rank 53 Tracking & tracing - rank 39 Domestic logistics costs - rank 81 Timeliness score - rank 43 Page 110 of 207 Annex 3 Part 2 Inception Report

319 Analysis of Transport Infrastructure Modernization of the transport infrastructure in Bulgaria is a main condition for the successful integration in the European transport system. It is the one of the main factors to strengthen the country s attractiveness and competitiveness. For the sustainable development of the transport infrastructure the Ministry of Transport of the Republic Bulgaria elaborated the Strategy for the Development of the Transport Infrastructure of the Republic of Bulgaria by One of the main tasks of the Bulgarian Government for financing the infrastructural projects is to create better conditions for strengthening the role of the private sector. This condition includes the opportunities for various forms of public-private partnerships (PPP). The trend is towards improving and developing the majority of the ports, airports and highways by giving them on concession. Road Network Due to the chronic lack of maintenance funds and previously postponed repair work, the condition of the road system in Bulgaria does not meet international standards. In particular, the road connections between the Bulgarian capital Sofia and Black Sea ports Varna and Bourgas play a decisive role in the fulfillment of national transportation system. Besides the main highways there is a lack of bypass roads around the main Bulgarian cities and the existence of road sections with poor technical parameters that do not guarantee a sufficient level of comfort and safety according to European standards. The main targets of the development of road infrastructure in Bulgaria are: Construction of the Bulgarian highway system, which includes in the first stage the completion of the major highways in Struma, Trakia, Maritza and Hemus. Reconstruction and rehabilitation of road sections along the Trans-European Transport Corridors. Improvement and standardization of the transport-operational parameters of the Bulgarian road network through reconstruction and rehabilitation. Inception Report Annex 3 Part 2 Page 111 of 207

320 Figure 60: Pan-European transport corridors crossing Bulgaria Railway Network Lack of intermodal infrastructure is one of the main problems of the Bulgarian transportation system. The technical condition of the railway is relatively underdeveloped. The level of maintenance of the existing railway lines is low. Technology and equipment in the existing intermodal terminals are mainly outdated. Figure 61: Railway line in Sofia Besides the infrastructural weaknesses in the railway terminals there is a lack of know-how in terminal management and administration. Railway terminals are operated by Bulgarian State Page 112 of 207 Annex 3 Part 2 Inception Report

321 Railways, BDZ. Private carriers are usually unsatisfied with the existing quality of service in the terminals operated by BDZ. According to the information of the Ministry of Transport, railway terminal operations are being privatized step-by-step. Improving the technical condition of railway infrastructure is the main target of BDZ in the coming years. The main ongoing infrastructure projects in the railway sector are: Construction of a second bridge across the Danube River at Vidin Kalafat. Construction project is financed by ISPA, the European Investment Bank, the German KfW Bankengruppe, and the French Development Agency (AFD). Total cost of the project is 226 million. Deadline for completion: 2009 Electrification and upgrading of the railway line Plovdiv Svilengrad. Total cost of the project is 340 million. Deadline for completion: 2010 Rehabilitation and modernization of the railroads along the Trans-European Transport Network have highest priority for BDZ. The following railway projects are planned by Bulgarian authorities: Trans-European transport corridor IV Electrification and reconstruction of the railway line Svilengrad the Turkish border Doubling and electrification of the railway line Purvomay Yabulkovo Modernization of the railway line Sofia Pernik Radomir Modernization of the railway line Sofia Plovdiv Modernization of the railway line Vidin Sofia Modernization of the railway line Radomir - Blagoevgrad Trans-European transport corridor VIII Reconstruction of the railway line Plovdiv Zimnitza Replacement of rail sections along the railway line Plovdiv Burgas Doubling and electrification of the railway line Karnobat - Sindel; Trans-European transport corridor X Modernization of the railway line Sofia Dragoman Trans-European transport corridor IX Reconstruction of the railway line Ruse Gorna Oryahovitza. Projects along the additional connections along the TINA network: Renovation of railway sections along the Mezdra Gorna Oryahovitza line Reconstruction of the railway line Ruse Varna Projects that do not lie on the priority axes: Reconstruction of the railway line Sofia Karlovo Zimnitza Reconstruction of the railway line Gorna Oryahovitza Kaspichan. The Bulgarian Government recognizes the problem of underdeveloped intermodal infrastructure. For this reason the construction of railway terminals in Sofia, Plovdiv and Rousse is planned. The completion of Sofia intermodal terminal is the first stage of this programme. According to the approved Master Plan of Sofia the intermodal terminal will be located close to the city centre. Inception Report Annex 3 Part 2 Page 113 of 207

322 Figure 62: Master Plan of Sofia- Location of the planned Intermodal Terminal The total area of the territory amounts approximately to 73ha. An estimated investment in construction is around 26 million. The costs of construction will be covered partly by the Bulgarian state and partly by European funding. The beneficiary of the container terminal is the Infrastructure Company of Bulgarian State Railway (BDZ). Analysis of Main Logistics Nodes Sea Ports Bulgaria has two main ports on the Black Sea: Varna and Bourgas. Both ports are the main gateways of the country. Port facilities are generally adequate for bulk commodities. Bulgarian ports are the most important nodes, handling 60% of all imports and exports of the country. Bulgarian ports are state-owned companies, controlled by Executive Agency "Port Administration". The border position of these ports is a precondition for their key role in the economy of the country, because of the fact that all goods transported by water, whether they are intended for the domestic market, the export market or are in transit, are processed in them. With the joining of the country to the European Union, the Black Sea ports turned into the Eastern border of the Union. In the future they will perform a mainly transit function and through them the connection between the EU and countries of Central Asia, the Near-, the Middle and the Far East, as well as with the countries of the Black Sea basin will be established. National Port Development Programme ( ) The National Port Development Program is developed in compliance with article 103a, paragraph 2 of the Law for Sea Space, Inland Water Ways and Ports of the Republic of Bulgaria. The Programme s mission is to improve the efficient and quality services provided to the economy of the Republic of Bulgaria through ports modernization and to ensure fast, safe and Page 114 of 207 Annex 3 Part 2 Inception Report

323 secure services, increased transit traffic through the territory of the country and enhanced competitiveness of the Bulgarian ports. The reform that started in the ports is an important priority of the development of the transport sector of Bulgaria. Bulgarian ports are part of the national transport system, which is integrated into the multimodal European transport network. That is why the development and modernization of the state transport infrastructure is extremely important in providing a suitable environment for the country s development and integration into the EU. The major port development projects have been determined on the grounds of the analysis and forecasts of cargo flows. The construction of container and Ro-Ro terminals, for the fast growing modes of transport, is of great significance. Port of Varna The Port of Varna is the largest Bulgarian port. It implements the quality standards ISO 9001:2000 and it is one of the first Black Sea ports to be certified as per the requirements of the International Ship and Port Facility Security (ISPS) Code. The target of the port s management is to become a fully fledged landlord port. Port services are mostly offered by private companies. Pilotage and tugboat services are privatized. The infrastructure in the port is mostly under a 35 year concession contract. The Port of Varna includes two component port units: Varna East and Varna West. In both port units there are 9 specialised terminals. Each terminal is provided with adequate equipment and storage space for the handled goods. Typical for the Port of Varna is that, with the exception of those berths which are dedicated to particular types of liquid or bulk cargo or containers, all other berths are multi-purpose and are used for handling general goods and other cargo types (for example kaolin, silica sand, sugar, etc.). Varna has 32 berths. The total quay length amounts to 5,601 m. A total area of 240,800m 2 is available for open-air storage. The total storage area consists of 77,500m 2. Varna East is located 1km away from the city centre. Varna East is a main link in the canalriver-sea transport corridor for the transit traffic to/from Central Europe routed via the Danubian port of Rousse. The main section of this link is the transit rail section Rousse Varna. Varna East has 14 berths with a maximum depth of 11.3m. The total quay length amounts to 2,378m. Varna East is equipped with 28 portal cranes (up to 32t) and one gantry crane (30.5t). There is a container terminal with a storage capacity of TEU. The terminal has 3 conventional cranes (32t) and one gantry crane (30,5t). Varna West is situated 30 km away from the city, close to the chemical factories of Devnya. The port has the technological lines for handling of soda, fertilizers, cement, coal, ores, phosphates, silica and liquid chemicals. There is a lack of maintenance of existing facilities. Varna West has 18 berths with a maximum 11m depth and total quay length of 3,223m. There are 7 different terminals (containers, sulphur acid, soda, cement, coal, clinker, general cargo). Varna West has 27 portal cranes (up to 16t), 2 gantry cranes (35t), one mobile crane (100t), 2 reach stackers, 3 systems of rubber belt conveyors, 2 quay shiploaders for soda and fertilizers and a loading facility for sulphuric acid. Inception Report Annex 3 Part 2 Page 115 of 207

324 Figure 63: Varna West- Bulk Cargo Terminal The second container terminal is situated in Varna West. The terminal storage capacity is TEU. The berth is specialised in the handling of bigger vessels of TEUs. The terminal is equipped with two gantry cranes (35t). The container berth is used also by Ro-Ro vessels. A parking area can accommodate 500 cars. Figure 64: Container terminal at Varna West There is a lack of specialization of the port terminals. The internal infrastructure has poor technical parameters. The technology and equipment in the existing terminals are mainly outdated. Page 116 of 207 Annex 3 Part 2 Inception Report

325 In the last 6 years the Port of Varna achieved 10% annual growth of cargo revenue. In 2008 the port handled 7,7Mt of cargo (2007: 6,6Mt) and TEU (2007: TEU). In 2008 Varna had 59% growth in container handling as a result of strikes in the Port of Thessaloniki. This year the management of the port expects 20-30% decrease of cargo revenue. The main container ship operators in the port of Varna are Maersk (50%) and MSG (30%). A customs office is located within the port territory. Customs clearance services are satisfactory. Online custom clearance is available. Figure 65: Varna West- Container Terminal The Port of Varna has rail ferry services to Poti, Iliychevsk and Odessa and feeder container lines to Mediterranean and West European ports. Inception Report Annex 3 Part 2 Page 117 of 207

326 Figure 66: Rail ferry in the Port of Varna Road transport plays an essential role in the distribution of cargo from the port. Only 13% of cargo is shipped by rail. 100% of containers are trucked. The main destinations of containers from the port are Sofia and Plovdiv. There is a lack of competition in the truck service between Varna and the main container destinations in Bulgaria. For this reason the shipment prices are extremely high (the price for transporting one container from Varna to Sofia is ). Approximately 5km away from Varna East, construction of a new container terminal is planned. The planned annual terminal capacity is TEU. The quay length will be 800m, the berth depth 12,5m. The total investment will be 180 million. The financing for the construction of the terminal has been provided by Japan International Cooperation Agency (JICA). Operation of the terminal have to be tendered and will go under the concession contract. Main development projects for the modernisation and upgrade of Port of Varna: Building of passenger terminal with business-centre in the Port of Varna-East Building of container terminal on the North shore of the Varna Lake Building of grain terminal on the North shore of Varna Lake Building of liquid cargos terminal in Konstantinovo - South shore of Varna Lake Extension of container terminal Varna-West Building of liquid hazardous cargos terminal - Varna-West Ecological evaluation of General Plans Actualization of the Ports in the region Port of Bourgas Port of Bourgas is the second largest port in Bulgaria and is in close proximity to Greece and Turkey. Like Varna, Bourgas is certified under ISO 9001:2000. The existing facilities in the port are generally adequate for bulk commodities. The total quay length is 5,5km. The average depth is 15,5m. There are 72 cranes installed. 70 of them are in operation. The Port of Bourgas has developed the largest complex for bulk cargoes in Bulgaria. Total investment is US$190 million. Financing for the facility was provided by JICA. The terminal is for Page 118 of 207 Annex 3 Part 2 Inception Report

327 handling and storing bulk commodities: coal, coke, ores and concentrates etc. The facility comprises several portal cranes, grab gantry unloader type Ceretti Tanfani and state-of-the-art screw type coal unloader Siwertell, capable of handling 1,500 tonnes per hour. The transfer of coal is carried out by conveyor belts, stackers and reclaimers. Figure 67: Bulk cargo complex in Port of Bourgas At the terminal a wagon loading station is located. Special facilities for handling of oils, chemicals and ethanol are installed on berth. A pipeline connects the site with the tank farm, near to Terminal West. There are also a filling station for tanker rail cars and ethanol storage tanks in the vicinity. The port completed an ammonium nitrate facility, which is not in operation and has never been used. The real reasons are unknown. Inception Report Annex 3 Part 2 Page 119 of 207

328 Figure 68: Wagon loading station at the bulk cargo complex The container terminal is located at Terminal West. It includes two berths for container vessels with a maximum depth of 11m. The total area is approximately 60,000m² with 1,330 ground slots. The containers are stowed 3 high. The reefer installations include 60 plugs for such kind of containers. There are two multi-purpose 40t cranes using semi-automatic spreaders. The main customers of the container terminal are: MSC, Bulcon, ZIM, K-Line and Happag Lloyd. In 2008 the Port of Bourgas handled in total 4,6Mt of cargo (2007: 5,2Mt; 2006: 6,7 Mt) and TEU (2007: TEU). The prognoses of the port s management for 2009 are: 3Mt and TEU. The main source of containerised import traffic is China (60%). Only 65% of containers are trucked from port to different destinations (the main distribution destination is Sofia). 35% are shipped by block trains to Sofia and Serbia. In 1998 Bourgas put into operation a cold storage facility with the capacity of 10,000t. The total area is 7,000m². The warehouse area is 5,280m² with a cooling volume of 52,800m 3. The maximum allowable height of goods is 6.80m. Cold storage is designed for all kinds of deep frozen and chilled goods, requiring temperatures in the range -26 /0 /+17 C. HACCP system implemented. Page 120 of 207 Annex 3 Part 2 Inception Report

329 Figure 69: Cold storage facility at the Port of Bourgas In cooperation with JICA, the Port of Bourgas planned the construction of a new container terminal with the total annual capacity of TEU. The quay length of the terminal will be 550m with a maximum depth of 15,5m. The total investment for the terminal is 120 million. The construction works should start in 2010 and finish by Main development projects for the modernisation and upgrade of Port of Bourgas are: Expansion of Port of Bourgas: - Building of Terminal 2А - Building of new East pier - Building of new access channel Building of passenger terminal with business - centre in the Port of Bourgas East Building of container terminal in the Port of Bourgas Reconstruction and building of new infrastructure in Port Terminal Rosenets, Bourgas The expansion of the Port of Bourgas is financed according to a loan agreement between the Governments of Republic of Bulgaria and Japan. Sea ports - SWOT Analysis Strong sides Traditional cargo stream, which cannot be attracted from the competitors Free capacity Highly qualified personnel Built land and railway connections with the national road and railway network. Weak sides Insufficient specialization of the terminals Insufficient technical conditions of the ports installations and the reloading equipment Working after the old system, which does not comply with the new market requirements Inception Report Annex 3 Part 2 Page 121 of 207

330 Poor condition of the internal transport infrastructure Opportunities Completing the reform in correspondence with standards and practices of the EU Increase of the transit cargos through the territory of Bulgaria Concession of the port terminals Liberating and competition of the port services Modernization of the existing infrastructure and cargo processing installations Developing the transit European corridors 7, 8, 4, 9, TRACECA Improvement of the safety and security systems in the ports Threats Competition from the ports of Constantza and Solon Lack of investments in new infrastructure and port technologies Incomplete reform Air Cargo hubs Air cargo has much less importance for the Bulgarian transportation market than other transport modes. There are four international airports in Bulgaria. The biggest is Sofia Airport, which is the country s main air cargo hub. Plovdiv International airport is mainly used for charter flights for the ski resort of Pamporovo. The international airports of Varna and Bourgas are used for local flights from Sofia, as well as for charter flights in summer, serving the beach resorts on the Black Sea coast. In 2008 total air cargo turnover of Sofia Airport amounted to t, an increase of 7% over the previous year. In 2006 the airport put its new runway into operation, which is 3.600m long. New rapid and connecting taxiways are built additionally to allow 200 aircraft movements per hour at a high level of safety. The navigational aids installed on the new runway enable landing operations under low visibility conditions at category III of the ICAO standards. In the last 3-4 years the location of Sofia Airport has become the most popular site for international logistics providers, setting their warehouses and distribution centres there. Within 3-5km radius from the airport the facilities of DHL, UPS, Rhenus, Schenker, Orbit etc are located. There is also a railway access available, but not used at the moment. The location of Sofia Airport could be considered as a logistics park for Sofia. The prices of land are very high in comparison with other areas around the city. At the moment the location of Sofia Airport is acting as the most favourable territory for the development of distribution centres and warehouses. Air Cargo plays an insignificant role in this supply chain (apart from DHL and UPS). The preferred transport mode for the companies located around the airport is road. Analysis of Stakeholders in Freight Transport and Logistics Sector Ministries and Related Public Authorities Ministry of Transport The Ministry of Transport is responsible for transport policy; development and implementation of transport strategy; and implementation of the state investment policy in the field of transport. The Ministry is also responsible for implementation of the Strategy for the Development of Transport Infrastructure in Bulgaria by One of the main priorities of the transportation strategy is development of intermodal transport. Page 122 of 207 Annex 3 Part 2 Inception Report

331 Port Administration Executive Agency Port Administration is a corporate body of the Ministry of Transport. It consolidates regional divisions in Varna, Bourgas, Rousse and Lom. Its legal authority covers all civilian ports. It is responsible forort regulation and tariffs. Bulgarian Ports Infrastructure Co., with a director representing the Directorate in every Port, is in charge of the development and maintenance of infrastructure in the ports. Regional and Municipality Authorities Sofia Municipality is the biggest owner of real estate after the state. The municipality has the right to ownership of its property and is completely autonomous in deciding its use. In exercising its powers it does not require the approval of other bodies, and of state bodies in particular. According to the Local Self-Government and Local Government Act (LSGLGA) Sofia Municipality is an administrative and territorial unit with the status of a region. It combines selfgovernment of the community with the implementation of government policies for the development of the capital city. Customs Administration The Bulgarian Customs Administration is a centralized administrative structure, organized within the National Customs Agency (NCA) under the Minister of Finance. NCA is a legal body financed by the state budget. The Central Customs Directorate is located in Sofia. There are five Regional Customs Directorates located in the main cities of the country: Bourgas, Varna, Plovdiv, Rousse, Sofia. After Bulgaria s entrance into the EU the volume of customs bonded cargo has decreased greatlyly. The rest of the EU accounts for 90% of Bulgaria s imports. For this reason the Customs Administration has become less important. Generally customs in Bulgaria is functioning without any serious troubles, except that excessive time is needed for customs clearance procedures in the terminals and ports. Logistics Service Providers The market for logistics services in Bulgaria is very fragmented. Mainly international logistics operators are able to offer their customers complex logistics services and third party logistics. The national logistics companies are mainly concentrated on the typical logistics services: road freight, sea freight and rail freight. Only warehousing and distribution are provided by certain national logistics companies. The main problem is a lack of logistical know-how by the national logistics providers and lack of investment in logistics infrastructure and modern technology. Freight Forwarding Companies The core business of the Bulgarian freight forwarding companies is import/export logistics. They are also offering customs clearance services. The focus of these companies is on road transportation. Most national freight forwarder own private fleets of trucks. The warehouse and storage facilities are owned and operated only by certain companies. The prices of services of freight forwarders in Bulgaria are usually very high. The main reason for this is a lack of competition in the transportation market. Operators of Transport Infrastructure The main operator of the infrastructure in railway terminals and ports is the Bulgarian State. The main operator of the railway terminals is the National Railway Infrastructure Company (the daughter company of Bulgarian State Railways, BZD). Bulgarian Ports Infrastructure Company, which is a corporate body of the Ministry of Transport of Bulgaria, is responsible for the infrastructure in the Ports. According to the plans of the Ministry of Transport the operations of railway terminals should be given under concession contracts. The same is planned for container terminals in the ports. The main infrastructure in the Bulgarian ports (railway, berth Inception Report Annex 3 Part 2 Page 123 of 207

332 etc.) will stay under the responsibility of the Bulgarian Ports Infrastructure Company. The Bulgarian Airports are operated mainly by private companies. The operator of the airports of Varna and Bourgas is the German company Fraport. Operators of Logistics Nodes There are several newly developed logistics parks in Sofia. They have usually the territory of 30-40ha and are owned by private logistics companies, retailers or real estate firms. There is no operator in this logistics parks. The companies located there are acting independently. Shippers and Consignees The largest shippers in Bulgaria are Maersk, MSC, ZIM and Happag Lloyd. They are operating their container ships in the ports of Varna and Bourgas. Railway Operators The main railway operator is the Bulgarian State Railways, which was split into three different companies: BDZ Passenger Services Ltd, BDZ Freight Services Ltd and BDZ Infrastructure Company. In recent years different private railway operators entered the market. The main ones are: Bulgarian Railway Company, Bulmarket and Unitranscom. Entering of Romanian and Austrian railway carriers in Bulgaria has resulted a big competition on the market. Romanian carriers have most advantages particularly on the Varna-Constanta rail connection. There are no regular block train services between Varna/Bourgas and Sofia at this moment. The most important directions for the implementing block train services are: Varna-Sofia, Bourgas-Sofia, Sovia-Plovdiv. Missing Links and Bottlenecks in the Transport and Logistics Network The main bottleneck in the Bulgarian transportation sector is the relatively underdeveloped railway network and lack of intermodality. The existing rail network in Bulgaria is lacking the network effect, which is the one of the main features of a sophisticated transport system. Due to the insufficient connection and coordination of rail, road and sea transport the synergies are not being realised. Road infrastructure has to be improved and capacities extended. In particular road sections along the Trans-European Transport Corridors and road connections between Sofia and the Black Sea ports are important for smooth operations. Due to the lack of optimized railway routes and transhipment connections between the Bulgarian Black Sea ports, main industrial cities and high density areas, the prices of transport services are extremely high. The reason for this is also a lack of competition in the market. This factor is a serious barrier to Bulgaria s attractiveness as a logistics location. For the optimization of routes between the main logistics locations it is necessary to have regular block trains and transshipment services, with reasonable prices. Absence of the logistics centres, lack of logistics parks and intermodal terminals are problems that must be addressed if a powerful logistics network is to be created. They give the possibilities to their customers (logistics providers, retailers, distributors, industry, etc.) to optimize supply chains and save costs. It is very important to choose the right location for these facilities. The existing or planned intermodal terminals and logistics parks are mostly located in the city centres or very close to them. There is no possibility for future expansion, which will be an obstacle for the development of high-capacity logistics chains and for the attraction of global players. On the other hand it will have a negative impact on the environment. Page 124 of 207 Annex 3 Part 2 Inception Report

333 Conclusions and Initial Recommendations The interviews with the main stakeholders in the transportation sector and visits to facilities made clear that there is a need for an International Logistics Centre (ILC) in Bulgaria. Development of an ILC in Sofia is most necessary. There are several factors determining a logistical necessity of ILC in Sofia. Sofia is the largest Bulgarian city with nearly 1,5 million population and the major industrial centre. The Bulgarian capital is located at the crossroads of European transport corridors. Three Trans-European Transport Corridors cross the city: IV, VIII and X. Using regular block trains and transshipment services to the Ports of Varna and Bourgas the routes to the Bulgarian Black Sea ports can be optimized and sea freight integrated in the logistics network of ILC Sofia. The bottleneck in container handling and logistics operations in and around Sofia is being addressed by the Bulgarian Government and the private sector. The Ministry of Transport and Bulgarian State Railways identified a plot of approximately 73ha for the development of an intermodal terminal. The territory is approved by the Municipality of Sofia and is integrated into the Sofia Master Plan. Advantages: Planned location has good connectivity to road and railway junction. Weaknesses: It s located very close to the city centre. Expansion possibilities are very limited. Land price per m² is very high. Implementation of an ILC at this location might have a negative impact on traffic in the city as the location is situated within the city limits. TheBulgarian Association for Freight Forwarders favours a location for the development of storage facilities and logistics installations just outside of Sofia City, adjacent to the ring road, approximately 2km away from the railway shunting yard and close to two main highways (to Belgrad-Zagreb-Vienna, corridor X, and to Northern Romania). There is area for expansion of around 50ha both outside and inside the ring road. Warehouses and retail centres of the different companies (Metro, Gorenjie, Prakticer etc) are located close by, which are creating a natural logistics and trade park around the territory. Advantages: Good connectivity to rail. Proximity to the highway (2-3km). Good expansion possibilities, close to the warehouses and trade centres. Weaknesses: Large number of different land owners and very difficult land acquisition. Investment needs in the road section, connecting the plot with the central road connection of the city. Furthermore, warehouses of leading logistics companies are mushrooming in the area around Sofia Airport. The airport location can be considered as a logistics park for Sofia already. Advantages: Excellent connectivity to the road and air. Proximity to the potential clients (3PL providers, wholesalers and retailers). Possibility for future expansion. Weaknesses: Relatively large investment in the rail connection. Extremely high land prices. In the long term, locations for warehouse and logistics complexes beyond the city limits will have a competitive advantage in comparison with complexes within the city (lower land prices, better possibilities for expansion, less burden on the traffic in the city). Inception Report Annex 3 Part 2 Page 125 of 207

334 Page 126 of 207 Annex 3 Part 2 Inception Report

335 1.2.2 Romania Background Information Introduction Romania is situated in south-east Europe bordering Bulgaria, the Republic of Serbia, Hungary, Ukraine, Moldova and to the east the Black Sea. Romania has a favorable geographical location, allowing it to connect west and central Europe with the Near East, West and Central Asia and China; and also to connect the north and south of Europe. Four Trans-European Transport Corridors (corridors ІV, VІІ, VІІІ and ІХ) pass through Romania, which make the country a natural transit hub for Eastern Europe and the Black Sea region. Current Economic Situation The global financial and economic crisis has negatively influenced Romania s economy. After healthy growth in the first three quarters of 2008, Romania s economy slowed significantly in the last quarter of 2008 and in first quarter The economic slowdown reduced external demand and affected the abilities of Romanian companies to export. According to statistics from the Romanian National Statistical Institute, Romania's GDP increased by 6.7% in 2008, slower than the 7.5% growth recorded in The Romania Finance Ministry, Central Bank and IMF all forecast about 0% growth of Romania GDP in Inception Report Annex 3 Part 2 Page 127 of 207

336 Current Situation of Freight Transport and Logistics Sector General Overview The Romanian transportation and logistics sectors is undergoing immense changes. The importance of logistics is increasing. The entry of international manufacturers and retailers into the Romania market has resulted in growing demand for complex logistics services in the country. International logistics providers DB Schenker, DP World, AP Maersk, K&N and DHL have already entered the Romanian market and are providing contract logistics services. The market continues to be dominated by 2PL and 3PL providers and fast-moving consumer goods (FMCG) retailers and distributors. Usually the Third Party Logistics (3PL) services are provided by international logistics providers. Due to the relatively underdeveloped railway system and inflexibility of railway services, road transport took a greater share of the freight task in recent years. Trucks are clearly the preferred way to move goods around Romania and to Western Europe. The Romanian freight transport market is very well developed. The National Union of Road Hauliers (UNTRR) has 13,000 members, mostly small and medium sized national freight forwarders concentrating on normal transportation services. It is a typical truckers association, representing and defending its members interests, training their personnel according to ADR Agreement requirements and providing TIR carnet services. UNTRR members work mainly in EU Countries (about 90%) as well in Moldova and Ukraine. They generally avoid travelling to Russia and other CIS countries because of difficulties associated with customs and other border procedures. The Romania transportation market has suffered a 25-30% decline in the first quarter of 2009 because of the global financial and economic crisis. Logistics Performance Indicator Due to the World Bank logistics performance the country is ranked 51, being four positions better than Bulgaria, but with huge potential for improvement in domestic logistics sphere. The rank consists of the following components: Customs rank 56 Infrastructure rank 50 International shipments rank 35 Logistics competence rank 52 Tracking & tracing rank 56 Domestic logistics costs rank 123 Timeliness rank 66 Analysis of Transport Infrastructure Modernization of the transport infrastructure in Romania is a main condition for its successful integration in the European transport system. It is the one of the main factors to strengthen the country s attractiveness and competitiveness. For the sustainable development of the transport infrastructure the Ministry of Transport of the Romania is preparing the Romania Transport Strategy, in which is included a section on logistics centres. Until now Romania has no legal basis for the development of public logistics centres. One of the main tasks of the Romanian Government with regard to financing the infrastructural projects is to create better conditions for strengthening the role of the private sector. This Page 128 of 207 Annex 3 Part 2 Inception Report

337 should include creating opportunities for various forms of public-private partnership (PPP). The trend is to improve and develop ports, airports and highways by giving them on concession. Road Network Roads around Bucharest and main links to the Port of Constantza are well connected with the national and European road network. The connection with the Pan-European Transport Corridor No.IV has a strategic importance, linking the Port of Constantza with the landlocked countries of Central and Eastern Europe (see Figure 70 below). There is a permanent concern for the upgrading of the port road network and the enhancement of road traffic inside the Port of Constantza. Trucks benefit from facilities offered by the Port of Constantza, ensuring a fast and flexible door-to-door transport of all kinds of cargo. The A2 motorway, nicknamed the Sun's Motorway (Autostrada Soarelui in Romanian) is a partially built motorway which will, upon completion, link Bucharest to Constantza. Construction began in the 1980s. The first section Fetesti-Cernavoda (about 18km) opened in This section includes the complex system of motorway and railway bridges and viaducts over the River Danube and one of its branches at Cernavoda. As of August 2007, 152 km of the motorway's total 224km length are finished and operational, from Bucharest to to Cernavoda. Completion to Constantza is due in Another motorway links Bucharest with Pitesti city (117 km) on Transport Corridor No. 4. The main targets of the future development of road infrastructure, included in the Romania Transport Strategy (under preparation) are: Construction of the Romania highway system, which should link Constantza Bucharest - Hungarian border. Reconstruction and rehabilitation of road sections along the Trans-European transport corridors. Improvement and standardization of the transport-operational parameters of the Romania road network through reconstruction and rehabilitation. Inception Report Annex 3 Part 2 Page 129 of 207

338 Figure 70: Pan-European Transport Corridors in Relation to Romania Railway Network The railway network is extensive throughout the country, with multiple cross-border connections 20 (see Figure 71 below). It is owned and operated by the state-owned railway company CFR 21. The technical condition of the railway is relatively underdeveloped and the level of maintenance is low. Renovation of the line between Bucharest and Constantza is now under way. The railway network of the Port of Constantza connects with the national and European railway network system, Constantza being a starting and terminus point for the Pan- European Transport Corridor No. IV. Round-the-clock train services carry high volumes of cargo to the most important economic areas of Romania and Eastern Europe, the Port of Constantza being also an important TRACECA node, providing a connection between Europe, the Caucasus and Central Asia. Lack of intermodal infrastructure is one of the main problems of the Romanian transportation system. Technology and equipment in the existing railway intermodal terminals are generally outdated. Photos of the CFR Marfă terminals at Bucharest Sud and Bucharest Progress are shown in Figure 72 to Figure Indicated in Figure 71 by a broad arrow-head symbol. 21 Full name: Compania Nationala de Cai Ferate CFR SA. Page 130 of 207 Annex 3 Part 2 Inception Report

339 Constantza Port s internal railway system is quite extensive, with seven railway stations and two marshaling yards. Every port terminal has direct access to the railway system. Every day shuttle trains carry containers to national destinations for just-in-time delivery. In view of the rail traffic growth in the south part of the Port of Constantza and the estimated cargo growth traffic, N.C. Maritime Ports Administration S.A. Constantza is promoting two projects to develop railway infrastructure within the port: Development of railway capacity in south area of Constantza. Development of the railway system in the maritime-river sector (berths ). Figure 71: Romanian Railway Network Inception Report Annex 3 Part 2 Page 131 of 207

340 Figure 72: CFR Marfă Container Terminal Bucharest Sud (1) Figure 73: CFR Marfă Container Terminal Bucharest Sud (2) Page 132 of 207 Annex 3 Part 2 Inception Report

341 Figure 74: CFR Marfă Intermodal Terminal Bucharest Progress (1) Figure 75: CFR Marfă Intermodal Terminal Bucharest Progress (2) Inception Report Annex 3 Part 2 Page 133 of 207

342 Figure 76: CFR Marfă Intermodal Terminal Bucharest Progress (3) Inland Waterways Romania has a good inland waterway system, which includes networks of natural and artificial lakes. The technical parameters of the Poarta Albă Midia Năvodari Channel are presented in Table 10 below as an example. This channel joins the Danube Black Sea Channel at km 35, providing river access to the ports of Midia and Luminiţa. Table 10: Albă Midia Năvodari Channel Technical Parameters Total length km Width (at the bottom of the transversal section) m Maximum depth 5.5 m Sea gauge (current) 4.5 m Double locks (twins) 2 (Ovidiu, Năvodari) Maximum barge convoy - tonnage 3,000 t - number of barges 1 x 3,000 t - maximum length 120 m - maximum width 11.5 m - sea gauge 3.8 m River-going or sea-going ships 2,000 DWT Class of waterway (EEC UNO classification) Class V Number of inland ports 2 Page 134 of 207 Annex 3 Part 2 Inception Report

343 Analysis of Main Logistics Nodes Freight Terminals, Bucharest The state-owned railway company CFR Marfă operates two freight terminals are on the outskirts of Bucharest: Bucharest Sud Container Terminal has a land area of 2.5ha; two railway lines, each 300m long; two 32t capacity stacker cranes; space to store TEU; and road access. It has the capacity to handle more than 3,000 containers per year. Infrastructure and superstructure are in need of renovation. The location is good (close to the public railway network and close to Bucharest ring road) but nearby land has been privatized which, although the land remains unused, constrains future expansion. The terminal could be integrated into the intermodal terminals system, but not improved to ILC standard. Bucharest Progress Intermodal Terminal is 20km south-west of Bucharest Sud. It has a land area of 5ha and one 32t capacity crane. The condition of infrastructure and superstructure require renovation, as at Bucharest Sud. Bucharest Progress is now considered a reserve terminal and mainly used to store scrap and other goods. The terminal location is favourable, with good access to the public railway network and proximity to the road network (about 1,5km from Bucharest ring road). The terminal could be integrated into the intermodal terminals system. Sea Ports Constantza Port is one of the biggest ports in Europe. Traffic statistics are appended. The port s main characteristics are presented in Table 11 below. Table 11: Constantza Port Characteristics Port territory 1,124 ha Docks 2,596 ha Length of the quay 29.8 km Number of berths 145 Maximum depth in berth 19 m Maximum capacity of the ships 250,000 DWT Cargo handling capacity 120 Mt/year There are also two satellite ports to Constantza, each about 30km distant: Midia (to the north) and Mangalia (to the south). Both have a maximum depth of 9m. In 2004 Midia handled 1.1Mt of cargo (livestock over a dedicated wharf, crude oil, petroleum products, natural gas and minerals including iron ore). In the same year Mangalia handled 209 thousand tons of cargo (petroleum products and construction materials including cement). Foreign vessels are barred from certain parts of Mangalia Ports. Plans of Constantza Port and its satellites appear in Figure 77 below. In Figure 78 there is a general view of the port. Constantza Port has specialised terminals for general cargo, ores, cereals, chemical products, petroleum products, Ro-Ro, ferries, building materials, containers, refrigerated products and bitumen. Their technical specifications, capacities and operators are presented in the Romania appendix at the end of Annex 3, Part 2. Four container terminals operate in the Constantza Port, with strongly growing throughput over the last 10 years. The terminals are operated by Socep, DP World (Constantza South Container Terminal), Umex and APM Terminals. Demand growth has necessitated the development of new container handling facilities. Consequently a new container terminal became operational recently in the south part of Constantza Port-Pier IIS, being designed to Inception Report Annex 3 Part 2 Page 135 of 207

344 accommodate Post-Panamax container ships with an annual capacity of 325,000 TEUs in the first stage and up to 1,000,000 TEU's in the final stage. The terminal is operated by Constantza South Container Terminal. Constantza Port offers users the usual range of services, including a traffic tracing and management system, pilotage, towage, berthing/unberthing of ships, electricity and water supply, waste disposal and emergency response to fire and pollution. Constantza Port is state-owned. Together with its satellite ports it is managed by NC Maritime Ports Administration SA Constantza, which acts as the port authority for all Romanian seaports. It is responsible for providing high-quality and competitive services to the ports customers, as well as high levels of security, safety and environmental conditions. It engages in port infrastructure development, dredging and maintenance work. However, all port commercial activities are undertaken by private companies: stevedoring, stuffing and re-stuffing, towage, piloting and other services. And the Maritime Authority is responsible for navigation safety, PSC, FSC. Figure 77: Plans of Constantza Port and Satellite Ports Midia and Mangalia Note: These plans are not presented to the same scale. Constantza Port has a land area of 1,124ha, 156 berths with total quay length of 29.8km. The comparable figures for Midia are 234ha, 14 berths and 2.2km; and for Mangalia they are 27.5ha, 4 berths and 0.5km Source: Aries Shipping Agency website Page 136 of 207 Annex 3 Part 2 Inception Report

345 Figure 78: General View of Constanza Port Constantza Port is connected to the Pan-European Corridor No.VII (the River Danube: see Figure 70 above) through the Black Sea Danube Canal. The Canal is 64.4 km long and 90m wide and has a water depth of 7m with 17.5m clearance under bridges. River traffic through Constantza Port in 2008 was almost 11.4 million tonnes, the dominant cargoes being coal, ore, cereals and steel products. The railway network connects Constantza Port (and each of its terminals) with the national and European railway network systems. The internal road network connects via ten separate port gates to the national and European road networks. The international airport Mihail Kogălniceanu is situated 20km from Constantza Port, promoting regional development. Mihail Kogălniceanu has a 3,500m concrete runway; can accommodate wide-bodied aircraft; and is serviced by five scheduled airlines and thirteen charter airlines. It has also been a US military base since 1999, being used for the operations in Iraq and subsequent counter-insurgency operations. The national pipeline network is connected to Constantza Port, affording direct access to the main Romanian refineries. Constantza Port is located at the crossroads of trade routes linking the markets of the landlocked countries of Central and Eastern Europe with the Transcaucasus, Central Asia and Far East. It is the main Romanian port and ranks among the top ten European ports. Its favourable geographical position and importance are recognized by its inclusion in two Pan- European Transport Corridors: Corridor VII (Danube inland waterway) and Corridor IV (railroad). It is no exaggeration to say that its hinterland includes Austria, Bulgaria, Hungary, Moldova, Slovenia, Germany, the Czech Republic, the Serb Republic and Croatia. Regular shipping services to Constantza Port are provided by the state-owned CFR Marfă ferry company, created 25 years ago to operate Ro-Ro railway ferries. It has two Ro-Ro vessels, Eforie and Mangalia, each with a capacity of 1,680 loading metres (80 trucks) and space for 12 passengers. They work the Constantza Derince (Turkey) route and make two voyages per month. The standard tariff for a crossing is 40 per linear metre, which is equivalent to rather less than 2 per truck-kilometre. Inception Report Annex 3 Part 2 Page 137 of 207

346 There are plans for expansion and upgrading of Constantza Port and associated infrastructure: Improvement of operating conditions inside the port, by diminishing wave impact in the port basins, improving navigation safety. The Feasibility Study & Technical Project were drawn up by SC IPTANA in 2002; a fully revised version was delivered in April Estimated cost = 122 million. Financing: EU structural funds and State Budget sources. Extension of the railway system in the river-maritime area of Constantza Port. Purpose: improvement of railway operations in the river-maritime area by building a systematized railway complex. In the first stage new railway lines will be built to match the 2020 traffic forecast. Estimated cost of the first stage = 15 millions. Infrastructure on Pier III South. New container terminal to be built with container handling capacity of 700,000 TEU/year. This will entail reclaiming 34ha of land from the sea. Estimated cost of the project = 67 millions. Infrastructure on Pier IV South. After completing the infrastructure new specialized terminals will be created, allowing SuperPost Panamax vessels to be accommodated. Stage I 35ha = 118 million, Stage II 55ha = 155 milllion, Stage III 70ha = 140 milllion. There is ample space for further port expansion towards the south. Such expansion is envisaged as Constantza s role as a major European intermodal transport node grows, the motorways of the sea concept develops and private investors (such as DP World) extend their activities. There are some obstacles to the port s development, however. Chief among them are: Absence of a by-pass from CSCT to the highway, including a new bridge over the Danube channel as well as increased capacity of the rail link. The condition of the CFR Marfă ferries, which are both more than 25 years old. They have a maximum speed of only 10 knots (compared to new ships for which 16.5 knots is normal) and they consume about 1t of fuel per hour 22. Personnel costs are high, with 150 employed in the office and a crew of 33 on each ship. The company in a poor financial situation. Air Cargo hubs Air cargo has much less importance for the Romania transportation market than other transport modes. There are seven international airports in Romania with annual cargo throughput totaling less than 30,000t. The tonnages for 2008 were: International Airport Henri Coanda Bucharest t International Airport Bucharest Baneasa-Aurel Vlaicu t International Airport Mihail Kogalniceanu Constantza t International Airport Traian Vuia Timisoara t International Airport Arad t International Airport Cluj- Napoca t International Airport Iasi t The biggest Romanian airport is International Airport Henri Coanda Bucharest. It is the main air cargo hub for Romania, as the above figures show. In the last 3-4 years Bucharest Airport has become the most popular location for international logistics providers, siting their warehouses and distribution centres there. Within a radius of between 3 and 8km from the airport the facilities of DHL, UPS, Rhenus, Schenker, Orbit and others are located. There is also railway access. 22 Fully loaded, this is equivalent to about 0.8 litre per truck-kilometre. Page 138 of 207 Annex 3 Part 2 Inception Report

347 Analysis of Stakeholders in Freight Transport and Logistics Sector Ministries and Related Public Authorities Ministry of Transport Ministry of Transport Romania, General Directorate for Infrastructure and Road Transport is responsible for the development of logistic centres. It is currently preparing the Romania Transport Strategy, which includes a section on logistics centres. It is understood that this aspect of the strategy is being given high priority. Until now Romania has no legal basis for the public logistics centres development. Maritime Administration The executive agency is the Maritime Administration, which is a corporate body of the Ministry of Transport. It consolidates regional divisions in Constantza and river ports. The Maritime Administration is responsible for navigational safety in Romania waters; search and rescue; environmental protection; and other conventional matters. Its legal authority covers all civilian ports. Port regulation and tariffs are under the responsibility of the Port Administration. Regional and Municipality Authorities Bucharest Municipality is the biggest owner of real estate after the state. The municipality has the right to ownership of its property and is completely autonomous in deciding its use. In exercising its powers it does not require the approval of other bodies, and of state bodies in particular. Customs Administration The Romanian Customs Administration is a centralized administrative structure, organized within the National Customs Agency (NCA) under the Minister of the Interior. NCA is a legal body financed by the state budget. The Central Customs Directorate is located in Bucharest. There are a number of Regional Customs Directorates located in the main cities of the country including Constantza, Midia and Mangalia. Generally the customs system in Romania is functioning without any serious troubles, though there are some problems concerning the time needed for customs clearance procedures at terminals and ports. Logistics Service Providers The market for logistics services in Romania is still developing. Mainly international logistics operators are able to offer their customers complex logistics services and third party logistics. The national logistics companies are mainly concentrated on the typical logistics services: road freight, sea freight and rail freight. Warehousing and distribution are provided by national and international logistics companies. Logistic Park is a typical ILC located in Constantza Industrial Zone. It is owned by CELCO Company (a group of private companies engaged in logistics centre management). It is relatively small, with an area of about 15 ha and an original investment of about 13 million. 35 logistics service providers rent land and operate within Logistic Park. The rentals depend on usage: 1.50/m 2 /month for storage; 3.00/m 2 /month for production/manufacturing activities; 8.00/m 2 /month for offices; /m 2 /month for multi-purpose areas of 2,000 5,000m 2 ; and /m 2 /month for multi-purpose areas of at least 10,000m 2. Inception Report Annex 3 Part 2 Page 139 of 207

348 The biggest operator is the the Coca-Cola Company, which rents about 13,000m 2, of which 40%, is used for storage, 4% for offices and the remainder for manufacturing. The main problems are (a) national logistics providers lack of logistical know-how and (b) lack of investment in the logistics infrastructure and modern technology. Freight Forwarding Companies The core business of the Romania freight forwarding companies is import/export logistics including customs clearance services. The focus of these companies is on sea, road and railway transportation. Most national freight forwarders have their own fleets of trucks. The warehouse and storage facilities are owned and operated by state organisations such as CFR Marfă, road transport companies and international companies. UNTRR member companies using intermodal terminals for example in Constantza port and the Arat terminal close to the Hungarian border have an interest in ILC development. Inland Waterway Shipping Services Several shipping lines provide container services on the inland waterways. The principal routes are Constantza Giurgiu and Constantza Belgrad. Capacity on the Constantza Giurgiu route is 300 TEU/week; current demand is 200 TEU/week. Operators of Transport Infrastructure The main operator of transport infrastructure is the state-owned railway company CFR SA which is responsible for the rail infrastructure. Separate but related train operating companies are responsible for passenger and freight train services; see below. Informatică Feroviară is a commercial company which provides IT infrastructure and application services for the rail sector. Autoritatea Feroviară Romănă (Romanian Rail Authority, AFER) regulates the rail sector. It is subordinate to the Ministry of Transport. Operators of Logistics Nodes There are several newly developed intermodal logistics centres in Bucharest and Constantza. Logistics Park in Constantza Industrial Zone is typical for Romania. Port terminals in Constantza, especially container terminals, provide logistics services and have organisational structures. According to CFR Marfă representatives in Bucharest there are at least six intermodal terminals which work with containers: CFR Marfă itself has three (Bucharest Sud, Bucharest Progress and Bucharest Noi) and there are three private terminals: Van der Vlist (Holland) in the southern part of Bucharest just close to the ring road; Sud Terminal inside ring road not far from Bucharest Sud; and a new one close to the center of the city. Some industrial companies that have recently established south of Bucharest have set up their own freight handling and storage facilities. Outside the ring road there is ample land which is not yet occupied. Most is privately owned and much is currently for sale. Shippers and Consignees The largest shippers in Romania are DP World, MSC, Maersk, ZIM and Happag Lloyd. They are operating their container ships to/from Constantza port. Page 140 of 207 Annex 3 Part 2 Inception Report

349 Railway Operators CFR Călători operates passenger trains on the track for which CFR SA is responsible; and CFR Marfă operates freight train services. CFR Marfă s role includes operation of railway ferries, as discussed above. AFER regulates the whole railway sector, comprising infrastructure as well as the operating of trains and related services. Missing Links and Bottlenecks in the Transport and Logistics Network The main bottleneck in the Romania transportation sector is the relatively underdeveloped railway network and lack of intermodality. The existing rail network in Romania is lacking the network effect, which is the one of the main factors in the development of a sophisticated transport system. Because of poor connection and coordination of rail, road and sea transport the potential synergies effect are not fully realised. Well located logistics centres and intermodal terminals have a crucial role to play in this regard. Road infrastructure, especially in mountain regions, needs to be improved and capacities expanded. Of particular importance are road sections along the Trans-European Transport Corridors and road connections between the Hungarian border and the Black Sea (Constantza). More specifically, the 2-lane road between the small village of Besarabi and Highway A2 is a serious bottleneck. Conclusions and Initial Recommendations Our interviews with the main stakeholders of the transportation sector and visits to facilities made clear that there is a need for and strong interest in the development of logistics centres in Romania. The Locations where logistics centres are most necessary and most likely to succeed are Bucharest and Constantza. Of secondary interest are Arad, Iasi and Braila. These five locations are marked on the map in Figure 79 below Inception Report Annex 3 Part 2 Page 141 of 207

350 Figure 79: Potential Logistics Centre Locations in Romania Potential logistics centre location There are several factors that point to a location close to Bucharest: Bucharest is the largest Romanian city with a population of nearly 3 million, and the leading industrial centre with the highest income level. It is located at the crossroads of three Trans-European Transport Corridors. The main manufacturers, international retailers and leading logistics operators are already located in Bucharest. Bucharest has good tri-modal access with road, rail and air. Using regular block train and transshipment services to Constantza Port, the inland waterway routes to the Black Sea ports can be used to integrate sea freight into the logistics network. Bottlenecks in container handling and logistics operations in and around Bucharest are being addressed by the Romania Government and the private sector, which is now starting to develop. The ideal location would be close to the ring road and Motorway A2. Constantza Port is also a strong contender for development of logistics services: It is the leading Black sea port in terms of cargo throughput, vessel turnaround time, transit cargo volumes, organizational structures, tariff system and clarity of regulations. (These claims are supported by ISO certification, ISPS, EHS prevention and the quality, completeness and nature of services provided to calling ships, stevedores, shippers, agents and other port users.) Page 142 of 207 Annex 3 Part 2 Inception Report

351 The Port is supported by two of the biggest Container Terminal Operators in the world (DP World and APM Terminals) and stands in the front line of the EU transport policy and regulations implementation process. Having become a full member of the European Sea Ports Organization, Constantza Port is making better use of the European know-how and becoming directly involved in European legislative initiatives on port related matters. The ideal location would be between Motorway A2 and the railway, about 8km to the west of Constantza City. The secondary locations are characterized as follows: Arad is in the west of the country near the Hungarian border. The town has a population of only 200,000, but it is relatively prosperous with over 40% of employment in the industrial sector. It is already recognized as an important transport node. Iasi is in the north-east close to the Moldovan border. The population exceeds 300,000 and it is an important educational and industrial centre, with metallurgy, pharmaceuticals, food processing and textiles. Moldovan Railway runs direct services to its two railway stations. Galati and Braila both lie on the River Danube in south-east Romania, close to the borders with both Moldova and Ukraine. Galati has a population of about 300,000 and the country s largest iron and steel plant and largest shipyard (on the River Danube). Braila s population is rather smaller at about 200,000, with large grain-handling facilities and metal, textile and food-processing industries. Both towns are close to the Giurgiulesti International Free Port (GIFP) in Moldova. Inception Report Annex 3 Part 2 Page 143 of 207

352 Page 144 of 207 Annex 3 Part 2 Inception Report

353 1.2.3 Turkey Source: UN Map Database Background Information Introduction Turkey is located in South-eastern Europe and South-western Asia. It is an important regional player and a bridge between East and West, The country is bordering the Black Sea, between Bulgaria and Georgia, and the Aegean Sea and the Mediterranean Sea, between Greece and Syria. Turkey shares 779 km of border with TRACECA countries: 268 km with Armenia, 9 km with Azerbaijan, 240 km with Bulgaria, and 252 km with Georgia. Turkey is rich in natural resources such coal, iron ore, copper, chromium, antimony, mercury, gold, barite, borate, celestite, emery, feldspar, limestone, magnetite, marble, pumice, pyrites, and clay. The country has rich hydropower resources and arable land. According to the World Bank statistics the total population counted m people. The estimate suggests that population will reach 76,8 m by July Over 73% of its population lives in urban areas. The country has 81 administrative provinces. Turkey's dynamic economy is a complex mix of modern industry and commerce along with a traditional agriculture sector that still accounts for more than 35% of employment. The largest industrial production is textiles and clothing. Other sectors, especially the automotive and hitech industries, are significant within Turkish GDP composition. Turkey 's economy is among the world's 20 largest, with a GDP of around USD 400 billion in Agriculture accounts for Inception Report Annex 3 Part 2 Page 145 of 207

354 about 11% of its GDP, industry for 29.5%, and services for 59.5%. Turkey today is the main economic player in the Near- and Middle East and for the Caucasus. The country has a strong and rapidly growing private sector. However, public structures still play a major role in industry, banking, transport, and communication. Асcording to World Trade Organisation (WTO) statistics, both export and import volumes where growing in , constituting 0.77% and 1.19% share in the world s exports and imports respectively. In 2007, the economy s total export comprised agricultural products (9.4%), fuels and mining products (10%), and manufactured goods accounted (79.6%). The import structure by main commodity groups was dominated by manufactured goods (22.7%), followed by fuels and mining products (22.7%) and agricultural products (5.9%). The major trade partners are European Union (57.2 % in export and 40.4% in import), followed by Russian Federation (4.4% and 13,8%). Other important trade partners for export are the United States (3.9%) and United Arab Emirates (3.0%). Turkey had imported 7.8% from China and 4.8% from the United States. The commercial services amounted 0.86% in country s exports and 0.46% in country s import. The main services items were transportation 21.8% in export breakdown and 46.1% in import, followed by travel services 65.5% and in exports and 30.9% in imports. Current Economic Situation In 2007 and 2008, financial markets in Turkey reflected the significant domestic political turmoil influenced by various reasons. Despite economic fundamentals are sound, the Turkish economy is likely to face more negative economic indicators in 2009 as a result of the global economic slowdown. The International Monetary Fund (IMF) forecasts a 1.5% decline in the Turkish economy in 2009 before recovering to 4,25% per cent in 2010, in line with the global recovery. Turkish manufacturing industry is exposed to the world trade, especially to Europe, where, the main trade partners are slipping into a deep recession. Notably motor vehicle exports that increased dramatically from , making Turkey one of the leading manufacturing bases for the European market, have experienced a negative shock in 2008, with a decline by 60.3% in January, 2009, followed by a 55.7% % contraction in electronics. These are Turkey's most export-oriented sectors and classic logistics centre cargo in terms of transportation. Current Situation of Freight Transport and Logistics Sector General freight transport sector development: Turkey is one of the major transit points and destinations for freight, having a substantial transport and logistics demand generated by industry and private consumers. The country may provide logistics services to neighbouring regions in EU, Balkans, Middle East, Russia Caucasus, the Black Sea and Mediterranean countries. Turkey is a part of IV and X Pan-European corridors. The plans made in 2008 were aimed at reduction of congestion, particularly in Istanbul, and at crossing the Bosporus. Projects such as the Bosporus tunnel construction will offer a missing link between Turkey's two continents. The overall economic recession has slowed down the pace of these projects, but did not put them on hold. The development of the Turkish transport sector goes hand in hand with growth of export oriented industrial production. The export of agricultural production such as vegetables and citrus fruits to Western Europe and CIS countries also pushes the development of freight transport.. The trucking industry used this challenge to generate business. Today, Turkey has the largest fleet of trucks in the region. With its registered heavy trucks it can reach all markets in Page 146 of 207 Annex 3 Part 2 Inception Report

355 Europe and CIS. With several links from Turkish ports to TRACECA ports at Black Sea or to South and Western European ports with RoRo ships, the Turkish transport industry has made a huge step towards intermodal solutions and partly realised Motorways of the Sea concept. The railway sector has so far not managed to cope with requirements of modern transport logistics, the reason being the missing link for Bosporus crossing and the strong competition of trucking industry. The Government of Turkey is working on the subject. Block trains have been introduced both for domestic and international destinations. The Bosporus crossing by rail will be possible from 2011 on. The very ambitious tunnel project from Europe to Asia is nearly completed, The line will link the European railways with Turkey and after bogie changes with the railways of the former USSR countries via the railway link Kars to Ahalkalaki in Georgia. Further to that, the Government is realising a so-called Logistic Villages Programme to offer all kind of logistics services at 12 locations throughout Turkey that have a railway connection. Development trends: The Turkish freight transport report (2008) by Business Monitor international suggests the following trends for the five-year forecasting period 23. By the end of 2013, sea freight is anticipated to be the largest transport sub-sector, accounting for approximately 50% of all shipments, compared with 43% for road freight. By transport mode, fastest growing is likely to be airfreight with 9.3% annual expansion rates, followed by maritime cargo at 6.6%; road haulage at 5.1% and rail freight at 2.7%. According to Business Monitor international forecasts, in the transport and communications sector will continue outpace the economy as a whole in value terms. The trend is likely to be kept even under the current economic recession. The total value of transport and communications GDP is forecasted to represent 11.4% of Turkey s GDP in Despite road transport continues to be a backbone of the Turkish land transport system, the importance of railway transport due to investment programme of the government is increasing. According to the 2006 figures in Turkey, the share of railways in freight transportation was approximately 5% this figure is likely to further increase in the next years. Facilitation to this trend is one of the government s transport policy priorities. Logistics Performance Indicator: The World Bank study gives Turkey rank 34 among all the countries analysed in the overall logistics services performance indicator. The components of indicator show the performance of Turkey as follows: Customs rank 33 Infrastructure rank 39 International shipments rank 41 Logistics competence rank 30 Tracking & tracing rank 34 Domestic logistics costs rank 112 Timeliness rank See BMI (2008) - Turkish freight transport report (BMI's Europe Freight Reports are based on an extensive network of multilateral organisations, government departments, Freight industry associations, chambers of commerce and company reports. 24 Seehttp://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTTLF/0,contentMDK: ~menuPK: ~pagePK:210058~piPK:210062~theSitePK:515434,00.html Logistics Performance Index, WB, 2007 Inception Report Annex 3 Part 2 Page 147 of 207

356 Turkey scored the best among all TRACECA countries in logistics performance. Rapidly growing trade and industrial development have created a promising perspective for the logistics sector, and the trend is expected be maintained. Initiatives in logistics centres development: There are three mainstreams in development of logistics centres in Turkey. These entail: Governmental initiatives according to the development strategy of the Ministry of Transport and Communication, Turkish Railways (TCDD) plans to organise 12 logistics villages on its network on the basis of the existing transhipment points. Public private initiatives organisation of the logistics centres next to industrial zones, or at private ports. One of the most successful examples is a BALO Project a project of Western Anatolia Logistics Organisations. This comprises the efforts of Turkish Chamber of Entrepreneurship, the industrial zone of Bursa, Eskisehir, Manisa, Denizli, the Aegean Region Chamber of Industry, Barsan Global Logistics, and Akport Tekirdag company. Based on this initiative logistics nodes are planned in Tekirdag port, Bandirma port, Okcugol Istasyonu station, Eskisehir consolidation centre, Manisa organised industrial zone, Izmir consolidation centre and Denizli organised industrial zone. These logistics villages will also be supported by block train operations. These two most remarkable initiatives are schematically presented in the picture below: Figure 80: Locations of BALO Project and TDCC Logistics Villages Private warehouses operated by various trucking/freight forwarding companies, industrial entities or other private companies dealing with storage business. Such warehouses are misleadingly called logistics centres. As they are not designed or equipped to provide modern logistics services, neither allow the presence of more than one operator, such entities were not considered in the present survey, since they do not fall under the category of the international logistics centres. Analysis of Transport Infrastructure The transport network infrastructure analysis in Turkey was predominantly based on the TRACECA map published by the Permanent Secretariat of the Intergovernmental Commission TRACECA. In December 2008, the TRACECA member-states have enlarged the network and especially the hubs linked with TRACECA. This new map is still not published at the PS Page 148 of 207 Annex 3 Part 2 Inception Report

357 webpage, and new changes are anticipated at the IGC meeting in June In the inception period, not all of additional hubs and links were visited in Turkey. The findings are based on the field missions. This includes site visits to the Black Sea Ports of Samsun, Trabzon and Hopa. A site visit to the Turkish/Georgian Border in Sarp(Sarpi) has been made and the Istanbul port of Haydarpasa has been also visited. The management and operation company of Akport in Tekirdag with its railway link to Muratli and its logistic village have been interviewed. Road Network The dominant role of the trucking industry as well as the growing mobility has forced the Government during the last decades to develop the road network. The development of land transportation in Turkey is critical for the economic development of the country and has much importance for the neighbouring regions of Europe, the Middle East, the Balkans, Caucasus, and the Black Sea area. The share of highways in both passenger and freight land transportation is about 95%, while railways do not handle more than 5%. As per information published at General Directorate s of Highways website 25 the total length of highway controlled by this entity is km, comprising motorways, state highways and provincial roads. General Directorate of Highways is a legal entity within the Ministry of Public Works responsible for planning, design, construction, maintenance and operation motorways, state highways and provincial roads. Table 12: Road network surface ROAD NETWORK - SURFACE TYPES (KM) Asphaltic Surface Stone Stabilised Concrete Treatment Block Earth Primitive Total Motorways State Highways Provincial Roads Total The old version of the TRACECA route in Turkey has depicted a national highway crossing the Northern part of the country from West to East. Namely, this is a link of the Corridor IV from Istanbul and Izmit in the West, via Merzifon, Samsun port to Trabzon, Hopa to Sarpi at the Eastern Turkish border to Georgia Source: Ibid Inception Report Annex 3 Part 2 Page 149 of 207

358 Figure 81: Old TRACECA route in Turkey Source: webpage of PS IGC TRACECA, status April 2009 The updated route includes the upper part of the Turkish fishbone land transport network in the Central and Northern part of the country. The two highways starting from the port of Izmir switch an important Manisa industrial zone onto the TRACECA route. The highway follows then by the port of Bandirma with further access to ports of Marmara region and to the existing TRACECA road Istanbul Samsun-Hopa. Figure 82: Updated TRACECA route Source: MAP produced by the EU financed Traffic Flows project, status April In addition, the TRACECA route is enforced with the almost parallel highway through the Central Turkey: Izmir Afyon-Karahisar-Ankara-Sivas-Erzinkan-Kars. The both highways are connected with radial roads leading mostly to the ports. The road network is also supported by the railway network crossing the whole country from the West to the East and contributing with road fishbone network of TRACECA route in Turkey. Page 150 of 207 Annex 3 Part 2 Inception Report

359 During the expert mission almost 800 km were travelled by car following the main TRACECA route. It should be pointed out that roads are from 2 to 4 lanes and are in excellent condition. TRACECA Road Border Crossings: Currently, TRACECA border crossing to Georgia at Sarp is operated at the juxtapose method, clearance procedure is automated, reducing human mistakes and red tape that may occur. The drivers interviewed at the Sarp border from the Turkish side reported about a waiting time variing from 1 to 3 hours, but the clearance procedure from both side takes less than 5 minutes. Figure 83: Trucks waiting at the border (Turkish side) Mar Figure 84: The Turkish / Georgian Border in Sarp March 2009 Bottlenecks: The Bosporus crossing is one of the major bottlenecks for road transport. Two bridges are heavily congested. Alternative routes using ferries are on various locations in and around Istanbul. The Turkish government is addressing this issue having launched the Marmaray project. Railway Network The length of the main lines of railway in Turkey is currently km. About 22% of the main network is electrified, while about 28% are equipped with signalling systems. Five percent of the network has a double track. The railway system received modest investments for several decades. The importance of railways as an alternative to highways, waterways, and airways has only been recognised in recent years. Inception Report Annex 3 Part 2 Page 151 of 207

360 Figure 85: Railway network of Turkey Source: TCDD presentation, March 2009, Ankara TCDD, The Turkish State Railways, is the operator of national railway network, both freight and passengers. Other businesses include ports that have not been privatised yet, manufacturing and repairing rolling stock, transhipment of cargo and cargo handling. The railways participate in export, import and transit operations. In discussions with the representatives of the Turkish railways it was revealed that the company will be outsourcing its secondary activities to concentrate on its core business i.e. on train operation and railway infrastructure development. There are several internationally supported programs and railway projects. The EU and the World Bank are the most important financial and technical supporters to strengthen the sector and to ensure the integration into the EU transport systems. Private companies have become significant players in freight transportation since they were given the right to operate their own block trains, wagons and containers on TCDD railway lines. The current figure of annual carriages by TCDD is 17 million tons, although the capacity is estimated to be 50 million tons. The private sector is expected to raise this figure with the help of block train and intermodal transport. Already in 2003, the TCDD launched first block trains operation. Since then,, freight volumes increased. Currently 4000 domestic block trains are operated a month as per TCDD information. International block trains are operated to destinations in Europe, Asia, as well as in the TRACECA region, including. Kazakhstan, Turkmenistan and Romania. In interviews, however, it was noted that a TRACECA related block train project of Turkey and Kazakhstan from Almaty to Istanbul has been cancelled. Duringa trial period, weekly container trains did not meet the plannes schedule. Block train operations are now influenced by the global economic crisis. Page 152 of 207 Annex 3 Part 2 Inception Report

361 Considering the importance of the railway in the national network, Turkish government has taken several measures to and investments to modernise and rehabilitate the railway infrastructure. The main project is the railway tunnel crossing the Bosporus linking the European part of Turkey and the Asian part. The railway link between Turkey (Kars) and Georgia (Ahalkalaki) is under construction and should be finalised in As a result, these links will create a direct connection between South and West Europe and the southern network of the former USSR states, giving the railway a stronger position in the international transport. With the direct railway link from Turkey to the CIS railway network a new and important link to the TRACECA corridor (Cetral Asia, Azerbaijan) will be opened. The capacity of this link will depend on the bogie change facility needed to operate the European railcars on CIS gauge and vice versa. TCDD makes efforts to increase its share in freight transportation by construction of so-called industrial lines which are directly connecting industrial zones private centres with high freight potential to its network. Currently about 450 km of industrial lines exist connecting the organised industrial zones of Turkey. Figure 86: Industrial lines of Turkey Industrial lines of Turkey: Combined transport operations are done in Halkali, Haydarpasa, Kosekoy, Ankara, Alsancak, Bogazkopru, Iskenderun, Mersin and Gaziantep (Baspinar), which have container depots. Implementation of future investments is planned as to merge such container terminals into new logistic villages. The TCDD is planning to construct 12 Logistics Villages in Halkali/Ispartakule (Istanbul), Kosekoy (Izmit), Gelemen (Samsun), Hasanbey (Eskisehir), Bogazkopru (Kayseri), Gokkoy (Balikesir), Yenice (Mersin), Ushak, Palandoken (Erzurum), Konya, Kaklik (Denizli) and Muratli (Tekirdag). However, the interviews revealed that an overall nationwide freight master plan for the networking is missing. The visited logistics village location Gelemen in the vicinity of Samsun Inception Report Annex 3 Part 2 Page 153 of 207

362 explained that there was no master plan for the logistics village as well, which complicates the attraction of foreign investors Bottlenecks: The main bottleneck of the TRACECA railway links is the railway crossing of the Bosporus. The tunnel under construction will be opened by 2011 and solve this problem. Analysis of Main Logistics Nodes Sea Ports The map available at the official TRACECA webpage depicts two TRACECA ports Istanbul and Samsun. The updated TRACECA map includes in addition the ports of Bandirma and Tekirdag in Marmara region. New TRACECA routes now lead to Izmir port in the Aegean region, which will be included into the TRACECA routes in Turkey as new Western gateway to this corridor as per information of the Ministry of Transport. The Black Sea ports as Trabzon, Derince, Zonguldak located on the TRACECA route, but not nominated as TRACECA ports, are connected by the regular lines to other ports in TRACECA countries. Thus they constitute important links with TRACECA corridors. The following ports were included into the analysis: Istanbul (Haydarpasa), Samsun, Trabzon, Hopa, Tekirdag, and Izmir. General: There are four categories of ports regarding their ownership and operations in Turkey: 1. Public ports: State owned and operated ports, which belong to Turkish Republic State Railways (TCDD) and the Turkish Maritime Administration (TDI). Both public entities report to the Ministry of Transport and have a separate Department of Ports, which is responsible for planning and coordination. All the provided services to ship and cargo are given by the port s own labour and equipment. Main services are given by the ports. 2. Public/Private Ports: State owned, but operated by private enterprises after privatisation 3. Private Ports: owned and operated by private enterprises. The third group of ports comprises special private ports ranging from multipurpose ports confined for particular needs of an industrial plant. As for instance Tekirdag port a new operated by a private company Akport included recently into the TRACECA network 4. Municipal ports: managed by responsible municipalities. These ports are comparatively small and serve the local needs of towns. The Black Sea ports of Samsun, Trabzon and Hopa (to a minor extend) and the port of Izmir as well as some of the Marmara ports are the main hubs for goods coming to TRACECA corridor by sea. The dry cargo with destination to the South Caucasus and Central Asia are carried by trucks. Cargo coming from Europe by is transported by feeder vessels to the TRACECA Ports of Georgia, Ukraine, Romania and Bulgaria. The main feeder ports so far are Izmir and Haydarpasa. Current status of port privatisation in brief: TCDD included six ports that have domestic railway connections in the privatisation program: Haydarpasa, Samsun, Bandirma, Derince, Izmir and Iskenderun. The privatisation process is either completed or underway. The privatisation of the ports of Mersin, Iskenderun, Bandirma (TRACECA port) and Samsun (TRACECA port) is in different stages, but the investors are already known. Page 154 of 207 Annex 3 Part 2 Inception Report

363 The operation of Mersin and Iskenderun ports is granted to a consortium, which is formed by a Singapore company, PSA, and a Turkish Akfen. The right to operate the port of Bandirma, in North-Western Turkey, and the port of Samsun, on the northern Black Sea coast, was granted in two separate auctions to Celebi Joint Venture Group and to Ceynak Lojistik, respectively. Haydarpasa port Haydarpasa is a TRACECA port on Bosporus operated by the Turkish Railways (TCDD). The port serves the most industrialised area of Turkey. Figure 87: Haydarpasa port Source TCDD publication The port has regular services to and from Europe, Asia and the USA. The main ship-owners calling the port are Yang Ming from Taiwan, Bulcon, MSC, Maersk-Sealand and CMA from Europe. The port has two breakwaters so. Pilotage is compulsory and is provided by the Turkish Maritime Organisation. Towage is not necessary for the vessels up to 1500 GT, one tugboat is compulsory for the vessels of more than 1500 GT, two tugboats compulsory for the vessels of more than 5000 GT according to national regulations. Towage is provided by the Port Administration round the clock. The port handles general cargo, containers, serves Ro-Ro vessels and passenger vessels. There are berths with a total quay length of 2134 m. and with alongside depths ranging from 6 m. to 9.5 m. Container handling operations at the yard are carried out by 4 quayside gantry cranes of 40 tons capacity, 18 rubber tired transtainers of 40 tons capacity, 9 reach stackers of 25 to 42 tons capacity and 8 empty container forklifts. 9 shore and yard cranes of 3 to 35 tons, 6 mobile cranes of 5 to 25 tons capacity, 8 standard and 30 small masted forklifts. The floating crafts comprise 1 floating crane of 250 tons cap., 5 tugboats, 3 rail ferries and 4 mooring boats. The port of Haydarpasa is the second largest container port. In 2008, the port handled approx. 400 thousand TEU according to the port manager. The handling capacity is appox TEU (4 quayside gantry cranes and an operation concept using transtainers and forklifts/reach Inception Report Annex 3 Part 2 Page 155 of 207

364 stacker). The storage facilities of Haydarpasa include sq. m. of open and sq.m. of covered storage. The annual storage capacity of these areas is tons /year and tons /year respectively. The space for container terminal is nearly sq.m. The holding capacity of the container terminal is TEU (both loaded and empty).there are two areas used outside the port for stacking the empty containers. A container freight station of 3.600sq.m.is available behind the container quay. Figure 88: Container terminal Haydarpasa, Istanbul. Status: March 2009 Unfortunately, the available storage capacity of the port is limiting its operation capacity to the before mentioned appox TEU, so the port has to use an inland terminal (land terminal Goeztepe) of sq.m. with a storage capacity of TEU. This land terminal is used for container stuffing/stripping and custom clearance for LCL containers. Maersk, CMA and Arkas group have rented land plots of about sq.m. each in the port area. The container stuffing and stripping of LCL containers is done by these companies and not by the port. The covered warehouses for LCL operations are 1500 sq.m. the total closed storage area is 21ths sq.m.. 90 % of all containers are moved by trucks and only 10% by the railways. An improvement of these figures in favour of the railways is expected after finalisation of the railway tunnel crossing the Bosporus. The RoRo berth has 160 m length with an alongside depth of 8 m. Berth no 3 serves the dry bulk traffic. The length of the berth is 190 m. with an along side depth of 8.2 m. A grain silo of tons capacity is available and has a conveyor connection with the quay. The bulk cargo handling is outsourced to the Turkish Grain Board with own conveyor and a silo capacity of tons. Bottlenecks: The access road and rail to the port are not sufficient. The port is situated in the middle of the city. Especially the access road is congested. It is used not only by incoming and outgoing port traffic but also for a central bus station located nearby. The three more operators within the terminal (Maersk, CMA, and Arkas) and 4 gates for entrance and exit of the terminal cause crowded operation within the terminal itself. Page 156 of 207 Annex 3 Part 2 Inception Report

365 Soft constraints: The port management is well aware about TCDD planning to privatise the port. This results in a non-investment policy. The management maintains the status-quo and shows limited motivation to eliminate the existing port maintenance and operation problems. Figure 89: Congested access road to the container terminal Haydarpasa, Status: March 2009 The Akport at Tekirdag The AKPORT in Tekirdag is a private port operated by Akport Tekirdag Liman Isletmesi A.S. a daughter company of the Akkoek Group of Companies. This is one the largest holding in Turkey with a turnover of USD billion in Inception Report Annex 3 Part 2 Page 157 of 207

366 Figure 90: Port of Tekirdag operated by AKPORT Source: AKPORT publication The port has excellent location for a creation of the international logistics centre for a Marmara region. The logistics centres and block train operation with utilisation of the Akport at Tekirdag are included into the BALO logistics project at the Marmara region. The port is located at the Marmara Sea approx. 140 km to West of Istanbul in a main industrial area:. cement, ceramics, food, paper, glass, textile production, oil and oil products - approx factories located on the area of 21 sq km. In the radius of from 40 to 150 km the major cities of Marmara regions are located including Istanbul, Edirne, Kiklareli, Kapikule, Corlu, Cerkezkoy, Silivri and Ipsala. A logistic village is planned close to Muratli in the industrial hinterland of the port. The railway line will be finalised by June 2009 linking Muratli with main connection Edirne Istanbul as well as the new port of Tekirdag. Liner services of the Arkas Group are linking the port with Bulgaria, Romania, Spain, Italia, North Africa and Egypt. RoRo facilities linking Tekirdag with Bandirma and Gemlik by ferry services. In the first phase the Akport will have 3 berths and an area of 71thds sq.m. and a storage capacity of 2500 TEU on 600 ground slots. In 2008 the port has already handled TEU. The port has modern handling equipment. 9 mobile harbour cranes are available. The container moves within the terminal are operated by 4 reach stacker, 3 forklifts and 7 tractor/trailer units. The port is handling general cargo and bulk on separate berths and is one of the London metal exchange approved ports. The port operation company intends to further develop of the port. In three stages the capacity should be enlarged to 1.5 million TEU. The plans of the port is to attract sea containers to Akport, utilising the concept of the motorways of the sea and providing logistics value-added services, as well as being the transit port for the Marmara and Black Sea Region. Already now the port can receive Panamax-type vessels and is planning to have a water depth of 17 meters on one of the berth. The time schedule is not fixed and depends on the utilisation of the stage one, which is slowed down by the current crisis. Page 158 of 207 Annex 3 Part 2 Inception Report

367 Figure 91: Ferry links Tekirdag Bandirma and Gemlink. Rail connection Tekirdag Muratli- Main Railway line Source: AKPORT publication The Port of Izmir The port of Izmir is one of the largest container ports in Turkey operated by the Turkish Railways (TCDD). The port is situated on the Aegean sea, in the Western Part of Turkey. The port is not only a gateway for the Turkish industry in the Aegean region, but also a gateway to Turkey in general. The port is located in the middle of the city. As one of the main feeder ports, Izmir is also very important for the ports of the Black Sea. The shipping lines MSC, Grimaldi, Yang Ming, Emes, Tarros, Maersk- Sealand, CMA/CGM, UASC, CSCL, CCL, Turkon, Admiral, COSCO, Borchard, NYK, Hamburg Suede, MCL, UFS, HMM, MOL, K-Line are calling the port on a regular bases. The main client of the port is the Industrial Free Zone of Manisa, 45 km north-east, contributing 30%.of cargo. On average, the port has 10 calls a day. The waiting time is for 90% of the vessels less then 9 hours and for almost 70 % the waiting time is below three hours. From Izmir several ferry connections to the European side of Turkey are operated. Inception Report Annex 3 Part 2 Page 159 of 207

368 Figure 92: Port of Izmir Source: publication of TCDD Figure 93: Izmir port Extension area blue marked Source: publication of Izmir Port The port has 24 berths and water depths down to 10 m. In 2008, the port has handled TEU and tons of general cargo. The work force of the port is 670 persons in average. The port is equipped with 5 gantry cranes of 40 tons, 10 rubber tired transtainers, 19 reach stacker and 20 forklifts for empty containers. Page 160 of 207 Annex 3 Part 2 Inception Report

369 The total area of the port is sq.m. whereas sq.m. are covered areas with storage capacity and container freight stations. Empty containers are stored outside the port. The transport of empty containers is organised by train. The port is temporarily not connected to the railway network of Turkey due to metro construction works in the city of Izmir. The traffic within the container terminal seems to be not very organised in comparison to European Standards. Persons on the operation areas of a container terminal are allowed, causing in high dangers for their safety. The container business has decreased by almost 20% in the first two months of 2009, compared to the figures of the end of Within the port, the Turkish Grain Board has a conveyor system connected with the quayside and silos with a capacity of tons. Despite the port is put for privatisation, the extension master plan is available and some upgrade works are underway:.the entrance channel will be dragged down to 14 meters, The dragging material will be used to fill up an extension area. This will help increase ports territory by more than two times. As the port is going to be privatised the investment projects are slowed down. Nevertheless, the management of the port is highly motivated and very cooperative. Figure 94: Port of Izmir with heavy traffic. Status March 2009 Inception Report Annex 3 Part 2 Page 161 of 207

370 Figure 95: Activities within the Izmir container terminal area. Status: March 2009 Bottlenecks: The port is temporarily not connected to the railway network of Turkey. The reasons for this are a construction of municipal metro system and extension of road network. This caused congestions of the port access road and in the around the port. Dredging is constantly needed in the port to accommodate large container ships. The Port of Samsun The port of Samsun is a TRACECA railway port operated by the Turkish Railways (TCDD) at the Black Sea. The new investor, Ceyhan Logistics Group, is already nominated, but the handover has not yet taken place. Page 162 of 207 Annex 3 Part 2 Inception Report

371 Figure 96: Port of Samsun Source: publication TCDD With a total berth length of 1756 meters and a maximum draft of -12 meters the port is able to handle all vessels normally calling ports in the Black Sea Area. The port area is sq.m. and in total million tons of cargo has been handled. Samsun is in first line a ferry port. The port is 24 hours open and offers all kind of operations. RoRo ships carrying export cargo to Russia and Ukraine are also calling the port. Mainly vegetables, fruits of the season and citrus fruits are going for export. The goods are coming from the south of Turkey by truck. Railway transport is so far not very much developed. The import cargo is mainly coal and grain. Coal is imported from Russia or Ukraine for a steel factory 100km away in the hinterland of the Port. The steel products as well as the import of scrap are going via a separate pier to the East of the port owned by the steel factory. The grain is coming mainly from Ukraine and Russia. The import in 2008 was tons, export was 1.0 m tons. The transit was only 5400 tons. All figures are rounded and obtained from the port management. It was observed, that some core activities of a port are in the hands of private entities. Lack of investments has created costly operations. For instance, the grain coming in by motor vessels are unloaded direct on truck or via a hoper to trucks and then carried about 200 meters to a conveyer of the silo owned by the Turkish grain board with its tons capacity. Inception Report Annex 3 Part 2 Page 163 of 207

372 Figure 97: From the blue ship the grain loaded onto trucks to be transported 200 m to the silo. The queuing trucks loaded with grain Other example of costly operation was observed at RoRo vessels transporting fruits. The trucks carrying citrus fruits are unloaded inside a ferry by forklifts and then stowed into the vessel. Switching to containers and small container vessels would eliminate this costly operation. The alternative costs are higher then by investing into a adequate container equipment. Figure 98: Unloading of a truck inside a RoRo ferry In addition to the RoRo activities a renewal of the rail ferry operation is planned. The port has already built the concrete part of a link span for rail ferries. The final design of the link span will accommodate European standard gauge and Russian standard gauge. A bogie change station will be build. It is not clear when these investments are finalised. It may be delayed because of the privatisation project and overall economic recession. Page 164 of 207 Annex 3 Part 2 Inception Report

373 Figure 99: The area for future rail ferry operation Bottlenecks: Lack of investment and the uncertain situation of the privatisation had brought the infrastructure upgrading activities to a certain extend on hold. Planned logistics centre (logistic village) in Samsun: There is an ongoing discussion about a logistics village in Samsun. The Turkish Ministry of Transport has pointed out that Samsun will be one of the nominated network locations. The site visit took place during the field expert mission to Turkey. The railway possesses a land plot and a loop station at Gelemen in the vicinity of Izmir port. The plot could be sufficient for a location of such a logistics centre. However, the forwarders and shipping agents together with Samsun Municipality are lobbying a location of a logistics village on the other side of Samsun. In fact, only the railway has a rail connected plot of land. Still, no master plan exists the logistic village, neither figures about potential users and nor market potential estimates exist. The railway company also seems to be reluctant to allow for competition and cooperation with other transport companies within the borders of the existing plot. Currently, Gelemen logistics village operates as a freight yard with standard railway operation. The railway in Samsun had been advised to work on a master plan and on a market analysis. Inception Report Annex 3 Part 2 Page 165 of 207

374 Figure 100: The railways land plot and the rail connection at Gelemen Port of Trabzon Figure 101: Port of Trabzon: The port of Trabzon with break water Source: Printout from Albayrak Sirketler Grubu The Black Sea port of Trabzon in the North-East of Turkey is privatised and operated by the Al- Port, Trabzon Liman Isletmeciligi A.S., a daughter company of the Albayrak Sirketl Grubu, Istanbul. Page 166 of 207 Annex 3 Part 2 Inception Report

375 The port seems to be the most modern one on the Black Sea Coast of Turkey, being not only well equipped, but also with a dynamic management; the latter constitutes the principle difference between the State owned and the private ports observed during the mission. With its container yard, the general cargo berths and the storage area (covered 8390 sq.m. and uncovered paved area of sq.m.) the port has sufficient space to handle and store any kind of cargo. The capacity of the port is estimated with 5 million tons for cargo handling, 3 million tons of storage. The yearly acceptance of vessels is 2000 ships. The port is protected by two break waters one of meters and a second one of 380 meters. In total there exist 5 Berths including RoRo, ferry and general cargo, container and bulk facilities. The cargo handling equipment comprise 1 mobile crane with 100 tons capacity, 9 gantry cranes from 3 to 25 tons, 7 mobile crane from 5 to 25 tons, 1 reach stacker 40 tons 13 forklifts, 6 loaders terminal tractors and trailers. The management has a clear picture about the cargo to be handled in the port. Trabzon was and is the northern gateway to Iran. Currently, Iran imports goods via Dubai in a total amount of USD 23 billion, Trabzon is aiming at a share of USD 6-7 billion, worth 3 million tons of goods. Figure 102: Container Vessel in the port of Trabzon March 2009 Inception Report Annex 3 Part 2 Page 167 of 207

376 Figure 103: RoRo ship in Trabzon March 2009 Main import cargo is coal, timber and wooden articles and the main exported cargo is cement shipped to Romania, Azerbaijan and Georgia. Wheat, green vegetables and citrus fruits are shipped to the Russian Federation. With total 5 RoRo vessels and 5 Ferry boats a regular service is operated to Sochi/Russian Federation. Containerised export or transit cargo is going via Trabzon to, IIyichevsk, Viking and Novorossiysk to Northern Europe. The MSC shipping line has 3 calls a week. CMA has shipped tons of chrome ore via Trabzon and Tekirdag to China last Year. This ore was loaded into container. Bottlenecks: The port has no railway connection. Since 1922, a railway link between Trabzon and Erzurum has been under discussion and has still no clear perspective. For the cargo handled the existing road access is sufficient, the expected Iranian cargo will cause congestion in the city, due to the limited capacity of the access roads. Port of Hopa Hopa is a small port 15 km away from the Georgian border. The port is owned by PARK DENIZCILIK Hopa Liman Isletmeleri AS. The shareholder of this company is with 60 % Ciner Group and with 40 % IMISK. Page 168 of 207 Annex 3 Part 2 Inception Report

377 Figure 104: Port of Hopa source: port publication With 4 berths with an water depth of 10 Meters the port is able to receive the feeder vessels and smaller container ships used in the Black Sea. During the site visit no containers were stored and no ship was in the port. A rail ferry ramp scheduled for 2004 has not been built. The newest investment is a mobile harbour crane with a capacity of 40 tons and a reach stacker with a capacity of 42 tons. In addition the port has 5 Mobile cranes from 10 to 25 tons, 5 shore cranes with 5 to 25 tons and 10 forklifts with capacities from 2.5 tons up to 10 tons. The open area of the port is sq.m. and a dedicated area for container of sq.m. are paved with concrete in good condition. The covered storage is sq.m. and used for the storage of cotton from Tajikistan and Uzbekistan. This cotton arrives by truck and is for the Turkish textile industry. There are no regular ship calls or liner services in Hopa. The role of Hopa as one of the entrances to the TRACECA corridor is only visible in cases of congestions in the other Black Sea ports of Turkey. The silo capacity is in total tons and the discharging capacity is 300 tons per hour. The port would win from the construction of a railway link to Batumi in Georgia and the CIS railway network but this is not included in investment plans, so far. Bottlenecks: As there is currently no activity in the Port of Hopa, so no bottleneck was visible. Inland Hubs and Terminals An inland hub should be based on at least two modes of transport, where the combination of rail and road has the highest potential in terms of efficient logistics. At the country macro level, to such inland hub locations belong Ankara, Manisa, Sivas, Adana, Erzurum, and other major Turkish cities located at the crossroads of rail and road routes. These cities have with high consumer demand, and industrial and agricultural concentration. Inception Report Annex 3 Part 2 Page 169 of 207

378 Since no logistics locations have to be selected for Turkey within the project scope, during the initial field mission in Turkey no specific inland terminals linked with the TRACECA Corridor have been visited, expect one site located in Manisa Organised Industrial Zone, 45 km to the North-East of Izmir. This node includes a logistics facility which is not in operation, yet. The reason is linked to a management problem. The organised industrial zone is operated by the Chamber of Commerce on a non-profit basis, and in accordance with the new regulation in Turkey should operate the logistics facility in the same way. Therefore, the investor interested in operation a consortium of MASBAR (Manisa Free Zone and Barsan Logistics) had to be released, since it was not in the interest of a private enterprise to participate in a project on a non-profit basis. Another problem for suspension of this project was that the railway link from Manisa to Izmir port, exists, but could not be put into operation, since the section of a port railway connection is closed due to a construction of the light rail system in the city of Izmir. Figure 105: Newly built warehouse for logistics service in Manisa Traditionally the land-based infrastructure of Turkey is highly dependent on road transport. So, to satisfy a classical criteria for an inland hub, a railway connection is essential. The future of rail freight in Turkey will probably very much depend upon the ability to bring new rail services to inland nodes with high cargo potential. This will also strengthen the position of Turkey in international rail transport. The inland terminals in Turkey are likely to be relevant only for the domestic logistics. For regional logistics and in terms of importance for the whole TRACECA corridor, the Turkish ports are of supreme importance as major logistics hubs. Page 170 of 207 Annex 3 Part 2 Inception Report

379 Air Cargo hubs The main aviation cargo hubs are Istanbul, Ankara and Izmir. During the mission, a presentation of the leading Turkish cargo airline MNG was delivered. The company provides scheduled cargo services to Europe. This includes chartered cargo, bonded warehouse and export warehouse facilities, as well as aircraft maintenance services and ramp services. It has also EASA 145 and JAR 145 approved jet-maintenance facility. The company has warehouses in Istanbul (main base), Ankara and Izmir. Figure 106: MNG Warehouse next to Istanbul airport. Source: MNG presentation Analysis of Stakeholders in Freight Transport and Logistics Sector Ministries and Related Public Authorities The Ministry of Transport and Communications: Within its scope of jurisdiction related to overall management of the transport sector the Ministry can take over a masterminding process for improvement of Turkey s nation-wide logistics sphere. The following spheres could be taken over by the Ministry. To define, implement and control provisions related to freight transport and logistics To take into account the nationwide logistics aspects in determination and planning transportation needs and demand. To determine main policies and strategies in freight transport and logistics and coordinate activities related to their implementation. It is crucial that the Ministry develops the freight and logistics Masterplan to enhance position of Turkey in the world logistics and to improve the domestic performance on the sector. Take measures to monitor and control implementation of the set objectives and defined policies. Encourage research to determine and implement State s transportation and communication goals and policies related to logistics sector. To designate legal requirements of establishment of the logistics sector with consultation to all involved stakeholders. Inception Report Annex 3 Part 2 Page 171 of 207

380 To promote advanced logistics solutions in its activity of taking measures to encourage road and railway transport on provision of economic, safe and quality services. The roadmap and action plan for this is conventionally formulated in a freight transport and logistics master plan. The Ministry of transport has determined the strategic goals. One of the targets (Target 1.6) is to promote combined transport. This implies the development of Halkali, Ispartakule (Istanbul), Kosekoy (Izmit), Kaklik (Denizli), Eskisehir, Bogazkopru (Kayseri), Balikesir, Yenice (Adana), Palandoken ( Erzurum), Konya and Ushak as logistics centres, building 11 logistic villages on these centres. In the meantime, this has been extended to 12 locations, including Muratli (Tekirdag). It is highly recommended to base this development on a nation-wide freight transport and logistics master plan and to facilitate the creation of an individual master plans for each of the location. Port Administrations: The Port Administration in the Ports visited take care about safety, security and pollution subjects as well as have sovereign tasks related to port development. It was not reported that any hindrance are coming from these authorities in terms of logistics processes, as long as the law and regulation of Turkey are respected and the visa regime not violated. Associations of transporters: The most influential association of transporters are International Transporters Association UND, Ro-Ro and Ro-La association (RODER), and Turkish Transporters Association TND. They are also involved in the analysis of efficiency of the transport process on the national level, elaboration of priority projects representing interests of their member including logistics, and in research activities. A meeting was held with UND. There has been no interview with RODER and TND during the first mission, but their influence and interest in development of efficient logistics has been emphasised in interviews with other stakeholders. International Transporters Association (UND) UND encourages Turkish road transporters to enter partnerships on national and international scales and concerning strategic cooperation issues; spends efforts in removing obstacles in international road transportation towards more effective and sustainable services to the society; establishes cooperation with the related international organisations and sector associations in other countries. The association is involved in the development of logistics projects in the vicinity of Istanbul. Involvement of UND in the development of the TRACECA network is essential as.it possesses a unique and updated knowledge base on international road transport and supports the development of the logistics centres. Regional and Municipality Authorities During the interviews an interest of Istanbul municipality was revealed to develop logistics centres in the vicinity of Istanbul together with UND and other stakeholders. The interest of Samsun municipality was revealed to develop a logistics centres together with a group of 11 private investors, some of them represent forwarders and shipping lines. The location is determined on the Western side of Samsun which currently does not have a railway connection. This location is proposed as an alternative to the railway-based Gelemen logistics village at the eastern edge of Samsun. Page 172 of 207 Annex 3 Part 2 Inception Report

381 Logistics Service Providers Logistics services and freight forwarding business are very often mixed up in Turkey. According to analysis of MOT, about 80% of companies do not outsource their logistics, but are doing this themselves. One of the largest logistics service providers in Turkey, Barsan Logistics, was interviewed. During other interviews, stakeholders referred to companies as Omsan Logistcis, Horoz Group, Reysan Logistics as thethe most successful enterprises in Turkey proving logistics services. Barsan Global Logistics (BGL) is owned by Barsan Holding and was founded in 1982 as a customs clearance firm. Currently, BGL is the only logistics firm in the market offering its customers exclusive customs clearance services. With its rich logistics services portfolio, BGL also provides international transportation through land, air, sea, rail and multi-modal freight forwarding, bonded and non-bonded warehousing, and stock management. As a logistics service provider to many multinational companies in the Turkish marketplace, BGL currently operates in an indoor area of 350,000 m² over an area of 750,000 m² in total in Turkey. The national organisation of BGL is represented by 6 regional office, beyond Turkey BGL is positioned in 6 countries, each having its own warehouses, and reporting to Head Office in Istanbul.BGL handles 10% of Turkish foreign trade volume. Barsan is mainly focused in iron and steel, chemicals, food, automotive, brown and white goods industries. It is the main logistics provider for the industrial village in Manisa. The company has formed a consortium together with the Manisa Organised Industrial Zone on development of the logistics centre project. The project is put on suspension due to unclear situation with management (the operating company should work as a non-profit organisation according to the Turkish regulations, the railway link to Izmir port is currently closed). During the interview the company revealed a long-term interest in participation in the logistics centres in TRACECA countries. It was advised to contact the regional manager on business development once the investment sites are concretised. The Barsan is operating in TRACECA countries. While discussing establishing of international logistics centres in the Caucasus, Ukraine and Moldova, the company has not excluded an interest to participate in the operation. Further discussions about Barsan s investment interest will be carried out after determination of the locations in the beneficiary countries. Freight Forwarding Companies The forwarding industry is mainly combined with the trucking industry. Almost all forwarder are as well truck operators. These truckers are organised in the UND the International Transporters Association which are members of the DEKRA, IRU, Kalder, BESEC URTA, FIATA and SECI. In meetings with trucking/forwarding companies, the situation of transport within the TRACECA corridor was explained. More then 90% of cargo transported in this corridor is export or transit cargo to these countries. The trucking companies working Europe-wide arecarrying goods to Georgia, Armenia and Azerbaijan. On the way back the trucks are empty. It has turned out that shippers in the Caucasian states are very often not aware of the proper documentation, and that delays on the border are more costly then the additional earnings. During the discussion, the idea to create logistics centres in Caucasian countries, dealing with the problem of documentation and providing consignment consolidation was welcomed by the representatives of freight forwarders and the trucking industry. Inception Report Annex 3 Part 2 Page 173 of 207

382 Operators of Transport Infrastructure The main operators of transport infrastructure are road administration who construct and maintain roads, The operation of the railway network is under jurisdiction of state railways. However, the railway is going to have a clearer concept concentrating on core activities and privatizing the ports under their jurisdiction. Counting parts of the ports as Infrastructure the port operators are as well operators of infrastructure. Shippers and Consignees The almost each Turkish province has its organised industrial zone. Most interesting industries from the logistics point of view are in the region of Tekirdag and Manisa. The main export is coming from the region around Tekirdag on the European side of Turkey. With more then 1000 factories in this region the port has an attractive natural hinterland. The consignees of the cargoes generated in the region are Turkey and mainly abroad. The companies located in the Organised Industrial Zone of Manisa are the main shippers of the lines calling the port of Izmir,contributing nearly 30 % of the in - and outgoing cargo of the port. More then 400 trucks are attending the Industrial Free Zone daily. The railway connection to the port is not in operation because the access to the port is temporarily interrupted. Manisa Organised Industrial fulfils all requirements of a modern industrial zone. It creates added value and gives rise to an increase of possibilities for sub-industries. Many companies are based in Manisa including multinational companies and the largest companies of Turkey. Exports from Manisa OIZ are sent to more than 100 countries in the world. For the Black Sea ports the main shippers are the agricultural entities situated in the South of Turkey. The consignees of these goods are in the states of the former Soviet block. Missing Links and Bottlenecks in the Transport and Logistics Network As already mentioned before the main bottlenecks are the railway links: the Bosporus crossing and the rail connection to Georgia. But this is being currently settled with the investment programmes of the Turkish government. The concept of Logistics Villages with actual 12 locations is not based on a country-wide master plan for transport and logistics. The hinterland of the Logistics Village in Samsun is without basic industry except one steel factory with own port facilities. The main cargo comes from the South of Turkey and is going in transit to the former USSR States. The logistics centre in the zone in Manisa is on hold because of a regulation to operate it on a non-profit basis. According to the regulations, the manager should belong to the Chamber of Commerce and operate the logistics centre on a non-profit basis. The main settlers in the zone are currently companies producing electronics, white consumer goods and parts for the automotive industry for the world markets, they dealing with their logistics themselves or using logistics provider. The zone is not yet equipped with a functional logistics centre. The ports situated in the middle of the cities such as Istanbul, Haydarpasa and Izmir Port are faced with severe access problems and congestion on the access roads. Page 174 of 207 Annex 3 Part 2 Inception Report

383 Haydarpasa Port (Istanbul) Izmir Port Additionally, the port of Haydarpasa has in addition the problem of not having extension possibilities. The access road to is heavily congested and has crossing traffic with a central bus station. The railway is suffering from the missing rail crossing of the Bosporus and, consequently, more then 90% of all containers are transported by trucks over two bridges. The inland terminal of Haydarpasa has only connection during the night time. The outsourced terminals for Maersk-Sealand and CMA have generated an additional problem with capacity and operation process. These companies have their own access to the port area via the 4 gates and within the port area. This makes the operation inside the port rather complicated and leads to crowed operation. Due to the fact that the port is going to be privatised necessary investment or changes in the field of operation are on hold. The access to the port by railway is temporarily not in function due to construction work in the public transport rail based system. A remaining railway track is used for the transport of container to a storage area with the port area. The access by road is crossing the whole city of Izmir. The port itself can be extended. There is a plan to use an area next to port. The entrance channel will be dragged up to 14 meters and the sediment and sand will be used for the extension area. Due to the privatisation process investments are on hold. The port is in general well managed but the safety regulation either not sufficient or not executed properly. Persons were observed standing next to the container operation alongside of ships. This is does not comply with European standard of container operation. Conclusions and Initial Recommendations Amongst all TRACECA countries, Turkey has the highest potential in terms of intermodal transportation. Still, if Turkey does not improve existing transport infrastructure notably railway, it will not be able to take a full advantage of its strategic advantages. For improved performances, well-connected links should be developed. The observed Turkish ports, especially those which are in the privatisation pipeline, suffer from uncertainties of their further development. There are a number of obstacles identified to be tackled in improvement of the multimodal transportation of Turkey at the major ports relevant as links to the TRACECA corridor and logistics. This includes, but is not limited to the following factors Many ports are located in urban areas and have limited possibilities for extension (Izmir, Haydarpasa, Trabzon) Port congestion resulting from using the port area for storage purposes, reluctance to develop inland terminals for such purposes (Haydarpasa) In principle the links to the TRACECA Corridor are functioning. It is advisable to develop operation concepts oriented towards business generation for the railway ports. However, in the Consultant s opinion the future operator after the privatisation will promote exposure of ports towards international business. It has to be pointed out that the private ports in Tekirdag as well as in Trabzon are much better organised and that the management of these port have a clear vision about the future. This will generate competition between the ports with the effect that standards and tariffs will reach a better level. Ports (e.g. Samsun, Haydarpasa) outsource profitable and logistics value added services to many different agencies. This is a soft factor that could be changed with business Inception Report Annex 3 Part 2 Page 175 of 207

384 oriented mentality of the new management. In some cases, like in Izmir, the TCDD port manager has demonstrated an open-minded and business oriented approach of successful port operation and development. The business mentality case of Izmir could be used as an example for other TCDD ports still under operation The lack and inadequacy of master plans and uncertainty under privatisation. Most of the governmental port visited, with an exception of Izmir, had no clearly defined master plans and development perspectives estimations. All private ports conduct marketing analysis and develop their master plans and extension programme on the basis of research and projections either prepared by the professional external advisers or by the business development units within these entities. The lack of promotional activities and the insufficiency of port marketing efforts, outdated brochures and promotional materials The absence of connecting roads and railways in ports. Turkey should develop a framework for an optimal integration of different modes to enable an efficient and cost-effective use of the transport system. Customer-oriented door-to-door services enhanced by the development of the logistics centres need to be promoted to enhance competition between transport operators. While planning new logistics infrastructure, special attention must be paid to meet the requirement of international intermodal standards. EU transport and logistics standards will play an important role in this process. All the partners of the intermodal transport should take part in the formulation of such plans. Further development of the railways will help avoid congestion at roads and ports. Ports need efficient railway connections. The ports are advised to calculate the opportunity costs of not using and not upgrading existing inland terminals for container operations. From the institutional point of view, Turkey must develop a transportation and shipping policies taking on board all players of the international trade and transport industry. For improved logistics capabilities a national wide freight transport and logistics Masterplan is highly recommended. The non-profit operation philosophy for the logistics villages has to be reconsidered. Page 176 of 207 Annex 3 Part 2 Inception Report

385 1.3 Preliminary list of suitable locations for logistics centres Summary This chapter consists of five sections. They explain applied methodology, determine logistics centres features, demonstrate the model characteristics of an international logistics centre and benchmark the locations specified in the TOR against such requirements. The chapter starts with defining the main determinants of a logistics centre as parameters for multicriteria analysis. Then the results to be achieved by the Consultant in terms of determination of priority projects are summarised. A two-step approach will be used for this. Both steps involve multicriteria analysis on macro and micro level consequently. The macro level analysis results in determination of locations for international logistics centres. Then a micro level analysis will be applied for specific sites in the Phase B. The methodology for the multicriteria analysis is described. This implies the selection of the macro criteria, their sub-determinants and corresponding weights. These criteria are derived from a model logistics centre and outline requirements for benchmarking. For each direct beneficiary country an evaluation is presented. The results summarised reveal to which extent the proposed locations are suitable for establishment of logistics centres. Those locations that match the model for at least 70% will be proposed for site specifications in the phase B. The sites defined will undergo the micro level of the multicriteria analysis to determine the locations for which feasibility studies will be prepared Main determinants of an international logistics centre Transport nodes are essential for the efficiency and competitiveness of intermodal solutions. They serve as interface between transport modes, transport and logistical operations. During the field missions, the Consultant has revealed that understanding of a logistics centre s functions varies across the region. Many stakeholders tend to call terminals or warehouses a logistics centre, which is not justified. Therefore, the Consultant will use the commonly adopted methodology of EUROPLATFORMS in defining this notion. The term logistics centre applies for sites especially organised for carrying out logistics activities. The name of these hubs may vary across Europe and imply such notions as Centres logistiques de fret, Gares routières de marchandises, Logistics park, Platform freight terminal, Interporto, Centro integrado de mercancias, Güterverkehrzentrum, Transport centre, Freight village or Transport center 27 "A logistics centre is a defined area within all activities relating to transport, logistics and the distribution of goods, both for national transport and international transit, are carried out on commercial basis by various specialised service operators. These operators can either be owners or tenants of buildings and facilities (warehouses, break-bulk centres, storage areas, offices, car parks, etc.) which have been built there. Also in order to comply with free competition rules, a logistics centre must allow access to all companies involved in the activities set out above. 27 See What is a logistics centre, EUROPLATFORMS EEIG, January 2004 Inception Report Annex 3 Part 2 Page 177 of 207

386 A logistics centre must also be equipped with facilities necessary to meet requirements to carry out the above mentioned operations. If possible, it should also include public services for the staff and equipment of the users. In order to encourage intermodal transport for the handling of goods, a logistics centre must preferably be served by a multiplicity of transport modes (road, rail, deep sea, inland waterway, air). Finally, it is imperative that a logistics centre is managed by a single body, either public or private" 28. This definition was established by EUROPLATFORMS in the Appendix to the Statute of Europlatforms E.E.I.G. in Results to be achieved For each direct beneficiary country, the Terms of Reference specify areas and indicate preliminary locations to be investigated. However, the indicative number of logistics centres is not suggested. The Consultant anticipates that each direct beneficiary country may favour the location of at least one logistics centre. The final identification of priority projects will be derived from multicriteria analysis in order to establish one logistics centre per country to form a TRACECA network of logistics centres in Western NIS and Caucasus. The application of macro-location criteria enables to identify aggregated locations. The microlocation criteria is précising a concrete hub. The macro criteria should be common for all TRACECA countries to define comparable locations on the network, while micro-criteria may be country specific. Within the scope of the project identification exercise is executed in two phases within two consequent tasks: A Analysis of the TRACECA logistics network and of the related operation of transport and logistics within the network; and B Identification, ranking and promotion of the logistics centre projects. Within the scope of the task A the macro locations will be identified. Within these locations the sites for priority projects will be ranked to create a short-list of priority projects as a result of the task B Methodology of multicriteria analysis for evaluation of the logistics nodes Location is a key factor for all the transport operators as optimisation of delivery time and transport saving costs is one of the elements for taking a decision on logistics centre location. Interoperability of transport connections and coordination of the transport modes are essential. That is why most European Logistics Centres are located at hub points at intersections of main transport routes and closed to the markets. The logistics centres are established where major traffic flow are concentrated and distributed. These are normally sea ports, inland multimodal terminals, inland ports and railway ports. For establishment of an international logistics centres in TRACECA the following aspects are essential: 28 Adapted text Page 178 of 207 Annex 3 Part 2 Inception Report

387 Initial general considerations and willingness to finance logistics centres by various types of actors; Reference of potential locations for logistics centres to TRACECA corridor application of the network principle; Application of multicriteria analysis to justify the location on macro-level (regional level), including market potential and level of economic activity; Defining and categorising the logistics centre to be established at the macro location as either sea port, inland hub, inland port, rail port stressing intermodality solutions and core network access; Definition of the specific sites within selected location in direct beneficiary countries using the multicriteria analysis with micro-criteria and in consultation with stakeholders. Derived from the definition of a logistics centre, and in full compliance with the TOR, the following criteria groups were used to select an attractive location for an international logistics centre. 1. Possibility of financing (macro-micro criterion mix) 2. Relevance for TRACECA corridor and location at the network (macro) 3. Market potential for a logistics centre (macro) 4. Economic activities around the location (macro-micro criterion mix) 5. Quality of the location in terms of intermodality (macro-micro criterion mix) 6. Core network access (macro-micro criterion mix) These six criteria were assigned specific shares (weights) to reveal to which extent they satisfy the locations are suitable for logistics centres. These criteria groups may either include macro or macro-micro criterion mix. Macro criteria are those that only depict the aggregated level at the regional of concerned parameters. Macromicro criterion group can be used at both stages of analysis consequently with fine-tuned micro parameters. This approach allows to consider realistic sites for location already at the macrolevel. The scheme below presents the components to run a macro multi-criteria analysis. The weight attributed to each criteria group, and weights of sub-parameters within each criteria group are also shown. Inception Report Annex 3 Part 2 Page 179 of 207

388 Figure 107: Evaluation scheme - Macro locations for logistics nodes project Page 180 of 207 Annex 3 Part 2 Inception Report

389 These criteria are summarised in the table below in a form of evaluation grid. The requirements for a model logistics centre are also summarised. This table is used to benchmark locations in TRACECA countries and to reveal their potential to accommodate a modern international logistics centre: Criteria for determination of macrolocations TRACECA Requirements of a model ILC for 0 or 1 Score Inland hub / port / inland port / rail Types port 1. Financing model 10% 1.1 public Yes private Yes IFIs N/A TRACECA corridor 20% 2.1 Direct location at the TRACECA route Yes Importance as a hub to direct traffic onto TRACECA Yes International importance Yes National importance Yes Regional importance Yes Market potential 25% 3.1 International importance yes (medium - high) Suitable for logistics activities YES, e.g. food stuff / chemical products / consumer goods / collective consignments -Commercial goods Hub for container operation yes (medium - high) Hub for international trade yes (medium - high) National importance yes (medium - high) Suitable for logistics activities YES, e.g. food stuff / chemical products / consumer goods / collective consignments -Commercial goods Hub for container operation yes (medium - high) Hub for distribution of goods yes (medium - high) Export yes Import yes Economic activities yes (medium - high) 1 15% 4.1 Industrial areas yes Potential for consumers yes Potential for the logistics activities (value added) yes Quality of the location 15% 5.1 Intermodality status medium / high 1 60% multimodal Priority road-rail Priority road-inland waterway Priority road air Priority Intermodality potential medium / high 1 40% Inception Report Annex 3 Part 2 Page 181 of 207

390 Criteria for determination of macrolocations TRACECA Requirements of a model ILC for 0 or 1 Score multimodal Priority road-rail Priority road-inland waterway Priority road air Priority Core network access 15% 6.1 Road network Priority international road network Priority national road network Priority Railway network Railway network international Priority Railway network national Priority ports (only for port LC) Priority inland ports Priority airports Priority Total score: 100% The results of applied analysis are presented in the next section as a summary table. The country-per-country location fact sheets are also enclosed to demonstrate the results of individual evaluations. For the locations scored more than 70% the specific sites will be proposed for the phase B. These sites will be evaluated using the multicriteria analysis at the micro level. For most successful projects (one site per country) feasibility studies will be prepared in the phase C Country specific justification for macro location The following table summarises the locations that were to be inspected by the Consultant in order to check if they comply with the requirements for creation of the international logistics centre in countries. The table also contains additional locations checked by the Consultant to investigate and justify the potential of establishment of an international logistics centre. Table 13: Main Hubs analysed for preliminary list of locations at ports, large cities, crossroads Country Armenia Azerbaijan Locations in TOR Vicinity of Yerevan Caspian ports Main hubs analysed Location Type 29 Matching criteria of ILC in % 30 Specification and classification of ILC Yerevan 2 80% Inland hub (dry port with intermodal terminal), major international traffic junction / node, cargo potential in the caption region, intermodal transport potential Baku / Alyat 1 87% Sea port, major international traffic junction / node, large cargo potential in the caption region, intermodal transport Sea Port; 2 - Inland hub (Dry port with a intermodal terminal); 3 - Inland port; 4 - Rail port 30 See fact sheets per country for a detailed evaluation Page 182 of 207 Annex 3 Part 2 Inception Report

391 Country Locations in TOR Main hubs analysed Location Type 29 Matching criteria of ILC in % 30 Specification and classification of ILC Georgia Tbilisi Tbilisi % Inland hub (dry port with intermodal terminal), major international traffic junction / node, large cargo potential in the caption region, intermodal transport Port of Poti Port of Poti %% Sea Port, major traffic junction / node, limited cargo potential in the caption region, intermodal transport Port of Batumi % Sea Port, major traffic junction / node, limited cargo potential in the caption region, intermodal transport Moldova Chisinau Chisinau % Inland hub (dry port with intermodal terminal), major international traffic junction / node, limited cargo potential in the caption region, intermodal transport Giurgiulesti, GIFP % Inland port, important junction / node, limited cargo potential in the caption region, intermodal transport Ukraine Kiev Kiev 2 84% Inland hub (dry port with intermodal terminal), major international traffic junction / node, large cargo potential in the caption region, intermodal transport Ilyichevsk Ports area of Odessa / Ilyichevsk region (Odessa, Ilyichevsk / Yuzhny) 1 97% Sea Port, major international traffic junction / node, large cargo potential in the caption region, intermodal transport Kovel Kovel % Basis for Rail-Rail connections, limited logistics cargo potential in the caption region, mostly unimodal Lviv % Inland hub (dry port with intermodal terminal), major international traffic junction / node, large cargo potential in the caption region, intermodal transport Inception Report Annex 3 Part 2 Page 183 of 207

392 Armenia Yerevan location factsheet MACRO LOCATION: YEREVAN, Evaluation ARMENIA results Remarks Weight Types Inland hub Score 10% 1. Financing model 7% 33.3% 1.1 public 1 Yes state promotion % 1.2 private 1 Yes There is an initial interest of the national private companies interviewed to invest in Yerevan (Apaven, Trans Alliance). According to the Information of Camber of Commerce of Armenia several retail and real estate companies would be also interested to invest % 1.3 IFIs 0 NA Further investigations needed % 2. TRACECA corridor 20% 67% 2.1 Direct location at the TRACECA route 1 Yes Importance for the TRACECA route % 2.2 Importance as a hub to direct traffic onto TRACECA 1 Yes Importance for the TRACECA route % 2.2.1International importance 1 Yes 35% National importance 1 Yes Important node in the network of logistics centres 0.40 Main distribution - for Yerevan Population 3,213,011 M.(2001) sqkm Density of the population 107 inhabitants /sq km % Regional importance 1 Yes Important node in the network of logistics centres % 3. Market potential 21% 30% 3.1 International importance % 3.1.1Suitable for logistics activities 0 No In terms of absence the political problems and limited transport connections with the neighboring countries (Azerbaijan, Turkey) Yerevan can t be considered as hub with the international importance at the moment. 0 40% 3.1.2Hub for container operation 1 Yes % Hub for international trade 0 No 0 30% 3.2 National importance % 3.1.1Suitable for logistics activities 1 food stuff /consumer goods / collective 0.4 Page 184 of 207 Annex 3 Part 2 Inception Report

393 MACRO LOCATION: YEREVAN, Evaluation ARMENIA results Remarks Weight Types Inland hub Score consignments / commercial goods 40% 3.1.2Hub for container operation 1 medium There is a long term growth potential for container traffic. Yerevan is the main container hub for the country % Hub for distribution of goods 1 high % 3.3 Export 1 Yes % 3.4 Import 1 Yes % 4. Economic activities Source: National Statistics Service of the Republic of Armenia (2007): In 2007, Yerevan s share in the total industry output of the country accounted 48%. 15% 25% 4.1 Industrial areas 1 Yes Source: National Statistics Service of the Republic of Armenia (2007): In 2007, Yerevan s share in the total industry output of the country accounted 48% % 4.2 Potential for consumers 1 Yes 37% of Armenian population is leaving in Yerevan % 4.3 Potential for the logistics activities (value added) 1 Yes % 5. Quality of the location 8% 60% 5.1 Intermodality status medium 18% 40% multimodal 0 no 0 30% road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 0 No 0 40% 5.2 Intermodality potential high Increase of containerization of cargos and open of connection with Turkey will add attractiveness of Yerevan as a regional hub. 34% 40% multimodal 1 Yes Aviation sector % road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 1 Yes Yerevan is relatively small but a main destination for air cargo - (courier - express parcel) CEP services in the country % 6. Core network access 10% 25% 6.1 Road network % international road network 1 Yes Istanbul-Gumri-Yerevan % national road network 1 Yes Poti-Tbilisi-Yerevan 0.4 Inception Report Annex 3 Part 2 Page 185 of 207

394 MACRO LOCATION: YEREVAN, Evaluation ARMENIA results Remarks Weight Types Inland hub Score 25% 6.2 Railway network % Railway network international 1 Yes Poti-Tbilisi-Yerevan % Railway network national 1 Yes Poti-Tbilisi-Yerevan % 6.3 ports (only for port LC) No 0 15% 6.4.inland ports 0 No 0 15% 6.5 airports 1 Yes Yerevan international airport % Azerbaijan Baku location factsheet MACRO LOCATION: BAKU, Evaluation AZERBAIJAN results Remarks Weight Types Sea port Score 10% 1. Financing model 3% 33.3% 1.1 public 1 Yes state promotion, Presidential support and execution by the Ministry of Transport % 1.2 private 0 Not known Further investigations needed % 1.3 IFIs 0 NA Further investigations needed, IFI involvement against corresponding state guarantees % 2. TRACECA corridor 20% 67% 2.1 Direct location at the TRACECA route 1 Yes Importance for the TRACECA route % 2.2 Importance as a hub to direct traffic onto TRACECA 1 Yes Importance for the TRACECA route % 2.2.1International importance 1 Yes Important node in the network of logistics centres % National importance 1 Yes Metropolitan region (2009), City of Baku (2009), density of population inhabitants % Regional importance 1 Yes Important node in the network of logistics centres % 3. Market potential 25% 30% 3.1 International importance % 3.1.1Suitable for logistics activities 1 Yes TRACECA and North-South corridors % 3.1.2Hub for container operation 1 Yes regular container services Alyat-Turkemenbashi, Alyat - Aktau % Hub for international trade 1 Yes Regional and interregional trade flows % 3.2 National importance % 3.1.1Suitable for logistics activities 1 food stuff /consumer goods / The old port of Baku does not have the capacity for such activities, the new port will 0.4 Page 186 of 207 Annex 3 Part 2 Inception Report

395 MACRO LOCATION: BAKU, Evaluation Remarks AZERBAIJAN results Weight Types Sea port Score collective take over this function consignments / commercial goods This will be the major hub for container operation on 40% 3.1.2Hub for container operation 1 high Caspian sea 0.4 Market of Baku and containerized goods for oil industry % Hub for distribution of goods 1 high 20% 3.3 Export 1 Yes % 3.4 Import 1 Yes % 4. Economic activities 15% 25% 4.1 Industrial areas 1 Yes Baku is location 65km to the North of Alyat and will be in port hinterland and in a logistics centre capture region. More than 25% of population of Azerbaijan reside in Baku. The major supply basis for the containerized goods of the oil industry is located 30 km away from Alyat % 4.2 Potential for consumers 1 Yes Potential for the logistics activities (value added) 1 Yes high % 15% 5. Quality of the location 11% 60% 5.1 Intermodality status high 42% 40% multimodal 1 Yes % road-rail 1 Yes % road-inland waterway 0 No 0 The air cargo operation in Baku airport 0 15% road air 0 No 40% 5.2 Intermodality potential high 28% 40% multimodal 1 Yes Maritime-road-rail % road-rail 1 Yes Priority % road-inland waterway 0 No 0 15% road air 0 Yes Baku is the main air hub, distance from Alyat is about 80 km 0 15% 6. Core network access 13% 25% 6.1 Road network % international road network 1 Yes Baku-Tbilisi, Baku - Iran, Baku- Russia, Main TRACECA road from Caucasus to Central Asia % national road network 1 Yes % 6.2 Railway network 0.25 Railway connection to Western TRACECA countries % Railway network international 1 Yes 30% Railway network national 1 Yes % 6.3 ports (only for port LC) 1 Yes % 6.4.inland ports 0 No 0 15% 6.5 airports 1 Yes % Inception Report Annex 3 Part 2 Page 187 of 207

396 Georgia Tbilisi location factsheet MACRO LOCATION: TBILISI, Evaluation GEORGIA results Remarks Weight Types INLAND HUB Score 10% 1. Financing model 10% 33.3% 1.1 public 1 Yes need for a logistics centre is formulated by the municipality of the city % 1.2 private 1 Yes Land plots available at private landowners and real estate companies % 1.3 IFIs 1 Yes Possible EBRD in cooperation with a real estate company % 2. TRACECA corridor 20.0% 67% 2.1 Direct location at the TRACECA route 1 Yes Direct location at TRACECA route % 2.2 Importance as a hub to direct traffic onto TRACECA Yes % 2.2.1International importance 1 Yes important node in the network of logistics centres % National importance 1 Yes important node in the network of logistics centres % Regional importance 1 Yes important node in the network of logistics centres % 3. Market potential 20.0% 30% 3.1 International importance % 3.1.1Suitable for logistics activities 1 Yes 0.4 leading freight forwarding companies confirmed increase of container traffic % 3.1.2Hub for container operation 1 Yes 20% Hub for international trade 1 Yes % 3.2 National importance % 3.1.1Suitable for logistics activities 1 high main land hub of Georgia % 3.1.2Hub for container operation 1 high % Hub for distribution of goods 1 high 0.2 export is not well developed, due to absence of a logistics hub 0 20% 3.3 Export 0 low 20% 3.4 Import 1 high % 4. Economic activities 15% 25% 4.1 Industrial areas 1 high machinery, aircraft, textile 0.25 potential use as a hub for distribution of goods in the country level - metropolitan region inhabitants (2008) - almost 27% of Georgian population % 4.2 Potential for consumers 1 high 4.3 Potential for the logistics collection and consolidation 40% activities (value added) 1 high of cargo-regional hub % 5. Quality of the location 7.80% 60% 5.1 Intermodality status high 18% 40% multimodal 0 no 0 Page 188 of 207 Annex 3 Part 2 Inception Report

397 MACRO LOCATION: TBILISI, Evaluation GEORGIA results Remarks Weight Types INLAND HUB Score 30% road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 0 no International airport 0 40% 5.2 Intermodality potential high 34% 40% multimodal 1 Yes % road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 1 Yes potential to integrate air cargo % 6. Core network access 10% 25% 6.1 Road network % international road network 1 Yes East-West Highway, Turkish border-batumi-poti-tbilisi- Azerbaijani Border % national road network 1 Yes East-West Highway % 6.2 Railway network % Railway network international 1 Yes TRACECA % Railway network national 1 Yes TRACECA % 6.3 ports (only for port LC) 0 No 0 15% 6.4.inland ports 0 no 0 15% 6.5 airports 1 Yes % Poti location factsheet MACRO LOCATION: POTI, Evaluation GEORGIA results Remarks Weight Types SEA PORT Score 10% 1. Financing model 3% 33.3% 1.1 public 0 No not visible % 1.2 private 1 Yes The project of the industrial free zone is under development and will include all logistics services requested. This project is implemented by U.A.E. investors (Ras Al Khayman - Rakia). This project is in a very early planning status. Before this project is implemented there is no interest of private investors in ILC % 1.3 IFIs 0 No Only in the development of the industrial free zone % 2. TRACECA corridor 20.0% 67% 2.1 Direct location at the TRACECA route 1 Yes Direct location at TRACECA route - main gateway to Caucasus % 2.2 Importance as a hub to direct traffic onto TRACECA Yes % 2.2.1International importance 1 Yes main gateway to Caucasus on Black Sea 0.40 Inception Report Annex 3 Part 2 Page 189 of 207

398 MACRO LOCATION: POTI, Evaluation GEORGIA results Remarks Weight Types SEA PORT Score 35% National importance 1 Yes main gateway to Caucasus on Black Sea % Regional importance 1 Yes main gateway to Caucasus on Black Sea % 3. Market potential 7.5% 30% 3.1 International importance % 3.1.1Suitable for logistics activities 0 No No consumer area in the capture region 0 40% 3.1.2Hub for container operation 1 Yes yes, TEU per year, but not stripped in Poti - final destination in Tbilisi and transit to Armenia and Azerbaijan % Hub for international trade 1 Yes % 3.2 National importance % 3.1.1Suitable for logistics activities 0 No no consumer area, the population is people 0 40% 3.1.2Hub for container operation 1 high % Hub for distribution of goods 0 No 0 20% 3.3 Export 0 low export is not well developed 0 The hub is used in domestic 20% 3.4 Import 0 low and international transit, 0 15% 4. Economic activities 0% 25% 4.1 Industrial areas 0 no currently no 0 35% 4.2 Potential for consumers 0 no inhabitants Potential for the logistics activities (value added) 0 low to medium 0 40% 15% 5. Quality of the location 10.5% 60% 5.1 Intermodality status medium 42% 40% multimodal 1 Yes % road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 0 no no international airport 0 40% 5.2 Intermodality potential medium 28% 40% multimodal 1 Yes % road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 0 No 0 15% 6. Core network access 11% 25% 6.1 Road network % international road network 1 Yes Poti-Tbilisi-Azerbaijani Border % national road network 1 Yes East-West Highway % 6.2 Railway network % Railway network international 1 Yes TRACECA % Railway network national 1 Yes TRACECA % 6.3 ports (only for port LC) 1 Yes % 6.4.inland ports 0 No 0 15% 6.5 airports 0 No % Page 190 of 207 Annex 3 Part 2 Inception Report

399 Batumi location factsheet MACRO LOCATION: BATUMI, Evaluation GEORGIA results Remarks Weight Types SEA PORT Score 10% 1. Financing model 0% 33.3% 1.1 public 0 No not observed % 1.2 private 0 No not observed % 1.3 IFIs 0 No no indication % 2. TRACECA corridor 20.0% 67% 2.1 Direct location at the TRACECA route 1 Yes Direct location at TRACECA route - main gateway to Caucasus % 2.2 Importance as a hub to direct traffic onto TRACECA Yes % 2.2.1International importance 1 Yes main port for oil and liquid petroleum products coming from Azerbaijan and Central Asia % National importance 1 Yes main gateway to Caucasus on Black Sea % Regional importance 1 Yes main gateway to Caucasus on Black Sea % 3. Market potential 9.5% 30% 3.1 International importance % 3.1.1Suitable for logistics activities 0 No No consumer area in the capture region, population of , oil cargo as main commodity 0 40% 3.1.2Hub for container operation 1 Yes yes, TEU in 2009, most of the containers are stripped to use railcars with higher capacity (sugar, grain and wheat) % Hub for international trade 1 Yes % 3.2 National importance 0 40% 3.1.1Suitable for logistics activities 0 No small consumer area, oil cargos 0 40% 3.1.2Hub for container operation 0 No transit - domestic and international transit 0 20% Hub for distribution of goods 0 No 0 20% 3.3 Export 1 medium seasonal export of citrus fruits, oil products % 3.4 Import 0 low bulk cargoes 0 15% 4. Economic activities 0% 25% 4.1 Industrial areas 0 no currently no 0 35% 4.2 Potential for consumers 0 low Potential for the logistics low to 40% activities (value added) 0 medium 0 15% 5. Quality of the location 10.5% 60% 5.1 Intermodality status medium 42% 40% multimodal 1 Yes % road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 0 no International airport - mainly 0 Inception Report Annex 3 Part 2 Page 191 of 207

400 MACRO LOCATION: BATUMI, Evaluation GEORGIA results Remarks Weight Types SEA PORT Score for tourists 40% 5.2 Intermodality potential medium 28% 40% multimodal 1 Yes % road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 0 No 0 15% 6. Core network access 11% 25% 6.1 Road network % international road network 1 Yes Batumi-Samtredia-Tbilisi- Azerbaijani Border % national road network 1 Yes East-West Highway % 6.2 Railway network % Railway network international 1 Yes TRACECA % Railway network national 1 Yes TRACECA % 6.3 ports (only for port LC) 1 Yes % 6.4.inland ports 0 No 0 15% 6.5 airports 0 No only tourist purposes % Moldova Chisinau location factsheet MACRO LOCATION: CHISINAU, Evaluation MOLDOVA results Remarks Weight Types Inland hub Score 10% 1. Financing model 7% 33,3% 1.1 public 1 Yes 0,33 33,3% 1.2 private 1 Yes initial interest of international 0,33 companies to invest to be further investigated 33,3% 1.3 IFIs 0 to be further investigated 0,00 20% 2. TRACECA corridor 20,0% 67% 2.1 Direct location at the TRACECA 1 Yes 0,67 route 33% 2.2 Importance as a hub to direct Yes 0,33 traffic onto TRACECA 40% International importance 1 high 0,40 35% National importance 1 Yes important node in the network 0,35 of logistics centres 25% Regional importance 1 Yes important node in the network 0,25 of logistics centres 25% 3. Market potential 22,0% 30% 3.1 International importance 0,18 40% 3.1.1Suitable for logistics activities 1 Yes 0,4 40% 3.1.2Hub for container operation 0low 0 20% Hub for international trade 1 medium 0,2 30% 3.2 National importance 1 0,3 40% 3.1.1Suitable for logistics activities 1 Yes actual statistics is to be 0,4 obtained from the relevant authorities and stakeholder. 40% 3.1.2Hub for container operation 1 high relevant statistics to be 0,4 Page 192 of 207 Annex 3 Part 2 Inception Report

401 MACRO LOCATION: CHISINAU, Evaluation MOLDOVA results Remarks Weight Types Inland hub Score obtained in Phase B 20% Hub for distribution of goods 1high 0,2 20% 3.3 Export 1 Yes 0,2 20% 3.4 Import 1 Yes 0,2 15% 4. Economic activities 15% 25% 4.1 Industrial areas 1 Yes 0,25 35% 4.2 Potential for consumers 1 Yes 0,35 40% 4.3 Potential for the logistics activities 1 Yes suitable cargo for logistics 0,4 (value added) activities 15% 5. Quality of the location 12,75% 60% 5.1 Intermodality status high 51% 40% multimodal 1 Yes currently modest 0,4 30% road-rail 1 Yes 0,3 15% road-inland waterway 0No 0 15% road air 1 Yes 0,15 40% 5.2 Intermodality potential high 34% 40% multimodal 1 Yes region is significant for 0,4 containers 30% road-rail 1 Yes 0,3 15% road-inland waterway 0No 0 15% road air 1 Yes 0,15 15% 6. Core network access 10% 25% 6.1 Road network 0,25 60% international road network 1 Yes TRACECA transport corridor 0,6 40% national road network 1 Yes 0,4 25% 6.2 Railway network 0,25 70% Railway network international 1 Yes TRACECA transport corridor 0,7 30% Railway network national 1 Yes 0,3 20% 6.3 ports (only for port LC) 0 No 0 15% 6.4.inland ports 0 No 0 15% 6.5 airports 1 Yes 0,15 86,2% Giurgiulesti location factsheet MACRO LOCATION: Evaluation GIURGIULESTI, MOLDOVA results Remarks Weight Types Inland hub Score 10% 1. Financing model 10% 33,3% 1.1 public 1 Yes 0,33 33,3% 1.2 private 1 Yes GIFP is operated by Danube Logistics S.A., already first settlement of private companies 0,33 33,3% 1.3 IFIs 1 Yes EBRD 0,33 20% 2. TRACECA corridor 20,0% 2.1 Direct location at the TRACECA 67% route 1 Yes 0, Importance as a hub to direct 33% traffic onto TRACECA Yes 0,33 40% International importance 1 high 0,40 35% National importance 1 Yes important node in the network of 0,35 Inception Report Annex 3 Part 2 Page 193 of 207

402 MACRO LOCATION: Evaluation GIURGIULESTI, MOLDOVA results Remarks Weight Types Inland hub Score logistics centres 25% Regional importance 1Yes important node in the network of logistics centres 0,25 25% 3. Market potential 19,0% 30% 3.1 International importance 0,06 40% 3.1.1Suitable for logistics activities 0low 0 40% 3.1.2Hub for container operation 0low 0 20% Hub for international trade 1 medium 0,2 30% 3.2 National importance 1 0,3 40% 3.1.1Suitable for logistics activities 1Yes actual statistics is to be obtained from the relevant authorities and stakeholder. 0,4 40% 3.1.2Hub for container operation 1high relevant statistics to be obtained in Phase B 0,4 20% Hub for distribution of goods 1high 0,2 20% 3.3 Export 1 Yes 0,2 20% 3.4 Import 1 Yes 0,2 15% 4. Economic activities 6% 25% 4.1 Industrial areas 0 low 0 35% 4.2 Potential for consumers 0 No region is rural area Potential for the logistics activities 40% (value added) 1 Yes suitable cargo for logistics activities 0,4 15% 5. Quality of the location 12,75% 60% 5.1 Intermodality status high 51% 40% multimodal 1 Yes currently modest 0,4 30% road-rail 1 Yes 0,3 15% road-inland waterway 1 Yes 0,15 15% road air 0No 0 40% 5.2 Intermodality potential high 34% 40% multimodal 1 Yes 0,4 30% road-rail 1 Yes 0,3 15% road-inland waterway 1 Yes 0,15 15% road air 0No 0 15% 6. Core network access 10% 25% 6.1 Road network 0,25 60% international road network 1 Yes TRACECA transport corridor 0,6 40% national road network 1 Yes 0,4 25% 6.2 Railway network 0,25 70% Railway network international 1 Yes TRACECA transport corridor 0,7 30% Railway network national 1 Yes 0,3 20% 6.3 ports (only for port LC) 0 No 0 15% 6.4.inland ports 1 Yes 0,15 15% 6.5 airports 0 No 0 77,5% Page 194 of 207 Annex 3 Part 2 Inception Report

403 Ukraine Kiev location factsheet MACRO LOCATION: KIEV, Evaluation UKRAINE results Remarks Weight Types Inland hub Score 10% 1. Financing model 10% 33,3% 1.1 public 1 Yes state promotion 0,33 33,3% 1.2 private 1 Yes initial interest of interviewed international freight forwarders to invest in Kiev (Kuehne & Nagel, Willy Betz, Militzer & Muench, Panalpina) 0,33 33,3% 1.3 IFIs 1 Yes EBRD - e.g.lc in Brovary, interest in case international companies are involved 0,33 20% 2. TRACECA corridor 6,6% 67% 2.1 Direct location at the TRACECA route 0 No 0,00 33% 2.2 Importance as a hub to direct traffic onto TRACECA Yes 0,33 40% 2.2.1International importance 1 Yes important node in the network of logistics centres 0,40 35% National importance 1 Yes important node in the network of logistics centres 0,35 25% Regional importance 1 Yes important node in the network of logistics centres 0,25 25% 3. Market potential 25,0% 30% 3.1 International importance Yes 0,3 40% 3.1.1Suitable for logistics activities 1 Yes 0,4 40% 3.1.2Hub for container operation 1 Yes 0,4 20% Hub for international trade 1 Yes 0,2 30% 3.2 National importance Yes 0,3 40% 3.1.1Suitable for logistics activities 1 Yes actual statistics is to be obtained from the relevant authorities and stakeholder. The leading forwarding companies have confirmed the existence of container traffic and potential. 0,4 40% 3.1.2Hub for container operation 1 high relevant statistics to be obtained in Phase B 0,4 20% Hub for distribution of goods 1 high 0,2 significant regional export 20% 3.3 Export 1 Yes cargo volumes 0,2 significant regional import 20% 3.4 Import 1 Yes cargo volumes 0,2 15% 4. Economic activities 15% 25% 4.1 Industrial areas 1 Yes SOURCE: MFA PUBLICATIONS UKRAINE (2007) In 2006, Kiev region accounted for 1.5% in the total volume of Ukraine s commodities export and 0,25 Inception Report Annex 3 Part 2 Page 195 of 207

404 MACRO LOCATION: KIEV, Evaluation UKRAINE results Remarks Weight Types Inland hub Score contributed 4.6% to Ukraine s commodities import. 35% 4.2 Potential for consumers 1 high largest city and capital of Ukraine 0,35 40% 4.3 Potential for the logistics activities (value added) 1 high In 2006, the regional authorities examined and processed 227 document packages submitted by foreign investors, representatives of foreign investors, and business entities registered in Kiev region. 0,4 15% 5. Quality of the location 15,0% 60% 5.1 Intermodality status high 60% 40% multimodal 1 Yes increase of containerisation of cargos will add to attractiveness of Kiev as a regional hub. 0,4 30% road-rail 1 Yes 0,3 15% road-inland waterway 1 Yes 0,15 15% road air 1 Yes 0,15 40% 5.2 Intermodality potential high 40% 40% multimodal 1 Yes 0,4 30% road-rail 1 Yes 0,3 15% road-inland waterway 1 Yes 0,15 15% road air 1 Yes 0,15 15% 6. Core network access 12% 25% 6.1 Road network Corridor III - Berlin - Wroclaw - Krakow - Lviv - Kiev, Corridor V - Trieste - Ljubljana - Budapest - Lviv, Corridor IX - Helsinki - Kiev - Odessa - Chisinau - Bucharest - Plovdiv - Alexandropoulos 0,25 60% international road network 1 Yes 0,6 40% national road network 1 Yes 0,4 25% 6.2 Railway network Corridor III - Berlin - Wroclaw - Krakow - Lviv - Kiev, Corridor V - Trieste - Ljubljana - Budapest - Lviv, Corridor IX - Helsinki - Kiev - Odessa - Chisinau - Bucharest - Plovdiv - Alexandropoulos 0,25 70% Railway network international 1 Yes 0,7 30% Railway network national 1 Yes 0,3 20% 6.3 ports (only for port LC) 0 Yes 0 15% 6.4.inland ports 1 Yes planned new inland river port 0,15 15% 6.5 airports 1 Yes 0,15 84% Page 196 of 207 Annex 3 Part 2 Inception Report

405 Ilyichevsk/Odessa location factsheet MACRO LOCATION: Evaluation ILYICHEVSK/ODESSA, UKRAINE results Remarks Weight Types SEA PORT Score 10% 1. Financing model 7% 33,3% 1.1 public 1 Yes 0,33 33,3% 1.2 private 1 Yes stakeholders have interest 0,33 33,3% 1.3 IFIs 0 further investigations needed - Phase B and C 0,00 20% 2. TRACECA corridor 20% 67% 2.1 Direct location at the 1 Yes 0,67 TRACECA route 33% 2.2 Importance as a hub to direct Yes 0,33 traffic onto TRACECA 40% 2.2.1International importance 1 Yes Important node in the network 0,40 of logistics centres 35% National importance 1 Yes Important node in the network 0,35 of logistics centres 25% Regional importance 1 Yes Important node in the network 0,25 of logistics centres 25% 3. Market potential 25% 30% 3.1 International importance 1 0,3 40% 3.1.1Suitable for logistics activities 1 Yes due to seaport 0,4 40% 3.1.2Hub for container operation 1 high due to seaport 0,4 20% Hub for international trade 1 high due to seaport 0,2 30% 3.2 National importance 1 0,3 40% 3.1.1Suitable for logistics activities 1 Yes due to seaport and economic 0,4 region 40% 3.1.2Hub for container operation 1 high due to seaport and economic 0,4 region as well as hinterland connection 20% Hub for distribution of goods 1 high due to seaport and economic 0,2 region as well as hinterland connection 20% 3.3 Export 1 Yes 0,2 20% 3.4 Import 1 Yes 0,2 15% 4. Economic activities 15% 25% 4.1 Industrial areas 1 Yes 0,25 35% 4.2 Potential for consumers 1 Yes 0,35 40% 4.3 Potential for the logistics 1 Yes high 0,4 activities (value added) 15% 5. Quality of the location 15% 60% 5.1 Intermodality status high 60% 40% multimodal 1 Yes 0,4 30% road-rail 1 Yes 0,3 15% road-inland waterway 1 Yes 0,15 15% road air 1 Yes 0,15 40% 5.2 Intermodality potential high 40% 40% multimodal 1 Yes 0,4 30% road-rail 1 Yes 0,3 15% road-inland waterway 1 Yes 0,15 15% road air 1 Yes 0,15 Inception Report Annex 3 Part 2 Page 197 of 207

406 MACRO LOCATION: Evaluation ILYICHEVSK/ODESSA, UKRAINE results Remarks Weight Types SEA PORT Score 15% 6. Core network access 15% 25% 6.1 Road network 0,25 60% international road network 1 Yes TRACECA transport corridor 0,6 and Pan-European transport corridor IX 40% national road network 1 Yes 0,4 25% 6.2 Railway network 0,25 70% Railway network international 1 Yes TRACECA transport corridor 0,7 and Pan-European transport corridor IX 30% Railway network national 1 Yes 0,3 20% 6.3 ports (only for port LC) 1 Yes Baltic-Black Sea transport 0,2 corridor 15% 6.4.inland ports 1 Yes 0,15 15% 6.5 airports 1 Yes 0,15 97% Kovel location factsheet MACRO LOCATION: KOVEL, Evaluation UKRAINE results Remarks Weight Types INLAND HUB Score 10% 1. Financing model 3% 33.3% 1.1 public 1 Yes state promotion % 1.2 private 0 No private sector revealed little interest % 1.3 IFIs 0 No Limited interest of IFIs if there is no private company as an operator % 2. TRACECA corridor 17.4% 67% 2.1 Direct location at the TRACECA route 1 Yes % 2.2 Importance as a hub to direct traffic onto TRACECA Yes % 2.2.1International importance 0 No % National importance 1 Yes % Regional importance 1 Yes % 3. Market potential 0.0% 30% 3.1 International importance 0 40% 3.1.1Suitable for logistics activities 0 No Region is insignificant for distribution of containers 0 40% 3.1.2Hub for container operation 0 No 0 20% Hub for international trade 0 No 0 30% 3.2 National importance 0 40% 3.1.1Suitable for logistics activities 0 low 0 relevant statistics to be 40% 3.1.2Hub for container operation 0 low obtained in Phase B 0 20% Hub for distribution of goods 0 low 0 20% 3.3 Export 0 low in terms of logistics operation cargo - containerized cargos - not relevant 0 20% 3.4 Import 0 low in terms of logistics operation 0 Page 198 of 207 Annex 3 Part 2 Inception Report

407 MACRO LOCATION: KOVEL, Evaluation UKRAINE results Remarks Weight Types INLAND HUB Score cargo - containerized cargos - not relevant 15% 4. Economic activities 0% 25% 4.1 Industrial areas 0 Low low concentration of logistics suitable industry 0 35% 4.2 Potential for consumers 0 low Kovel Ukraine city population - 67,000 (2008) Potential for the logistics activities (value added) 0 low 0 40% 15% 5. Quality of the location 4.50% 60% 5.1 Intermodality status high 18% 40% multimodal 0 low 0 30% road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 0 No No international airport 0 40% 5.2 Intermodality potential high 12% 40% multimodal 0 Yes Container traffic is modest 0 30% road-rail 1 Yes % road-inland waterway 0 No 0 15% road air 0 Yes low potential 0 15% 6. Core network access 8% 25% 6.1 Road network % international road network 1 Yes Corridor Berlin-Warsaw- Brest-Kovel-Kiev) % national road network 1 Yes Motorway E 373 Kovel - Kiev % 6.2 Railway network 0.25 Corridor Berlin-Warsaw-Brest- Kovel-Kiev % Railway network international 1 Yes 30% Railway network national 1 Yes Rail port of Ukrainian railway % 6.3 ports (only for port LC) 0 No 0 15% 6.4.inland ports 0 No 0 15% 6.5 airports 0 No % Lviv location factsheet MACRO LOCATION: LVIV, Evaluation UKRAINE results Remarks Weight Types Inland hub Score 10% 1. Financing model 7% 33,3% 1.1 public 1 Yes no conception so far 0,33 33,3% 1.2 private 1 Yes initial interest of international 0,33 players of freight forwarding industry to invest to be further investigated 33,3% 1.3 IFIs 0 to be further investigated 0,00 20% 2. TRACECA corridor 6,6% 67% 2.1 Direct location at the 0 No 0,00 TRACECA route 33% 2.2 Importance as a hub to direct Yes 0,33 traffic onto TRACECA 40% 2.2.1International importance 1 Yes 0,40 Inception Report Annex 3 Part 2 Page 199 of 207

408 MACRO LOCATION: LVIV, Evaluation UKRAINE results Remarks Weight Types Inland hub Score 35% National importance 1 Yes important node in the network 0,35 of logistics centres 25% Regional importance 1 Yes important node in the network 0,25 of logistics centres 25% 3. Market potential 25,0% 30% 3.1 International importance 1 0,3 40% 3.1.1Suitable for logistics activities 1 Yes 0,4 40% 3.1.2Hub for container operation 1 Yes 0,4 20% Hub for international trade 1 Yes 0,2 30% 3.2 National importance 1 0,3 40% 3.1.1Suitable for logistics activities 1 Yes actual statistics is to be 0,4 obtained from the relevant authorities and stakeholder. 40% 3.1.2Hub for container operation 1 high relevant statistics to be 0,4 obtained in Phase B 20% Hub for distribution of goods 1 high 0,2 20% 3.3 Export 1 Yes 0,2 20% 3.4 Import 1 Yes 0,2 15% 4. Economic activities 15% 25% 4.1 Industrial areas 1 Yes 0,25 35% 4.2 Potential for consumers 1 Yes population in Lviv: 735,000 0,35 40% 4.3 Potential for the logistics 1 Yes suitable cargo for logistics 0,4 activities (value added) activities 15% 5. Quality of the location 11,4% 60% 5.1 Intermodality status high 42% 40% multimodal 1 Yes currently modest 0,4 30% road-rail 1 Yes 0,3 15% road-inland waterway 0 No 0 15% road air 0 low 0 40% 5.2 Intermodality potential high 34% 40% multimodal 1 Yes region is significant for 0,4 containers 30% road-rail 1 Yes 0,3 15% road-inland waterway 0 No 0 15% road air 1 Yes 0,15 15% 6. Core network access 10% 25% 6.1 Road network 0,25 60% international road network 1 Yes Motorway E 40, M06, M09, M10, 0,6 M11, M12, Corridor: Dresden- Praha-Krakow-Lviv-Kiev - a very high potential of traffic 40% national road network 1 Yes 0,4 25% 6.2 Railway network 0,25 70% Railway network international 1 Yes 0,7 30% Railway network national 1 Yes 0,3 20% 6.3 ports (only for port LC) 0 No 0 15% 6.4.inland ports 0 No 0 15% 6.5 airports 1 Yes 0,15 74,4% Page 200 of 207 Annex 3 Part 2 Inception Report

409 2 APPENDIXES 2.1 Appendix 1 Tables: Statistical Data and Info - Georgia Figure 108: Total Cargo Revenues Figure 109: Railway Cargo Inception Report Annex 3 Part 2 Page 201 of 207

410 Figure 110: Trucking Industry Figure 111: Air Cargo Handling in Page 202 of 207 Annex 3 Part 2 Inception Report

411 Figure 112: Cargo Revenues in Georgian Ports Figure 113: Container Revenues in Georgian Ports Figure 114: Cargo Traffic by Type of Cargo in the Poti Port Inception Report Annex 3 Part 2 Page 203 of 207

412 Figure 115: Railway Cross-Border Transportation in Figure 116: Truck Movement in Export, Import and Transit in 2008 Page 204 of 207 Annex 3 Part 2 Inception Report