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Poti Seaport Natural Monopolist: Small Shipping Companies May Disappear From The Market

In the globalization era, when economic borders between countries turn invisible, in practice, the role of transportation companies acquire vital importance.

The economic development of the country largely depends on the transportation sector tendencies, while shipping companies are facing essential problems at this stage.  Unsatisfactory infrastructure, monopolistic conditions of several companies – these factors created fundamental problems to transportation companies. They ask the Authorities to carry out efficient changes.

LLC Georgian Trans Expedition – Poti Seaport is a natural monopoly

David Davitidze, head of LLC Georgian Trans Expedition company says that the current condition in the business sector shakes the state economy and the field, in general.

Seaborne and land transportation fields are priority directions for Georgia. The Georgian route connects the East with the West. Despite competitors like Russia and Kazakhstan on the Caspian Sea and Iran, on the other hand, Georgia must have appropriate characteristics of turnover capacity and due infrastructure to maintain preferential positions on the market. The issue is of creating logistics storehouses. The existing tariff policy should be also  improved in seaport, land transport and railroad directions, Davitidze noted.

The current situation is the following: Georgia started developing logistics storehouse infrastructure 25 years ago, especially in the Poti Seaport, as well as the surrounding logistics centers. The Poti Seaport is very attractive due to its characteristics, but it possesses only a small part of land infrastructure. Consequently, when a ship is unloaded, the Poti Seaport does not have enough territory to store containers. Therefore, 25 years ago the Poti Seaport started arrangement of an appropriate container infrastructure a 5-10km way from the seaport, Davitidze noted.

“The cargo turnover has considerably shrunk. Therefore, the Poti Seaport has decided to arrange its own terminal. They have decided to use their own monopolistic condition in this situation too. They have been trying to load only their own terminal and neutralize all alternatives. They say that this is an inseparable part of the seaport, but the facility is as far from the sea as other terminals”, Davitidze noted.

The Poti Seaport and Georgian Railway are natural monopolies. They create subsidiaries and organize cargo expeditions. Therefore, other transportation-expeditor companies cannot develop on the market and they fail operation, Davitidze noted.

“You can imagine our condition. The legislation does not ban similar schemes. These subsidiaries are real competitors for us. If this policy continues, neither the seaport economy nor railway, nor aviation will be effective”, David Davitidze noted.

“When the country acquires the status of a transit country, this status is not a property of someone. This is the advantage and privilege of the whole country”, Davitidze said.

It is very difficult for transportation-expedition companies to make investments and create new job places in similar conditions, he added.

“We should be adjusted to the reality and potential that exist in the country. This is logistics business, shipping business. If this field is monopolized by specific companies, the country will bear losses. There are many companies like ours on the market and this is normal, because all cargo turnover should not be controlled by one company”, Davitidze noted and added Georgian Railway occupies almost the same monopolistic position.

Seeking the problems resolution, the company applied to the Competition Agency in 2015. The company won the case, but the Finance Ministry plans to appeal ag­­ai­nst the decision and the case will be discussed by the Supreme Court, he added.

Geoexspress – Small Shipping Companies may disappear from the market and the Poti Seaport’s monopolistic position is one of the main reasons.

Freight companies may disappear from the market, Giorgi Tvaliashvili, head of Geoexspress international shipping company, noted and added that cargo transportation has shrunk by about 25-30% on the market. All directions have worsened compared to the previous years, Tvaliashvili noted.

“Georgia is a gateway between Asia and Europe and the cargo from China or other countries were being directed to Baku or Yerevan. Only Georgians were working here and they were serving the cargo consignments. Now low tariffs have made this business useless for Georgians. Moreover, because of tensed relations between Russia and Turkey, Turkish drivers cannot enter Russia and these  vehicles are accumulated in Georgia, Azerbaijan and Iran. These factors have lowered tariffs. Therefore, this business has become useless for Georgians. There are many vehicles and auto importers cannot find job. Clients with cargoes seek lower tariffs. Our expenditures have increased and revenues have shrunk”, Tvaliashvili noted. Another problem comes from the Poti Seaport, he added.  The Poti Seaport is a main monopolist in the sector and all these factors stifle this business, Tvaliashvili noted.

Another problem comes from the Poti Seaport, he added.  The Poti Seaport is a main monopolist in the sector and all these factors stifle this business, Tvaliashvili noted.  As compared to shipping companies in the neighboring countries, Georgia-based shipping companies are in uncompetitive situation, because the Georgian Authorities set prefer

Eurotrans 2010 –Competition is Fundamental Problem

The business always has development perspectives, if the Authorities provide due environment and conditions. If the Authorities do not ensure due conditions and the economy is not strengthened, the shipping sector will not be developed, Zaza Khelkhelauri, head of the Eurotrans 2010 shipping company noted. Today competition is a major problem before all shipping companies, because there is a great number of operator companies, while the cargo turnover is deficient, he said.

The way out from this situation consists in the economic development. There were certain problems at customs checkpoints too, but these problems were resolved in a short period, Khelkhelauri said.