Georgia's Container Market and the Black Sea Region

Economic Alternatives, 2019, Issue 1, pp. 106-116 Georgia’s Container Market and The Black Sea Region Irakli Danelia*1 Introduction ince the end of the Cold War, the Summary SBlack Sea region has no longer been Due to the strategically important a static border between the West and the geographical location, the Black Sea region East. The region’s geostrategic location, has a key transit function throughout between proximity to the Eurasian energy corridor, Europe and Asia. Georgia, which is a part of as well as the transformation process to Black Sea region, has a vital transit function democracy and good governance are some for the Caucasus Region, as well as for whole of the factors that make the region a priority New Silk Road area, but still there is no for international actors. The collapse of the evidence as to what kind of positioning Georgia Soviet Union drastically increased the number has in The Black sea container market. Given of independent players in place and gave that the country harbours the ambition to be rise to new political, economic, and social a transit hub for containerized cargo flows forces to the region. The Black Sea basin is between the West and the East and is actively a strategically important area that serves as involved in the process of formation One Belt a pivotal East-West and North-South corridor One Road, it is very important to identify the and a crossroads of geopolitics, economics, current circumstances and future potential. energy and culture. It is a very dynamic region Hence the purpose of the study is to identify that presents various challenges and offers the existent container market, investigate many opportunities at once. The Black Sea competitiveness in the market and define container market is represented by Ukraine, Georgia’s positioning in the region. Based on Romania, Russia (Black Sea part), Bulgaria the practical and theoretical significance of and Georgia. Since Georgia’s transit potential the research, this paper provides systemic, is interconnected with the geopolitical and historical and logical generalization methods geo-economic functions at the regional and of research in the performance of the work, international levels, all possible economic and scientific abstraction. Furthermore, analysis political risks, challenges and opportunities and synthesis methods are also applied. should be profoundly analyzed (Danelia, 2016). Keywords: transit corridor; cargo flow; Georgia has the ambition to become a transit container market; Georgia; Black Sea Region. hub not only for the Caucasus region but also JEL code: N70 for whole West and East cargo flows coming * PhD Candidate, Faculty of Economics and Business at Ivane from China going to the Western European Javakhishvili Tbilisi State University. counties, but the country’s positioning among 106 Economic Alternatives, Issue 1, 2019 Articles the rest of the member states along the the characterize the spatial dynamics of container Black Sea container market is has not yet ports of the Black Sea multi-port gateway been given the due attention on the part of regions by testing the validity of established researchers. spatial models on port system development. In addition, the future evolution path for port Literature Review hierarchy in the Black Sea basin has been The Black Sea region accounts for only discussed. 2.5% of global seaborne trade, while the share According to Ederer and Sieber of the North Sea region accounts for about (Ederer&Sieber, 2018), the Black Sea 17%. However, the Black Sea is an important Region is acknowledged as a heterogeneous area of development due to its geographical economic area that emerged from the size and resource base. The Black Sea USSR and has been isolated from Western container port system is among the world’s European Economic Cooperation. The fastest growing markets for cargo flows. aspects of economic development of Black Container market research has become sea region’s member countries in terms of a popular topic of academic research regional economic cooperation have been worldwide. Hence, a huge amount of papers duly outlined. have been published, focusing on different The transport of containerized goods has aspects of containerized cargo flows in the dramatically reduced transport costs, mainly region for comprehensive reviews. Only a few as a result of faster loading and unloading. pieces of research have been published so The aim of the research carried out by far on the Black Sea Basin Container market Anghel and Ciobanu (Anghel &Ciobanu, 2018) in Georgia. This article makes an overview of is to present the evolution of the transport interesting opinions of different authors. In the of containerized goods through the port literature review, article (Papachashvili et al., Constanta in the period between 2009 and 2018) has been highlighted with Table 2. GDP 2017 and to make a comparative analysis for Growth – Data and Forecast, where based the containerized trade through some of the on Gravity Model (case of Georgia), distance most important countries which have ports and GDP are defined as the key factors for on the Black Sea, the Adriatic Sea, the Baltic development of trade between geographically Sea, the Mediterranean Sea, the Aegean close countries, if other essential factors are Sea, the Norwegian Sea and the North Sea. not a hindrance. This circumstance is the The period analyzed is between 2010 and reason to study the transit potential of the 2016. The methodology used consists in data Black Sea countries and develop practical processing and graphic representation of the recommendations. comparative analysis of the results. The concept of "multi-port gateway Reduction of transaction cost is crucial region" has been introduced by the other issue in the discussions regarding logistics. It authors (Grushevska &Notteboom, 2014) is noteworthy that the global changes caused and has been applied to important seaport by the information revolution as a means of markets across Europe and Asia. However, activating trade and economic relations and the dynamics and port development patterns the emergence of new challenges in the in secondary multi-port gateway regions, such market of containerized transportation, also, in as the Black Sea region, have received far terms of emergence of new opportunities for less attention in academic literature. Authors regulating traffic movement (Papachashvili, 107 Articles Georgia’s Container Market and The Black Sea Region 2018). More possibilities are made for (Bulgaria, Romania, Ukraine, Russia, Georgia, institutional compatibility, which affects trade- Armenia, Azerbaijan, and Turkey), cultures economic relationships between partner and ethnic groups. For about a decade after countries (Jamagidze, 2018). 1989, the Black Sea area largely remained Kuo and Kommenda, in their article "What outside the reforms and integration agenda of is China’s Belt and Road Initiative?" (Kuo & the European project. Today, the Black Sea Kommenda, 2018) explanes in very acurate region is reemerging from the periphery and way the meaning and purpous of OBOR, establishing itself as a an integral part of the identifies China’s geoeconomic strategy in project. Owing to the dynamic expansion of corelation of involved countries interest. demand, the countries in the region offer a Besides above mentioned Astrov and considerable market potential for EU, China, Havlik (Astrov&Havlik, 2008) present current and for the United States as well. setbecks in economy and social conditions in The Black Sea area can be described as a each and every Black Sea regional Countries heterogeneous economic area. The economies by offering analyses of macroeconomic differ in several aspects and, with the exception circusmtances. of Turkey, they all emerged from the USSR In the article "Main Determinants of and went through a lengthy and profound Georgia‘s Transit Function Development", transformation process, which is largely ongoing. author (Danelia, 2017) needs to be mentioned The initial situation in the 1990s differed widely, in terms of identification of major factors particularly in terms of the decline in industrial impacting on Georgia’s transit role. There is production and the per capita income given analysis of Logistic Performance Index after independence (Ederer&Sieber, 2011). offered by The World Bank and its influance Recently, however, the region has enjoyed a on Georgia’s containerized cargo flows. fairly rapid economic recovery, accompanied Among the visions given in the by welcome structural changes, although the proceedings to improve the quality of policy labor market situation and social conditions analyses on cross-border development are still generally fairly difficult (Astrov&Havlik, issues, encourage academic discourse within 2008). the Black Sea Region and reinvigorate cross The macroeconomic conditions for the border cooperation in Black Sea region Black Sea countries are mostly positive, (Kakachia (ed), 2012), it is worth to underline with prospects for the annual GDP growth offered interesting options of possibility to to go beyond 5% in the medium and have common border crossing policy and long run. Apart from sound economic regulations system to facilitate regional trade policies, institutional reforms and the development and increase containerized related improvements of the investment cargo flows. climate have been encouraged, which is The Black Sea Container Market a crucial factor for sustainable economic development. Overview The Black sea container market is Located at the crossroads between represented by Ukraine, Romania, Russia Europe and Asia, Russia and the Middle East, (Black Sea part), Bulgaria and Georgia. The the Black Sea Region is not only an area of Black Sea region accounts for only 2.5% of geostrategic and geopolitical importance. The global seaborne trade, while the share of the region also encompasses different nations North Sea region accounts for about 17%. 108 Economic Alternatives, Issue 1, 2019 Articles However, the Black Sea is an important area The growth of container throughput was of development due to its geographical size shown by all countries of the Black Sea region and resource base.

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