Review of Azerbaijan’s transport, logistics sector in 2016

Business Materials 13 January 2017 15:34 (UTC +04:00)
Carrying out the development policy of Azerbaijan’s non-oil sector to ensure the country’s economic growth has become the main direction of Azerbaijan’s economic activity in 2016.
Review of Azerbaijan’s transport, logistics sector in 2016

Baku, Azerbaijan, Jan. 11

By Maksim Tsurkov – Trend:

Carrying out the development policy of Azerbaijan’s non-oil sector to ensure the country’s economic growth has become the main direction of Azerbaijan’s economic activity in 2016. Azerbaijan far-sightedly chose transport and logistics segment as one of the main directions, and it will become one of the most important components of the country’s economy in the foreseeable future.

Despite the great complexities of the sector, which are due to external global economic factors that affected a significant reduction in the global freight traffic, 2016 can be called successful for Azerbaijan’s transport and logistics sector. This also concerns the implementation of big projects on the creation of international corridors, construction of infrastructure in the country, as well as the development of public transport.

The Trans-Caspian International Transport Route (East-West)

In the very beginning of 2016, Azerbaijan, Kazakhstan, Georgia and Ukraine signed a protocol on setting competitive preferential tariffs for cargo transportation via the Trans-Caspian International Transport Route (TCITR), which runs through China, Kazakhstan, Azerbaijan, Georgia and Turkey, further going to Europe. At the same time, Ukraine launched the first test container train via the TCITR through Azerbaijan to China.

The agreement to create the Trans-Caspian International Transportation Consortium was signed in April 2016 in Baku by the railway authorities of Azerbaijan, Georgia and Kazakhstan. The agreement was signed during the meeting of the operator companies engaged in cargo transportation via the TCITR.

Azerbaijan’s ADY Express and ACSC Logistics companies, Kazakhstan’s KTZ Express and Georgia's Trans Caucasus Terminals LLC became the members of the consortium. New competitive tariffs were introduced for the TCITR on June 1, 2016.

The number of countries and companies willing to join this project indicates its success. In February 2016, Ukraine and Lithuania signed a memorandum on the accession of the Viking container train to the TCITR from Europe to China via Azerbaijan and Kazakhstan.

After that, Ukrzaliznytsia (Ukraine), Ukrferry (Ukraine), Translogistic SRL (Moldova), PKP LHS (Poland) companies became members of the Consortium's Steering Committee. Rail Cargo Hungaria Zrt (Hungary) also joined the project.

In October, Azerbaijan, Kazakhstan and Georgia signed an agreement on the establishment of the TCITR International Association with its office in Astana. Its activities are aimed at attracting transit and foreign trade cargo, as well as developing integrated logistics products via the TCITR.

Finally, in December 2016, the heads of railway authorities of Azerbaijan, Kazakhstan, Turkey and Georgia signed a memorandum of understanding (MOU) in Baku on prospects of development of the TCITR. It is planned that the amount of container trains on the TCITR will reach 1,000 until 2020.

The “North-South” project

The “North-South” project, which already has certain history, finally became real last year. February visit of Azerbaijani President Ilham Aliyev to Iran, resulted in reaching certain agreements on the project.

A border railway bridge over the Astarachay river and an 8.5-kilometer section of the railway from Astara (Azerbaijan) till the border with Iran (already successfully tested) were built during the year.

Iran started the construction of the Gazvin-Rasht and Astara (Iran)-Astara (Azerbaijan) railway sections in February 2016 and railway authorities of Azerbaijan and Russia agreed to determine competitive tariffs for freight traffic via the corridor.

As for the construction of one of the corridor’s most important sections – Rasht-Astara railway, Azerbaijan agreed to open a credit line worth $500 million for Iran in order to finance the railway’s construction. Currently, the working group continues negotiations on this issue.

It was already noted in October that all countries participating in the International North-South Transport Corridor project joined the cargo transportation process. Containers were delivered via the sea from the Indian city of Mumbai to the Iranian port of Bandar Abbas, from which they were further delivered to Astara by vehicles. Afterwards, the containers were sent to Russia by railway.

Meanwhile, it was announced in November that Estonia and Ukraine intend to join the project.

Baku International Sea Trade Port and Free Trade Zone

Azerbaijan’s President Ilham Aliyev signed a decree on March 17, 2016, on measures to create a free trade zone (FTZ) type special economic area covering the territory of the Baku International Sea Trade Port (Port of Baku) in the Alat township of Baku’s Garadagh District.

In September 2016, the Port of Baku and Dubai Port World (DP World), one of the world’s major port operators, signed an agreement on provision of consulting services for Azerbaijan for the FTZ’s creation in the Alat township. The FTZ could start functioning in the first half of 2017.

Meanwhile, the first stage of construction is also being completed at the port. It is expected that the construction will be fully completed until late 2017, after which the goods capacity will reach 1,280 tons per day.

After the completion of the first stage, the Port of Baku will be able to receive up to 10-11 million tons of cargo per year, as well as to handle up to 50,000 TEU (the twenty-foot equivalent unit) per year. However, the port’s cargo transshipment volume increased in 2016 as compared to 2015.

"Road map"

The “Strategic road map on development of logistics and trade”, approved by the Azerbaijani President Ilham Aliyev, became the key factor in the process of development of Azerbaijan’s transportation and logistics sector in 2016. Under the document, it is planned to create 18,900 new jobs in the sphere of logistics and trade in Azerbaijan until 2020 and the GDP is planned to be increased by 605 million manats.

Meanwhile, it is planned to increase Azerbaijan’s share in maritime freight traffic via the Central Asia-Black Sea route up to 40 percent until 2020, Central Asia-Europe – up to 25 percent, China-Europe – up to 3 percent, Russia-Iran – up to 40 percent, and up to 25 percent – via the Iran-Black Sea route.

Carrying out measures aimed at the development of transportation and logistics sector gives a reason to say that both 2017 and the following years will be more successful for this sphere.