Will New Georgian Port Weather Economic Storm?

Georgian investors have begun work on a billion-dollar port facility on the Black Sea coast, but observers say the timing is less than ideal, and global economic crisis and declining trade could reduce the need for freight shipping.

The port in Supsa is the result of a 2009 agreement between Tbilisi-registered company Black Sea Product and the economy ministry. The facility will compete with existing ports in Poti, ten kilometres away, and Batumi, further away down the coast.

The company has already started preparing the site and installing drainage systems on 46 hectares of seafront. By 2015, it plans to spend a billion dollars on an development that will grow to 180 hectares of land once all the terminal buildings are finished.

“This is a very big project. Supsa will become the number one port in Georgia,” Black Sea Product’s director Shalva Tsakadze said. “This is because the mouth of the River Supsa where the port is being built is much deeper than other Georgian ports. At 18 to 20 metres deep, it will allow us to service any vessel capable of passing through the Bosphorus.”

Tsakadze said that current draught limitations meant that Georgian freight often had to change ship in Malta, Greece or Italy en route to European destinations, but now it would be able to go direct from Supsa, cutting costs.

Black Sea Product says the port will employ 2,500 people and ship 40 million tonnes a year. It says Kazakstan, across the Caspian Sea, has already expressed interest in using the outlet, and business will also be generated from the Free Industrial Zone in Poti, which is due to open on November 23.

Local officials have welcomed the port facility. Giorgi Goguadze, head of Lanchkhuti district where the work is going on, has promised it will create jobs.

“This project is important for the whole country,” he said. “In the election campaign we spoke of the significance of the Supsa post, and we were not lying – work has got under way and the port will be ready by 2012.”

Some experts believe the company’s plans are over-optimistic, arguing that trade levels have fallen in Georgia’s existing ports, and that other big investment projects have run into trouble.

After the 2008 conflict during which Russian troops briefly held at Poti, shipments through the port fell by 20-25 per cent. Around 400 people lost their jobs there this August because management could not afford to pay them.

Former economy minister Vladimir Papava says Georgia is not the most popular place for western investors.

“In a situation where we hear from our head of state every day that 20 per cent of the country is under occupation, you shouldn’t be too surprised no one with serious intentions is going to come here, no matter what incentives we offer,” he said.

Levan Kalandadze, head of the Association of Small and Medium Enterprises, said there was a risk that the Supsa port could undergo the same kind of problems as the free industrial zones at Poti and Kutaisi, where investment has been less than expected.

Managers of Black Sea Product remain optimistic that the port will be built on time and to budget.

“We have contracted both Georgian and foreign experts to conduct research… They’ve done all the sums and the results lead them to conclude that the port will be built. We will invest 700 to 800 million by 2012, while total investment by 2015 will be one billion,” Tsakadze said.

Lasha Zarginava is editor of the Resume Newspaper.