Georgia

Transport sector development is essential for the achievement of sustainable economic growth and for the alleviation of poverty in Georgia.  Deterioration of transport infrastructure increases cost of doing business, deters foreign investments, hampers transit traffic growth, and leaves segments of the population out of mainstream economic activities.  Georgia's geographical position 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). Trade with its neighbors, both transit and bilateral, is also an important feature of Georgia’s economy.  Transit activities generate a direct turnover of more that US$2 billion per year.  One of the government top priorities is to develop Georgia’s comparative advantage as a transit country by improving its East-West transport corridor (so-called transit corridor). Since East-West transit of oil and by-products  is projected to steadily increase over the next years, the Government intends to rehabilitate and modernize its transit corridor and connecting roads.
The new Government’s policy agenda recognizes transport infrastructure investments as one of the major ways to support the country’s accelerated economic growth.  The new Government’s commitment to the transport sector is evident given the substantial increase of funding for transport sector since Rose Revolution in 2003 from the state budget as well as increased resources mobilized from international institutions for rehabilitation of transport infrastructure.

Railways. Over half of the Georgian Railways (GR) traffic and revenue is provided by oil and by-products transit moving from Kazakhstan, Turkmenistan, and Azerbaijan to Georgia’s Black Sea ports of Batumi and Poti. This traffic is profitable and provides the financial backbone for all GR operations. It is forecast to grow substantially from 8.6 million to 18.7 million tons between 2004 and 2015 . GR will need to invest an estimated US$774 million over the next ten years to rehabilitate the railway and accommodate this traffic growth.  Georgia's fully electrified railway network covers 1,583 kilometers of track. The main route runs across the country, starting from Baku in Azerbaijan, via Tbilisi to Samtredia and then rounds off in Batumi and Poti ports, as well as into Russia via Sukhumi. Today Georgian Railways is completely independent and has agreements with the Azerbaijan and Armenian railways for facilitating transit traffic. About 80% of the network is in mountainous terrain with grades reaching 4.9%; 247 km have curves with radii of less than 300 m.

Roads. The road network in Georgia consists of 1,474 kilometers of main roads with about 70 per cent in good to fair condition; 3,392 kilometers of secondary roads of which over 60 percent are in poor condition and need rehabilitation; and 15,429 kilometers of local roads most of which are in very poor condition. The current condition of the road network in Georgia reflects a severe reduction in the resources allocated to road maintenance under the previous Government, from the early 1990s to 2003. A recent sector review  documents the decline in road maintenance expenditures, from GEL125.1 million (US$59.5 million) in 1988 to GEL 24.8 million (US$12.4 million) in 2002, in nominal terms.  The poor state of the highway network constrains goods and persons to travel between Georgia’s main cities, ports, and along the transit corridor. The long transit times, despite the relatively short distance, along with poor road conditions feed growing transport costs and deter usage of the Georgian transit route.  Since its election, the new Government has focused on improvement of road infrastructure.  Funding provided to the transport sector has increased substantially from GEL 51.4 million in 2003, to GEL 67.8 million in 2004 and GEL 121.4 million in 2005 with further increase projected for 2006.   Road maintenance and construction in Georgia is fully privatized.

Ports. Georgia’s major ports are Batumi and Poti ports (Black Sea ports).  All docks at Poti port have been transferred to private operators under long-term leases. In addition, Sukhumi port is located in Abkhazia but its operations have been affected by the political problems in the region since early 1990s.  Connected with Poti, four miles south, is the oil terminal Supsa which handles a substantial part of oil transport.  Construction of Kulevi port is also being considered. 

Urban Transport. Most urban centers in Georgia have extensive bus and limited trolley systems. While the fares are low, so is the level of maintenance, and reliability of the publicly operated bus and tram systems is weak. The Georgian capital Tbilisi takes advantage of an underground metro, buses, trolleys and a very well-developed, privately owned and operated minibus network. The metro is a three-line network that runs from 6a.m. until 11p.m. The service is efficient for daily business use, and it connects with bus/tram lines to reach every corner of the city.  The Municipality of Tbilisi is engaged in reforming the public transport system in the capital.

Air Transport. Increasing competition and liberalization of its air transport sector is a main priority of the Government.  Number of international carriers has started to operate in Georgia in the course of last few years.  Simultaneously, direct connections to a large number of European, Russian, Ukrainian and Middle Eastern cities have been opened.  Tbilisi airport has been rehabilitated with EBRD financing in late 1990s which has substantially increased its passenger handling capacity.  Further, in 2005 a concession agreement has been signed with the private Turkish consortium (Urban/TAV) for the construction of a new airport in Tbilisi (US$62 million investment) and the rehabilitation of Batumi airport (US$15 million investment) by 2007.  In exchange, the consortium will manage Tbilisi airport for 15 years.  There are several smaller airports in Georgia, namely in Kutaisi, Batumi, Poti and Senaki, all near Black Sea ports.

Trade Facilitation. The World Bank has been active in promoting Trade and Transport Facilitation (TTF) projects in Armenia, Georgia and Azerbaijan. The region faces high direct and/or opportunity cost of neglecting transit time at the borders and low credibility as trading partners. The objective of the World Bank's TTF projects was to expose the benefits of soft barriers on trade and transport and to develop mechanisms to progressively remove those barriers through active public-private interactions. The final Policy Note on TTF has been released in December 2003. The creation of GEOPRO, the public-private committee on trade and transport facilitation in Georgia, was expected to facilitate the implementation of broad reaching measures. Please also visit our Regional Initiatives in South Caucasus site.  Trade Facilitation is addressed in Transit Strategy of Georgia, 2004.

World Bank Projects. The World Bank is committed in Georgia's transport sector to assist the country in upgrading and modernizing deteriorated infrastructure.  Over the last decade, IDA has played a leading role in providing investment lending to Georgia for transport infrastructure sector and ensuring that projects are identified, prepared, implemented, and monitored in a competent way and according to high standards.  In May 2000, IDA approved a US$40 million credit to finance the rehabilitation of main roads.  The project has been successfully completed in 2005.  The ongoing Secondary and Local Roads project, in the amount of US$20 million, aims to develop a cost effective and sustainable secondary and local road network to link interior areas with the main highway network. Recently approved Infrastructure Pre-investment Facility focuses, among other strategic issues, on transport sector development. 

The Government has allocated approximately US$ 15 million to start in spring 2006 the upgrade of the existing two-lane corridor to four lanes from Natakhtari (15km west of Tbilisi) to Agaiani.  The Government requested IDA financing to continue the upgrade from Agaiani towards Rikoti.  In response to this request, IDA’s new commitments of US$143 million are anticipated to finance three projects over the period 2006-2009. The first one, named East-West Highway Improvement – Phase I proposes to continue the upgrade up to Igoeti and will benefit from a $5 million IDA grant allocated to finance feasibility studies, technical design and environmental assessments. The secondary objective of the project is to promote private participation in infrastructure by assisting the Government to concession the Rikoti tunnel. In this respect, a study is currently initiating the process to support a successful bidding phase.

The main external development partner engaged in the transport sector is the Millennium Challenge Corporation (MCC) with its US$103 million grant to construct a highway from Tbilisi to the isolated region of Samtskhe–Javakheti in Southern Georgia.  EBRD is also involved in the development of the transport sector in the country.

Updated February 23, 2006

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