All stakeholders agree, that development of marine sector is vital for Georgia. Experts of the field have been working on research to find out most optimal ways for development of industry. As a result, three main directions were identified: education, shipping and maritime services, and introduction of modern
innovative technologies. For the first time in many years, government of the Georgia: The Prime Minister, Minister of Economy and the Head of the Maritime Transport Agency are actively talking about specific initiatives that will facilitate rapid development of maritime industry, which will have positive impact on economy of Georgia.
Main challenges for in 2019,will be initiatives which will consider best European experience required for legislative changes, in order to promote business activities of domestic and international shipping companies through Georgia, facilitate maritime services development in Georgian territorial waters, optimize ships control and clearance efficiency for vessels arriving to Georgia, reduce the port turnaround time for the vessels in ports, develop digital single window, in order to reduce the physical document turnover and increase speed of ships and cargo handling.
The International Maritime Organization (IMO) has adopted the mandatory requirements for the electronic exchange of information on cargo, crew and passengers as part of a revised and modernized annex to the Convention on Facilitation of International Maritime Traffic (FAL). “Single window” concept, enable all the information required by public authorities in connection with the arrival, stay and departure of ships, persons and cargo, to be submitted via a single portal without duplication.
The active work on restoration of the Georgian merchant fleet began in September 2018. Negotiations are currently underway with several stakeholders and therefore the optimal model for the country is under development.
Existence of merchant fleet have various benefits for the country: clear vision for maritime segment development, millions of dollars’ investment in the Georgian economy, employment growth, expansion of the maritime industry and the various areas of supporting sub-segments (ships technical management, ship repair and related services), employment of seafarers, Georgian flag promotion in international merchant shipping.
The work is quite immense, accordingly in the next two years it is desirable to introduce a digital single window where the full range of marine services will be added, tax benefits will be introduced for international shipping and ship management companies, new maritime services introduction in Georgian territorial waters, dual degree program implementation in Batumi maritime academy with support of foreign experts.
Based on UNCTAD review of Maritime transport 2018, digitalization has challenges along with opportunities. Technological advances in the shipping industry, such as autonomous ships, drones and various blockchain applications, hold considerable promise for the supply side of shipping. However, there is still uncertainty within the maritime industry regarding possible safety, security and cybersecurity incidents, as well as concern about negative effects on the jobs of seafarers, most of which come from developing countries.
While the development and use of autonomous ships offer numerous benefits, it is still unclear whether this new technology will be fully accepted by Governments, and particularly by the traditionally conservative maritime industry. There are legitimate concerns about the safety and security of operation of autonomous ships and their reliability. The diminishing role of seafarers and ensuing job loss are a particular concern. At present, many blockchain technology initiatives and partnerships have the potential to be used for tracking cargo and providing end-to-end supply chain visibility;
Belt and Road Initiative is promising for the development of the middle corridor passing through
Georgia. It is important to develop regular line ferry services. During several years, there was no RoRo/Ferry services between Georgia and Romania, so in this direction initiatives of the Ministry of Economy of Georgia is appreciated.
Another opportunity for Georgia is that IMO (International Maritime Organization) has set a global limit for sulphur in fuel oil used on board ships of 0.50% m/m (mass by mass) from 1 January 2020. Majority of shipping companies are planning to be compliant to reduced sulphur content of 0.50% from present 3.5%. Stricter limits on sulphur (SOx) emission are already in place in Emission Control Areas (ECA’s) in Europe and the Americas (0.10%). Till 2020 ship owners and operators could have combination of LSGO (Low sulphur Gasoil 0.10%) and HSFO (High sulphur fuel oil 3.50%) switching between marine fuels, depending on area of navigation, but from beginning of 2020, there will be increased demand for LSGO, because there is no equivalent volume of LSFO (Low sulphur fuel oil max 0.5%) in the world.
Regulations will imply increase in operating costs in a volatile market, because majority of expenditure for ship operation lies on bunker fuel procurement. According to IMO estimates up to 70,000 ships may be affected by the regulation. Some of ship owners are retrofitting vessels to use alternative fuels such as LNG, however LNG bunkering are available only in few major ports and could not cover global operations, therefore can be used by liner vessels at the moment or in particular trades; Some of ship owners are installing scrubber systems which allow them to continue operating on regular HSFO, but due to high investment costs of scrubbers, money in time, and ROI (return on investment) for long range, still, majority of ship operators may have preference for LSGO.
Georgia with its oil terminals, is transit point for Crude oil and Oil products from oil rich, land locked Caspian Sea countries: Azerbaijan, Kazakhstan, and Turkmenistan. Fortunately, majority Crude oils (Cheleken, Turkmenistan – 0.09%; Kumkol, Kazakhstan 0.11%; Azeri Light 0.15, Shah deniz condensate 0.03%, Azerbaijan), originating from these countries have sulphur content %m much lower than 0.50%. For many years, Georgia is also transit points for LSFO (Low sulphur fuel oil) of Kazakhstan, Turkmenistan, and Azerbaijan origin.
Major traders of Fuel oil in the region (Vitol and Alvari) were using corridor passing through Georgian Black sea terminals for transportation by rail and tankers for accumulating in larger lots, and transship to handy size (30 KT), and aframax (80 KT) tankers, for further trading to international buyers. Global regulatory changes open new opportunities for Georgia.
There is no oil refinery in Georgia. Sourcing low sulphur crude oil, refining, and re-selling oil products to global markets, using preferential trade regimes of Georgia with CIS, EU, USA, and China could be cost efficient for the operators. More over Georgia is almost 100% dependent on imports of clean petroleum products, with annual volume of about 1.5 million tons for domestic market.
Georgia has business friendly environment, accordingly there are positive expectations for the years to come for many new initiatives in the pipeline, back up by the support of Government of Georgia.
Jaba Tarimanashvili is the Director of Maritime services and Cargo forwarding company in Georgia