International Logistics Centres for Western NIS and the Caucasus

International Logistics Centres

for Western NIS and the Caucasus

in Armenia, Azerbaijan, Georgia, Moldova, Ukraine

Final Report – Annex 4 Feasibility studies for the selected projects

Armenia: ILC at Zvartnots International Airport

February 2011

This project is funded by A project implemented by the European Union Dornier Consulting GmbH / NTU / Inros Lackner AG

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International Logistics Centres for Western NIS and the Caucasus

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY ...... 7 2 INTRODUCTION AND CURRENT SITUATION ...... 10 3 IDENTIFICATION OF MAJOR STAKEHOLDERS AND DEMANDS ...... 11

3.1 STATUS AND LEGAL FRAMEWORK FOR SITE DEVELOPER ...... 11 3.2 LOCAL TRANSPORT AND LOGISTICS MARKET ...... 11 3.3 OVERVIEW AND DEMANDS OF MAJOR STAKEHOLDERS ...... 12 3.3.1 Potential Stakeholders ...... 12 3.3.2 Public Sector Stakeholders ...... 13 3.3.3 Private Sector Stakeholders ...... 13 3.3.4 Investors and Financiers ...... 13 3.4 TRACECA NETWORK EFFECTS AND SYNERGIES ...... 14 3.4.1 Introduction ...... 14 3.4.2 Synergy with other ILCs in the European and Caucasian Parts of TRACECA ...... 15 3.4.3 Interconnections with EU Countries and the TEN-T ...... 17 3.4.4 Links with the Asian TRACECA countries...... 17 4 FUNCTIONAL DESCRIPTION ...... 18

4.1 FUNCTIONAL DESCRIPTION AND CONCEPT ...... 18 4.1.1 General Objectives ...... 18 4.1.2 Logistics Trends and Development Vision ...... 19 4.1.3 Cargo Volumes ...... 20 4.1.4 Planning Guidelines and Potential Synergies ...... 24 4.1.5 Functional Areas and Main Transport Infrastructure ...... 24 4.1.6 Functional Concept and Intermodal Operations ...... 27 4.2 SOCIO-ECONOMIC IMPACT OVERVIEW ...... 30 5 MASTER PLAN DESCRIPTION AND PRELIMINARY DESIGN ...... 33

5.1 LAND ACQUISITION ...... 33 5.1.1 Conditions and Requirement for Land Acquisition ...... 33 5.2 EXTERNAL AND INTERNAL TRANSPORT INFRASTRUCTURE ...... 33 5.2.1 Access to Urban, Regional and International Transport Network ...... 33 5.2.2 Description of Site Access ...... 34 5.2.3 Description of Internal Transport Infrastructure ...... 34 5.3 ACCESS TO UTILITY NETWORKS ...... 36 5.3.1 Current Installations and Capacities ...... 36 5.3.2 Interface Points ...... 36 5.3.3 Upgrade and Development Needs ...... 36 5.4 OVERVIEW OF ENVISAGED LOGISTICS AND NON-LOGISTICS SERVICES ...... 38 5.5 SPECIFICATION AND DIMENSIONING OF THE FUNCTIONAL MODULES ...... 41 5.5.1 Specification of Main Functional Modules ...... 43 5.5.2 Stationary and Mobile Equipment ...... 49 5.5.3 Information and Communication Systems ...... 51 5.6 SOIL INVESTIGATION PROGRAMME ...... 52 5.6.1 Description of Required Soil Properties ...... 52 5.6.2 Specification of Soil Investigation Programme ...... 53 5.7 EXPANSION STAGES AND IMPLEMENTATION PLAN ...... 54

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5.8 ESTIMATION OF INVESTMENT NEEDS (CAPEX) ...... 56 5.9 DESCRIPTION OF MAIN LOGISTICS PROCEDURES AND OPERATIONS ...... 58 5.10 ORGANISATIONAL STRUCTURE AND OPERATOR MODEL ...... 61 5.11 IDENTIFICATION AND CALCULATION OF REQUIRED STAFF AND WORKSTATIONS ...... 62 6 OVERVIEW AND ASSESSMENT OF STAFF KEY QUALIFICATIONS ...... 67

6.1 LABOUR MARKET OVERVIEW ...... 67 6.2 SWOT ANALYSIS OF LABOUR MARKET IN YEREVAN REGION ...... 67 6.3 SPECIFICATION AND ASSESSMENT OF REQUIRED KEY QUALIFICATIONS ...... 68 6.4 RECOMMENDATIONS FOR SELECTED TRAINEE AND QUALIFICATION PROGRAMMES ...... 73 7 ENVIRONMENTAL IMPACT ASSESSMENT ...... 75

7.1 GENERAL OBJECTIVES OF THE ENVIRONMENTAL INVESTIGATIONS ...... 75 7.2 DEFINITION OF THE INVESTIGATION AREA ...... 75 7.3 OVERVIEW AND CONDITIONS OF THE USED DATA BASIS ...... 77 7.4 MAIN ASSESSMENT OF ENVIRONMENTAL RISK ...... 78 7.5 POTENTIAL CONFLICTS WITH ENVIRONMENTAL FACTORS ...... 80 7.6 CONCLUSIONS AND PROSPECTIVE COMPENSATION NEEDS ...... 80 8 BUSINESS PLAN...... 81

8.1 GENERAL PROJECT DESCRIPTION ...... 81 8.2 LEGAL AND REGULATORY MATTERS ...... 81 8.3 TECHNICAL MATTERS ...... 82 8.4 ASSUMPTIONS ...... 82 8.4.1 Cargo Throughput ...... 82 8.4.2 Revenue to the ILC Operator ...... 82 8.4.3 Expenditures...... 83 8.4.4 Financing Plan ...... 83 8.4.5 Financial Parameters ...... 83 8.5 MARKETING APPROACH, STRATEGY AND PLAN ...... 84 8.5.1 Strategic Relevance of the Project ...... 84 8.5.2 Market Considerations ...... 84 8.5.3 Promotion Approach ...... 85 8.5.4 Marketable benefits ...... 85 8.5.5 Development Approach...... 85 8.5.6 Summary of Marketing Recommendations ...... 86 8.6 OPERATIONS PLAN ...... 87 8.7 FINANCIAL PERFORMANCE ...... 87 9 COST BENEFIT ANALYSIS ...... 88

9.1 SOCIO-ECONOMIC CONTEXT AND PROJECT OBJECTIVES ...... 88 9.2 PROJECT IDENTIFICATION ...... 88 9.3 PROJECT FEASIBILITY AND ALTERNATIVES ...... 89 9.4 FINANCIAL ANALYSIS ...... 89 9.5 ECONOMIC ANALYSIS...... 90 9.6 RISK ASSESSMENT ...... 93 9.7 DISTRIBUTION ANALYSIS ...... 94 10 RECOMMENDATIONS FOR PUBLIC PROMOTING AND SUPPORT ...... 96 11 APPENDICES ...... 97

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LIST OF FIGURES

Figure 1: Road and railway routes connecting Yerevan with neighbouring countries ...... 14 Figure 2: Overview of ZIA Boundary and Available ILC Land Plot ...... 18 Figure 3: Relevant Logistics Trends and Impacts ...... 19 Figure 4: Confirmed Available Area Size – Plot Boundary ...... 22 Figure 5: Status Quo and Development Potentials ...... 25 Figure 6: Specification of the Functional Areas and Categories ...... 26 Figure 7: Overview of Potential Functional Areas ...... 27 Figure 8: General Alignment of the Functional Areas ...... 29 Figure 9: Overview of Future Development Stages ...... 30 Figure 10: Master Plan Layout – Overall External Transport Infrastructure ...... 34 Figure 11: Overall Master Plan Layout ...... 42 Figure 12: Container Terminal – Cross-Section of Multipurpose Transshipment Module ...... 45 Figure 13: Master Plan Layout – Development Stage 1 ...... 54 Figure 14: Master Plan Layout – Development Stage 2 ...... 55 Figure 15: Master Plan Layout – Development Stage 3 ...... 56 Figure 16: ILC Management and Communication Process Structure ...... 61 Figure 17: ZIA ILC Business Model...... 62 Figure 18: Land Utilization Inside the Investigation Area ...... 76 Figure 19: View of the Development Area ...... 77 Figure 20: Cargo-Terminal of Zvartnots International Airport ...... 77 Figure 21: Sensivity in Relation to the Projected ILC Area ...... 78 Figure 22: Statistic Overview about the Sensivity ...... 79 Figure 23: Net Present Value as a Probability Distribution ...... 93

LIST OF TABLES

Table 1: Potential Stakeholders for ILC at Zvartnots International Airport, Yerevan ...... 12 Table 2: Summary - Utility Requirements ...... 37 Table 3: Electricity Power - Utility Requirements ...... 37 Table 4: Water - Utility Requirements ...... 38 Table 5: Functional Modules with defined functions and sub-functions ...... 38 Table 6: Overview - Main Functional Modules ...... 43 Table 7: Overview Container Terminal – Dimensions and Specification...... 44 Table 8: Overview Container Depot – Dimensions and Specification ...... 45 Table 9: Overview Container Service Centre – Dimensions and Specification ...... 46 Table 10: Overview ILC Service Centre – Dimensions and Specification ...... 47 Table 11: Overview TIR-Parking – Dimensions and Specification ...... 47 Table 12: Overview Logistics Service Facilities – Dimensions and Specification ...... 48 Table 13: Logistics Intensive Industries and Trade – Dimensions and Specification ...... 49 Table 14: Container Terminal – Survey of Mobile Handling Equipment ...... 50 Table 15: Container Depot – Survey of Mobile Handling Equipment ...... 50 Table 16: Container Service Centre – Survey of Mobile Handling Equipment ...... 51 Table 17: Overview Capex – Total of Development Stages 1-3 ...... 57 Table 18: Overview Capex – Development Stage 1 ...... 57 Table 19: Overview Capex – Development Stage 2 ...... 58 Table 20: Overview Capex – Development Stage 3 ...... 58 Table 21: Overview Required Staff and Workstations: Container Terminal ...... 63 Table 22: Overview Required Staff and Workstations: Container Depot ...... 64 Table 23: Overview Required Staff and Workstations: Container Service Centre ...... 64 Table 24: Overview Required Staff and Workstations: ILC Service Centre ...... 65 Table 25: Overview Required Staff and Workstations: TIR - Parking ...... 65 Table 26: Overview Required Staff and Workstations: Logistics Service Facilities ...... 66

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Table 27: Overview Required Staff and Workstations: Industries and Trade ...... 66 Table 28: Overview World Bank‟s Doing Business Index - Armenia ...... 67 Table 29: SWOT Analysis: Labour Market in Yerevan Region - Transport and Logistics Sector ...... 68 Table 30: Overall Required Educational Background and Professional Experience ...... 68 Table 31: Overview Required Staff Key Qualifications: Container Terminal ...... 69 Table 32: Overview Required Staff Key Qualifications: Container Depot ...... 70 Table 33: Overview Required Staff Key Qualifications: Container Service Centre ...... 70 Table 34: Overview Required Staff Key Qualifications: ILC Service Centre ...... 71 Table 35: Overview Required Staff Key Qualifications: TIR parking ...... 72 Table 36: Overview Required Staff Key Qualifications: Logistics Service Facilities ...... 72 Table 37: Graduates in Different Programmes, Tertiary Level ...... 73 Table 38: Overview of Required Trainee and Qualification Programmes ...... 74 Table 39: Main Assessment of Environmental Risk ...... 79 Table 40: Input Data ...... 90 Table 41: Cash Flow and Performance Indicators (Financial) ...... 91 Table 42: Cash Flow and Performance Indicators (Economic) ...... 92 Table 43: Distribution Analysis (1) ...... 94 Table 44: Distribution Analysis (2) ...... 95

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LIST OF ABBREVIATIONS

ADB Asian Development Bank AIA Armenian International Airports CJSC DEG Deutsche Investitions und Entwicklungsgesellschaft (German Investment and Development Company) EBRD European Bank for Reconstruction and Development (a bank owned and financed by European and other governments, the European Community and the EIB, headquartered in London. It provides loans and equity investment to private enterprises, especially those whose needs are not fully met by the market; and assists publicly owned enterprises in support of privatisation) EBRD European Bank for Reconstruction and Development FEZ Free Economic Zone GDP Gross Domestic Product (aggregate value-added within a national or regional economy, usually expressed on an annual basis in terms of the local currency or an international currency such as US dollars or Euros; valued at either current or constant prices; with or without adjustment to „purchasing power parity‟ which takes account of the general price level compared to that in the USA) GFC Global Financial Crisis HDI Human Development Index (an multivariate index compiled by the United Nations to show international and intertemporal comparisons) HPI Human Poverty Index IFC International Finance Corporation (a member of the World Bank Group that provides loans, equity investment and advisory services to private enterprises) IGR Income Gap Ratio (a measure of poverty severity) ILC International Logistics Centre ILO International Labour Office (a United Nations agency) IMF International Monetary Fund. ISCED International Standard Classification of Education LFPR Labour Force Participation Ratio LLC Limited Liability Company PID Project information Document (a standard World Bank document used in defining and assessing projects) SME Small or Medium-Sized Enterprise (a common focus for donor-funded projects). TEU Twenty-foot Equivalent Unit (a 20-foot long container being the standard unit for measuring containerised traffic) TIR Transports Internationaux Routiers (usually pronounced „Teer‟ in all languages) TRACECA Transport Corridor: Europe Caucasus Asia UN United Nations ZIA Zvartnots International Airport

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1 EXECUTIVE SUMMARY The logistics market development in Armenia and the Yerevan region is still in its beginning, and much less developed than in Europe or Ukraine, for example. There is no significant demand for „A-Class‟ warehousing, or value added logistics services. But Yerevan as the capital and the major city of the country and its economic centre presents a prospective market. Main cargo import flows are concentrated here, together with a central position in the transport network of the country. The process of identifying and interviewing potential private and public sector stakeholders is at an early stage. So far one private company has expressed a clear interest in the envisaged ILC:  The operator of ZIA, who is interested in developing economic activity in the vicinity of the airport, using existing territory under the concession agreement. The airport would benefit from the re-establishment of a railway link both for passenger and air fuel transportation.  The Government of Armenia is planning a Free Economic Zone (FEZ) close to the air cargo terminal of ZIA. The synergy effects between the FEZ and the proposed neighbour- ing International logistics centre are welcomed. The proposed ILC at the Zvartnots International Airport will be developed to a competitive logistics site as integrative part of the TRACECA network. The site will offer several logistics functions and well developed land plots with an excellent infrastructure and facilities for logistics service providers and logistics intensive industries. The existing and planned infrastructure (air cargo terminal, Free Economic Zone, customs services) will be integrated into the overall development concept of the site. The main objective of the planned logistics centre is to support the development of intermodal transport and other logistics services in the Yerevan region, offering facilities for cargo export operations as well. In Yerevan region a base-year (2007) potential market of 750,000 t of LC-suitable cargo has been estimated. Recognising that there is little competition in the logistics market, the Consult- ant has adopted a potential ILC market share of 50%. Armenia‟s GDP suffered a sharp decline between 2008 and 2009, but the IMF expects it to return to its 2007 level in 2012-2013, which is when the proposed ILC would open. Therefore, the ILC at Zvartnots International Airport could expect to attract 375,000t of cargo in its opening year. Demand growth would be at least in line with the country‟s projected medium-term GDP growth rate of 4.5%pa. Therefore demand is expected to exceed 0.9Mt/year within the 20-year appraisal period used for the cost benefit analysis. The future annual cargo throughput capacity for the final development stage of the site has been estimated to be about 525,000 t per year. In addition, the preliminary cargo projection for the envisaged container terminal potential throughput capacity has been estimated to be about 520,000 t per year. Future logistics trends have been identified and the site‟s development potential has been considered, and following three functional areas have been defined:  Logistics Services: transport, handling and storage facilities for logistics providers and operators (land allocation: about 60%).  Container Terminal: combined transhipment module rail-road, container service centre with container depot and empty container storage, container packing, container repair and cleaning (land allocation: about 20%).

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 Logistics-Intensive Industries and Trade: manufacturing and commercial enterprises with high-level or specialized needs for logistics services (land allocation: about 20%). The functional concept was the base for the further master plan elaboration and specification of the functional modules. In the Master Plan layout the following main functional modules have been defined for the final stage of development:  Container Terminal (No.1)  Container Depot (No.2)  Container Service Centre (No.3)  ILC Service Centre (No.4)  TIR – Parking (No.5)  Logistics Service Facilities (No.6)  Logistics intensive Industries and Trade (No.7)  Road System (No.8)  Rail Track System (No.9) The first estimation of required total investment needs (CAPEX) and for each of the three envisaged stages of ILC development has been calculated as follows:  Total of Development Stages 1-3: € 24.4 million thereof Sum of Development Stage 1: € 15.6 million Sum of Development Stage 2: € 7.6 million Sum of Development Stage 3: € 1.2 million Most industry is import-related, and much is also based on processing the products of Arm- enia‟s agricultural hinterland. It is to be expected that the project would promote industrial development and diversification, expanding the market for agricultural products and also the demand for labour. This would potentially have a positive impact on poverty, which is widespread in Armenia. 43% of people are reported to live below the internationally recognised threshold of US$2/day and 50% fall below the poverty line as defined nationally. Urban poverty is said to be rising. To achieve the full potential impact it may be necessary to implement training programmes to match labour supply and demand. A draft business plan (BP) has been prepared for the period 2012-2022. A summary version is presented in Chapter 8, for reasons of commercial confidence. A full version is available on application, with the approval of the interested parties. The BP is based on the existing concession agreement between the Government of Armenia and Corporacion America, which is to be extended to cover the adjacent FEZ and ILC; and a contractual agreement to be concluded between Armenia International Airports (Corporacion America‟s subsidiary) and a specialised ILC Management Company. The terms of the concession agreement‟s extension and the contractual arrangement with a management company are uncertain at present, so the BP is written for an undefined entity. The following assumptions have been made about capital funding:

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 IFI loans would cover 54% of the total capital cost. Several IFIs are already involved in funding airport expansion and have expressd interest in funding related projects.  A NIF grant, related to an IFI loan, would cover a further 4%.  Equity contributions would cover the remainder, mainly in the form of land which is gov- ernment-owned or is in the process of acquisition by the government. Depending on the terms under which the concession agreement is extended to cover the ILC, it may be that this equity-in-kind will in practice be the capitalised value of a stream of rental payments to the government. The estimates and assumptions about costs and revenues produce a strong financial perform- ance. The internal rate of return to the project and to the investor is 16%pa. This is reduced by between 4 and 6 percentage points if capital costs are 20% higher than expected or if revenues are 20% lower than expected. A cost-benefit analysis (CBA) was also carried out, using the same cost data but with additional benefits recognising the project‟s likely impact on load factors and modal split. The analysis produced a financial internal rate of return (FIRR) of 19%pa and an economic internal rate of return (EIRR) of 21%pa. Risk analysis showed that the probability of a negative net present value (NPV) is negligible, using any of three social discount rates (5.5%pa, 10%pa, 12%pa). These results suggest that the project should receive strong public support.

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2 INTRODUCTION AND CURRENT SITUATION The Air Cargo Terminal (incl. 10,000 m2 of warehouse space), operated by Zvartnots Inter- national Airport (ZIA), is a functioning facility on a 15 ha land plot. Thereof about 10 ha are reserved for the Air Cargo Expansion (3 ha) and a Free Economic Zone (7 ha). The available ILC land plot with a total area of about 36 ha is located about 12km to the south- west of Yerevan city centre, adjacent to the Airport (about 300m). The city road is about 1.5km and the direct distance to the railway main line is approximately 1.3km. There are obsolete industrial facilities in the northern part of the site, included in the land under concession by the airport concessionaire. A small strip between the current territory under operation of the ZIA concessionaire in the south and the former concrete parts factory in the north is still owned by private owners. The surrounding areas are in agricultural use. The industrial area and concentration of Yerevan‟s freight transport companies, their facilities and warehousing areas are located at a distance of about 5km. Residential areas are about 1km away from the site. The site is used for air cargo operations. The concessionaire plans to extend this business to services for the local market (construction of a temperature controlled warehouse next to the air cargo terminal). Access to the public road network is limited to a 1.5 km long 2-lane road, which connects the site to the main road, leading from Yerevan to the airport. This road crosses residential areas and is limited in capacity and expansion. While there is no direct railway access, the railway main line is only 1.3 km away. Formerly, there was a trunk line to the fuel farm of the airport, which is not longer in use. Currently, air fuel is trucked to the airport, a costly operation with trucks crossing residential areas. This old trunk line is partly owned by private land owners, now. One new building has been erected directly on this old trunk line recently. The Government of Armenia is analysing options to re-establish this former railway link. The main railway line leads to the main railway freight station and shunting yard Masis south of Yerevan, Masis station is only 10 km away. “Karmir Blur” railway station is about 6 km away from Air Cargo Terminal, to the south-east. In the northern direction this main railway line went further to Azerbaijan, a link which is closed at the moment. With the envisaged project to construct a 47km new railway line between Vanadzor and Dilijan (Fioletovo) this line would shorten the distance for domestic traffic and to Georgia. This project is currently under consider- ation with the ADB.

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3 IDENTIFICATION OF MAJOR STAKEHOLDERS AND DEMANDS 3.1 Status and Legal Framework for Site Developer ZIA is operated and maintained under a 30-year concession by Armenia International Airports CJSC (AIA), a subsidiary company of the American International Airports group (a subsidiary of the Argentinean conglomerate Corporacion America) which has the right to extend the agreement. The concession agreement for Zvartnots was commenced in 2001. The complete operation started from 2003, the concession was expanded to Shirak Airport of Gyumri in 2007. In 2006 a new terminal building (departure) was opened. A new terminal building for check-in and arrival is currently under constrution, financed by ADB, DEG and EBRD under a US$100 million credit line. The airport has a modern air cargo centre with 10,000m2 of warehouse space (in operation since 1998), fully equipped and with a capacity of 100,000t per year. The adjacent territory is to be developed as Free Economic zone. In 2008, 1.5 million passengers and 10,800t of air cargo were handled at Zvartnots. An adjacent land plot of some 10ha, formerly used by a construction company for prefabrication of concrete elements is included in the concession. The removal of these old structures has started. The concessionaire has partly rehabilitated the access road to the air cargo terminal. Some land plots between the air cargo terminal and the former concrete plant are privately owned. The same concerns the existing extension territory (36 ha, adjacent to the airport territory) for the envisaged logistics centre. Reportedly, any construction is prohibited on these land plots, as they are earmarked for airport extension. 3.2 Local Transport and Logistics Market Armenia is a landlocked country and, at present, geographically insulated as the some borders with neighbouring countries are closed – making transport routes longer. The country is heavily dependent on the road and rail links to Georgia and its Black Sea ports and on a single road connection to Iran. Yerevan is the largest industrial centre of the country and has about 1.1 million inhabitants. Yerevan is also Armenia‟s most important region with the strongest purchasing power. Yerevan is the main transport node of Armenia and there is a necessity for an International Logistics Centre (ILC). It is located in the middle of the country and thus serves north-south transport flows, as well. The nearest seaport is Poti (about 600km away) in Georgia, through which Armenia gets access to the countries of the Black Sea region. Armenia is heavily dependent on imported goods. The implementation of a future ILC in the Yerevan metropolitan area would strenghten the econ- omic region and enhance the supply of consumer goods to the population. Furthermore it could be an efficient logistics node along the logistics network TRACECA corridor and facilitate the future access to regional and international markets. In addition, a consolidation of the potential Yerevan container volumes in one ILC could create sufficient cargo flow to allow regular block train services to the Georgian ports of Poti and Batumi. There is also potential to attract further container cargo flows to the railway, if the railway line to Kars in Turkey is opened. Yerevan is reported to produce 49% of Armenia‟s industrial production, including 61% of its manufacturing1, and 64% of Armenia‟s GDP. According to official statistics the capital also generates 67% of the country‟s net profits and 73% of foreign trade.

1 Statistical Yearbook of Armenia, 2009

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The warehousing/distribution sector in Yerevan and Armenia is still in an early phase of devel- opment. Warehousing is generally done in former industrial or trade facilities, only a relatively small part of goods is handled in modern facilities. Moreover, current demand is predominantly for „B-Class„ warehousing and only somewhat for „A-Class„ facilities. But the hinterland of Yerevan extends to the whole country. Moreover, the proposed project would be designed mainly to facilitate inter-modal transhipment between road, rail and air, with opportunities for added-value services. In this regard there are few competitors at present. Chief among them is the APAVEN container terminal, only a few kilometres away. 3.3 Overview and Demands of Major Stakeholders 3.3.1 Potential Stakeholders The consultant has identified and met potential stakeholders with a variety of interests. They are listed in Table 1 together with an assessment of the nature and degree of their interest and whether they should be considered as candidates for membership of the Stakeholder Group. Table 1: Potential Stakeholders for ILC at Zvartnots International Airport, Yerevan

Nature of interest

Organisation Description

terest in in terest

Overall degree of of degree Overall [a] interest In Group Stakeholder None but present at None change may this of user Potential services or settler Potential investor Ministry of Transport and Site owner  5  Communication Armenia International Airport operator and developer on behalf 2  5  Airports CJSC of the concessionaire

APAVEN Container and customs terminal operator  3 

TransAlliance Forwarder  3

Potential provider of rail link and transport South Caucasian railways  4  services State Customs Service of Customs authority  3  Armenia

EBRD [b] International finance institution  4 

Asian Development Bank [b] International finance institution  4 

[a] On a scale of 0–5, 5 denoting the highest level of interest. [b] EBRD and ADB are already providing a co-financed US$100M loan for terminal construction.

2 The closed joint stock company Armenia International Airports is a wholly-owned subsidiary of US- registered American International Airports (AIA), which is indirectly owned by Lichtenstein-registered Southern Cone Foundation. All are ultimately owned by the diversified Argentinean company Corp- oracion America, which is the concessionaire.

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3.3.2 Public Sector Stakeholders Railway The railway infrastructure is still owned by the Republic of Armenia. The Government expressed the will to re-establish a railway link to the airport territory, which would serve the airport passenger and cargo terminals, as well as the fuel supply, the envisaged logistics centre and the planned Free Economic Zone. For the implementation of this project, additional land acquisition following the provisions of the Armenian legislation will be needed. Preparatory work is currently under way. Customs The State Customs Service is interested to establish customs posts where there is a concentrat- ion of imported cargo, to achieve enhanced cost-effectiveness of revenue collection and to provide a more convenient service to clients. The customs service is operating at the air cargo terminal of ZIA, already. Other agencies The Ministry of Economy of Armenia plans to establish a FEZ close to the air cargo terminal of ZIA. The aim is to attract industrial investors to Armenia and agricultural exporters to the territory near the airport, using the air cargo facilities for international integration of the economy. Preparatory work is under way, including a feasibility study. 3.3.3 Private Sector Stakeholders Logistics service providers The consultant has met several freight forwarding companies in Yerevan. They named ware- housing/distribution services as a future field of activities. The facilities and land plots currently used by theses companies do not allow expansion of their business into warehousing or other logistics services. It appears that the following features are essential to attracting leading logistics companies to ZIA:  Handling and road-rail transshipment facilities for containers, general cargo and project cargo.  Bonded warehousing available for long-term and temporary storage.  Warehousing and distribution services  Temperature guided warehousing for export operations  On-site customs services. Industrial and commercial companies Several potential logistics customers have been identified and preliminary meetings were held. 3.3.4 Investors and Financiers The operator of Zvartnots International Airport has its own financial resources and access to capital. It is cooperating with EBRD, ADB and DEG in financing of the new passenger terminal at the airport (USD 100m). The territory of the planned Free Economic Zone is within the land granted on a concession basis to the operator. Both EBRD and ADB expressed their readiness to analyse additional financing if the operator starts the development of new business opportunities on its territory, provided the business case is viable and professional operators are involved for the new activities.

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3.4 TRACECA Network Effects and Synergies 3.4.1 Introduction The location of the envisaged ILC at Yerevan is close to the ZIA in the south-western outskirts of Yerevan metropolitan area. The map below indicates the major existing and planned transport routes between the ILC in Yerevan and the neighbouring countries. The site is well located for access to the national road network, but the eventual alignment of the planned bypass road will have to be considered. The direct distance of the Airport site to the main railway line is approximately 1.3 km and an efficient railway link to the plot will need to be established. The government of Armenia considers establishing railway access to the airport. For the ILC in Yerevan to exploit the full potentials there is an urgent need to reduce the freight transport costs, which are currently very high in Armenia in comparison with neighbouring countries. The intention is also to include a free industrial zone on the territory of the airport site. This measure is under implementation by the Ministry of Economy. Currently, market studies are under way with participation of the World Bank. Figure 1: Road and railway routes connecting Yerevan with neighbouring countries

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3.4.2 Synergy with other ILCs in the European and Caucasian Parts of TRACECA Existing International Transport Routes: The existing routes by road and railway between Yerevan and Georgia involve:  the road route Yerevan-M3-Spitak-M6-Georgian border at Sadakhlo, and from there via E117 passing Marneuli to Tbilisi;  the road route Yerevan-M3-Spitak, and from Spitak via M7 and M1 to the Georgian border at Bavra, and leading further on to Poti/Batumi via Akhalkalaki and to Tbilisi via Akhal- kalaki/Ninotsminda; an alternative western route between Yerevan and this Georgian border station follows M1 passing Gyumri;  the existing rail route Yerevan-Armavir-Gyumri-Spitak-Vanadzor-Alaverdi-Georgian border; it follows the M6 road alignment from Spitak to the Georgian border and represents a considerable detour between Yerevan and the border crossing. The existing routes between Armenia and Azerbaijan are closed due to the conflict about Nagorno-Karabakh. The road and rail infrastructure consists of:  the road route Yerevan-M2-Nakhichevan;  the road route from Yerevan via M2 and M12 to Karabakh/Azerbaijan border, and from here via M1 in Azerbaijan to Alyat/Baku;  the road route Yerevan-Hrazdan-Ijevan via M4 to the Azerian border, and from here via M1 to Alyat/Baku;  the rail route from Yerevan through Nakhichevan and southern Armenia to the Azerian border, and from here to Alyat/Baku;  the rail route Yerevan-Hrazdan-Dilijan-Ijevan to the Azerian border, and from here straight on to Alyat/Baku; The existing routes by road and rail between Yerevan and Turkey are presently closed, but they are envisaged to be opened in the future, including the railway connection to Kars in Turkey. They involve:  the road route from Yerevan via M1 to the border crossing with Turkey located approximately 15 km south-west of Gyumri, and with connection to E691 and E80 in Turkey;  the rail route from Yerevan via Armavir to the border crossing with Turkey located approximately 15 km south-west of Gyumri. Armenia could play an important role within the North-South transport corridor Iran – Russia in the future. Planned upgrading of international transport routes: The “Transport Strategy 2009-2019” indicates that the north-south corridor between Georgia and Iran is vital, and a new construction and upgrading programme is being implemented for this corridor. Preparatory work for the first sections (Yerevan-Gumri) is underway. This will improve the existing road route, and in the longer term it will offer a new connection from Yerevan and the Sevan area to Iran. Among the outstanding issues of the north-south corridor(s) pointed out in the Transport Strategy is that Yerevan can be bypassed to the west or the east. The following road sections are identified in the North-South corridor as priority projects for upgrading/rehabilitation:  Yerevan-Sevan-Dilijan (M4), in the direction of Georgia/Azerbaijan;  Yerevan-Gyumri (M1), in the direction of Turkey/Georgia;

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 Yerevan-70 km to south-east along M2, in the direction of Iran/Azerbaijan. Among railway projects for consideration are the new route between Armenia and Iran, and a new railway link between Dilijan and Vanadzor. For the railway line to the Iranian border at Meghri some alternative alignments are under assessment. A railway link between Dilijan and Vanadzor will provide a significant shortcut for the railway route between Yerevan and the Georgian border/Tbilisi. Rehabilitation of the previous railway routes between Armenia and Azerbaijan is also considered among the priorities. Potential relations with other hubs in the Caucasus, Ukraine, Moldova: Because of Armenia‟s landlocked position, the role of the ILC in Yerevan is mainly to serve the inbound and domestic market and to develop export oriented industries. However with reopening of borders and improvement in regional relations a stronger outbound orientation of the logistics centre is expected, together with improvement of its added value role in the network of the logistics centres. Commercial relations and potential synergies could be established with the ILC in Georgia/Tbilisi. Although Georgia is presently not a main trading partner to Armenia it is nevertheless an important transit country. The recent establishment of regular container block train services between Yerevan and Tbilisi is documenting this fact. The ILC in Tbilisi provides the opportunity of further consolidation, distribution and collection of goods via Baku/Alyat at the Caspian Sea and via Poti/Batumi at the Black Sea. The road route via Gyumri and the Georgian border at Bavra represents a direct and supplementary link to the ports in Batumi and Poti. This requires the planned upgrading of the road network in southern Georgia. Due to the geographical location of Yerevan, in combination with the closed border with Turkey and Azerbaijan, there is no significant potential for attracting and serving transit goods (e.g. between Turkey and Azerbaijan). The new road and railway links with Iran require huge investments to be implemented in the medium and longer term. The general potential for the ILC in Yerevan lies in the development of more diversified export products (including food processing based on domestic agriculture), and the development of foreign trade relations with Georgia, Turkey and Iran. Relations with hubs in Turkey, Bulgaria Romania and Ukraine: Armenian hauliers in transit through Georgia are presently using Poti port for the export and import of unitised goods (carried in containers and semi-trailers). In the short term the reopening of the border with Turkey will mainly benefit the north-western region of Armenia around Gyumri (Aragatsotn Marz, Shirak Marz, Lori Marz), as this will result in re-establishing the road and railway route across the border south-west of Gyumri. When it comes to both road and rail transport, the current development points in a direction where it will be hard to create synergy effects between the ILC in Yerevan and Romanian and Bulgarian logistics centres. Potentially there are some trade relations (e.g. for Armenian brandy), but as for now the prospects for synergy effects are not very optimistic seen from the viewpoint of private transport operators in Romania or Bulgaria. In addition the ILC in Yerevan is not located directly on the trade routes for the Central Asian countries, meaning that goods from EU to Azerbaijan or goods which are crossing the Caspian Sea will not be in transit through Armenia. From a positive viewpoint the trade relations with the new TRACECA member Iran could potentially prosper in the future and make the site in Yerevan an important node. If the ILC in Yerevan is to exploit fully its potential benefits in relation to Turkey, alternative transport routes need to be considered, notably the railway connections. As an alternative to the

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International Logistics Centres for Western NIS and the Caucasus detour route via Gumri, this could involve an upgraded or new road connection across the Araks River via M3 or M5 or M9 (near Bagaran) at the Armenian side. This will connect the Yerevan metro region directly with the road network in Turkey (e.g. E99 and E80 leading to Ankara and Istanbul). The railway route between the Yerevan metro region and Turkey could be shortened by construction of a new railway link between the existing railway line at the border west of Yerevan, and connecting with the Turkish railway network at Kars. However, an inclusion of these projects in the transport strategy for Armenia is pending a reopening of the border with Turkey. 3.4.3 Interconnections with EU Countries and the TEN-T The transport links with the EU go via the Black Sea ports in Ukraine, Romania and Bulgaria, and overland via Istanbul in Turkey. Presently air cargo is insignificant. Due to the location of the ILC near the ZIA in Yerevan, it could potentially serve an increasing volume of high-value air export and import products. 3.4.4 Links with the Asian TRACECA countries As long as the Nagorno-Karabakh conflict is sustained, all trade with the Asian TRACECA will flow via Tbilisi, potentially using the ILC there. In the medium-term perspective the transport route via Iran could provide an alternative outlet. The improved road and railway connection to Iran will open the import/export route to Asia as well as to the Persian Gulf. If the border between Armenia and Azerbaijan is eventually opened, the geographically more direct road and railway routes via Nakhichevan and Ijevan to Baku and Alyat could be re- established.

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4 FUNCTIONAL DESCRIPTION 4.1 Functional Description and Concept 4.1.1 General Objectives The site location and infrastructure network connectivity of the ZIA offers good conditions and development potential for the future establishment of an international logistics centre in Yerevan. The construction of the logistics centre is envisaged on a land plot which is approximately 12 km south-west of Yerevan city centre. The area is partly owned by American International Airports CJSC (AIA), which has a 30-year concession contract with the Armenian government. The distance to the port of Poti (Georgia) via the rail connection of Yerevan – Poti is about 600 km. The available land plot comprises about 36 ha. Figure 2: Overview of ZIA Boundary and Available ILC Land Plot

Data source: OpenStreetMap (2010), www.openstreetmap.org

Border Logistics Centre Area for future ILC development Road Zvartnots International Airport existing Railway Projected Railway

Author: INROS LACKNER AG The main objectives of the planned logistics centre are to support an integrated extension of the existing cargo terminal of ZIA, to provide integrated logistics services and to develop a further basis for intermodal transport. In addition; the ZIA and the envisaged railway link of the logistics

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International Logistics Centres for Western NIS and the Caucasus centre offer an option to provide trimodal transport access, as well as potential benefits from synergy effects. The city road is about 1.5 km away and the direct distance to the main railway line is about 1.3 km. Neither road nor railway infrastructure meets European standards and has to be upgraded. The proposed ILC at ZIA will be developed and upgraded to a highly productive and competitive logistics site as a part of TRACECA network. The different warehouses and areas for logistics services will be developed under consideration of the requirements of regional and international stakeholders. 4.1.2 Logistics Trends and Development Vision From the point of view of the short-term, mid-term and long-term developments in the field of logistics certain global, European and regional logistics trends can be identified (see Figure 3): Figure 3: Relevant Logistics Trends and Impacts

Trends Impacts Logistics potential  Intercontinental trade  Enhancement and

 Increasing product complexity expansion of transport  Demand for modern and  Need for cooperation and infrastructure efficient logistics solutions integration

Global and facilities  Development of regional  Consistent trend towards direct industrial and logistics  Implementation of new sales nucleus delivery chains for import

and export trade incl.  TRACECA corridor  Focus on supra-regional distribution strengthening and networking markets  Demand of logistics  Liberalisation of competition  New production services for distribution of European  Promotion of intermodality structures and supply local agricultural products chains  Strengthening of the local  Supply chain  Foreign investment and economy management of cooperative structures  Creating of new business intermodal bordercrossing opportunities  Qualifications freight transport requirements  Enterprise mobility  Increased demand for Regional  Shortened market qualified logistics staff  Development of training supply times capabilities

The development of the transport and logistics sector in Armenia and also in Yerevan region is still in the early stages. Warehousing is generally done in former industrial or trade facilities, only a relatively small proportion of goods is handled in modern facilities. The current market demand is predominantly for „B-Class„ warehousing facilities and services. In terms of intermodal transport and road-rail transshipment services the APAVEN container terminal (only a few kilometres away) will be the main competitor. The establishment of an international logistics centre integrated into an international network along the TRACECA corridor enables the further strengthening of the regional logistics sector and intermodal transport. The future ILC at ZIA, with its logistics facilities and services, will mainly support the local agricultural, industrial and aviation sector as well as further options for cross-border intermodal transport. In addition it will form a basis and nucleus for more efficient and competitive cargo export and regional cargo import distribution as well as enhanced marketing of national goods and products at international markets.

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The development potential for the future ILC at ZIA can also be determined by the preliminary economic data specified in the Chapter “Cargo Volumes“. 4.1.3 Cargo Volumes The most reliable relevant statistics relate to foreign trade. For the base year (2007) these show exports of 1.0Mt and imports of 3.7Mt. Of these volumes, 19% and 21% respectively are deemed to be containerisable and therefore suitable for handling at an ILC. They comprise: Exports ’000t Imports ’000t Base metals & articles thereof 96 Products of vegetable origin 219 Prepared food products 54 Prepared food products 191 Machinery & equipment [a] 20 Base metals & articles thereof 120 Other 22 Machinery & equipment [a] 87 Products of chemical industries 74 Other 82 [a] including transport equipment. In assessing the proportion of this volume that originates in or is destined for Yerevan, the Consultant has used official regional statistics. These show that Yerevan enjoys an unusual degree of primacy. The following summary statistics are for 2007: Yerevan Armenia Yerevan share Population (million) 3.23 1.11 34% Gross output [a] (billion drams) 3,162 2,033 64% Net profits (billion drams) 210 140 67% Exports (billion drams) 384 221 58% Imports (billion drams) 1,031 818 79% [a] So described in the statistics and apparently equivalent to GDP. It is reasonable to assume that demand for transport and logistics activities is distributed in pro- portion to economic activity, incomes and consumption. On this basis Yerevan is responsible for about two-thirds of Armenia‟s demand. Indeed, this probably understates Yerevan‟s importance in the transport and logistics industries. Its primacy is most obvious in the services sector, where it has a 91% share of national GDP. Therefore the Consultant additionally allocates to Yerevan an estimated 20% share of logistics demand outside Yerevan, taking its share to 66.7% + (33.3% × 20%) = 73%. Consequently the Consultant makes the following estimate of the base-year logistics market for which an ILC at Yerevan would compete:  [ (1.0Mt × 19%) + (3.7Mt × 21%) ] × 73% = 0.7Mt. The Armenian economy suffered a sharp decline between 2008 and 2009, with a 15.6% drop in GDP. The IMF expects GDP to recover to its 2007 level in 2012-2013. It is reasonable to expect that trade volumes will move in proportion to economic activity, and therefore that the base-year level of demand for logistics services will apply at about the time the proposed ILC would open. The IMF projects economic growth to accelerate gradually from 3% in 2011 to 4.5% in 2014. The Consultant has adopted the latter figure as the growth rate until the end of the appraisal period (i.e. until 2022 for the business plan and 2032 for the cost benefit analysis). This is the basis for projecting endogenous demand.

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Exogenous demand (chiefly for exports) depends on economic growth in Armenia‟s trading partners. The EU takes half of Armenia‟s exports by value, and Russia takes 20%. The other biggest export customers are Georgia (8%), USA (5%), Switzerland (5%), Ukraine (4%) and Iran (4%). Exporting to the Eurozone may be uncomfortable in the medium term, but overall an export growth rate of 4.5%pa is considered achievable, in line with Armenia‟s own projected growth rate. This analysis excludes domestic traffic, transit traffic and the possibility of new market opport- unities being developed. The Consultant has concluded that:  Domestic traffic is unlikely to be containerised or to need the special handling, intermodal facilities and value-added services that the proposed ILC will offer.  As a land-locked country, Armenia is not a natural candidate for international transit traffic.  New market opportunities depend mainly on the opening up of international borders that are now closed to trade, and the completion of transport infrastructure projects linking the South Caucasus region with Turkey and Iran. The time horizon for these developments is uncertain, and Georgia and Azerbaijan are better placed to exploit them. More positively, it should also be noted that:  Armenia has achieved much in terms of structural change and economic reform since the collapse of the Soviet Union, and the process is ongoing.  A high level of Russian investment in Armenian industry and infrastructure may stimulate stronger economic ties and export potential to the north.  Negotiations on an EU-Armenia Association Agreement have recently been launched. When concluded, this agreement is expected by the parties to facilitate continued reform and economic relations. Consequently the Consultant has added an undefined cargo category labelled „Future potential‟, with a base-year volume of 0.05Mt and an above-average growth rate. Regarding market share, the proposed ILC would have only one serious competitor in the medium term. This is Apaven, which operates a container terminal with some warehousing capacity in the southern part of Yerevan city. The site has limited expansion capacity, although adjacent public land and agricultural land offers some possibility. The owner, Apaven Ltd, has expressed interest in developing its business towards warehousing and logistics services. As this is not possible at the present location, Apaven has been listed above as a stakeholder for the ILC. If Apaven decided to relocate or extend its activities to the proposed ILC, there would be no competition at all. In any case, an assumed market share of 50% is conservative. The basis for the further preparation of a preliminary cargo capacity projection is the current available area potential of about 36 ha for the future development of the ILC (see Figure 4). Regarding a preliminary cargo capacity projection for the final stage of development in terms of “area productivity“ (throughput capacity in t/ha per day) empirical data of representative logistics facilities and industries from European ILC‟s have been considered.

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Figure 4: Confirmed Available Area Size – Plot Boundary

Data sources: OpenStreetMap (2010), Zvartnots International Airport

Border Logistics Centre Area for future ILC development RoadCentreCentre Zvartnots International Airport Ddevelopmentevelopment and FEZ

Author: INROS LACKNER AG Based on the available area as well as in accordance with the demands of the major stake- holders, three potential functional areas have been defined (see Figure 7). For each functional area the potential gross area has been determined which also includes green and traffic areas, administration and service facilities (see Figure 8). Therefore the relevant data input for the further estimation of “area productivity“ is the net area (hence marketable area) of the functional areas. The preliminary cargo projection in terms of potential throughput capacity has been calculated based on the following data and assumptions for each functional area. 1. Functional area “Logistics Services”  gross area: 21 ha*  net area: 12.5 ha * The gross area includes the following dedicated functional modules:  TIR-Parking,  Open Storage Area,  ILC Service Centre. The following development structure of representative logistics facilities with their appropriate standard characteristics has been applied.

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plot area building area throughput throughput throughput No. logistics services facilities: by type - standard - - standard - capacity capacity capacity [ha] [m 2] [t/d] [t/pa] [t/ha] per d 1 Distribution warehousing (large size) 2,00 10 000 160 40 000 80 2 Distribution warehousing (large size) 2,00 10 000 160 40 000 80 3 Distribution warehousing (large size) 2,00 10 000 160 40 000 80 4 Distribution warehousing (mid size) 1,50 6 000 120 30 000 80 5 Refrigerated warehousing 2,00 10 000 160 40 000 80 6 Forwarding with warehousing (large size) 3,00 9 000 360 90 000 120 total 12,50 55 000 1 120 280 000 90 The potential throughput capacity of the functional area “Logistics Services” has been estimated to be about 280,000 t per year (final stage of development). It equates to:  throughput capacity per day: 1,120 t/d  throughput capacity per ha and day: 90 t/ha per d 2. Functional area “Logistics Intensive Industries and Trade”  gross area: 7 ha* * Gross area is almost the same as the specific net area for future marketing. The following development structure of representative logistics facilities with their appropriate standard characteristics has been applied. plot area building area throughput throughput throughput logistics intensive industries and trade: No. - standard - - standard - capacity capacity capacity by type [ha] [m 2] [t/d] [t/pa] [t/ha] per d 1 Food processing - fruits 3,00 450 112 500 150 2 Food processing - vegetables 2,00 300 75 000 150 3 Automotive - CKD 1,50 5 000 240 60 000 160 total 6,50 990 247 500 152 The potential throughput capacity of the functional area “Logistics Intensive Industries and Trade” has been estimated to be about 247,500 t per year (final stage of development). It equates to:  throughput capacity per day: 990 t/d  throughput capacity per ha and day: 152 t/ha per d 3. Functional area “Container Terminal” In addition the potential throughput capacity of the functional area “Container Terminal” (plot area of about 7.5 ha including one mulitpurpose transshipment module of 3 ha, a container depot and a container service centre) has been estimated to be about 52,000 LU equivalent to 520,000 t per year (final stage of development). It equates to:  throughput capacity per day: 208 LU/d equivalent to 2,080 t/d plot area throughput throughput throughput throughput No. container terminal capacity capacity capacity capacity [ha] [t/d] [t/pa] [LU/d] [LU/pa] multipurpose transshipment module (2-loading tracks a 500m, 1 two reach stackers) 3,00 2.080 520.000 208 52.000 In total the preliminary cargo projection in terms of potential throughput capacity for the final stage of development of the future ILC including the two functional areas “Logistics Services”

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International Logistics Centres for Western NIS and the Caucasus and “Logistics Intensive Industries and Trade” has been estimated to be about 527,500 t per year. In summary it equates for both functional areas to:  throughput capacity per day: 2,110 t/d  throughput capacity per ha and day: 111 t/ha per d In addition the preliminary cargo projection for functional area “Container Terminal” potential throughput capacity has been estimated to be about 520,000 t per year. Due to the specific intermodal function, operation and logistics services for the further two functional areas, this potential throughput capacity of the envisaged container terminal has been considered separately. An estimation of future modal split will be prepared in a next step based on further results of interviews with stakeholders and potential partners and regional statistics so far available. 4.1.4 Planning Guidelines and Potential Synergies In the process of developing a design concept a number of key site requirements and planning guidelines for the future ILC at ZIA are to be considered, such as: Site requirements  Provision of adequate land supply for small, medium and large logistics companies  Well accessible and capable road and future rail connection of the site and the individual land plots  Unobstructed development potential of the site, no special construction requirements  Time unlimited accessibility (24h operation, 7 days a week)  Land plots are made accessible and construction is possible in a short-term (1-3 years) and mid-term (3-5 years) perspective Planning guidelines  Realisation of a flexible, economically viable and realtime logistics concept  Settling of logistics intensive industrial and trade companies of different size categories  Integration of existing transport infrastructure, warehousing facilities and equipment  Realisation of a functional, urban planning and ecologically sustainable overall concept  Planning of common service and administration facilities for ILC-settlers and third parties  Development of realtime construction modules and their integration for the implementation of the planning concept in development or expansion stages Coordination meetings with the land owner revealed that these essential requirements could be realised. Future site development will take place in expansion stages. This enables a flexible, demand- oriented adjustment to market developments and reduces development costs. The site develop- ment concept is modular, allowing a flexible response to the needs of investors and customers. Innovation, employment security and creation of synergy potentials are important objectives of modern logistics centres. Synergies can be achieved through a future road-rail interface, creation of future-oriented logistics products and services, as well as modernisation of facilities and equipment and continuous standardization and optimization of operational processes. 4.1.5 Functional Areas and Main Transport Infrastructure For the definition of the Functional Areas and the subsequent functional concept a qualitative assessment of the development potential has to be made, based on the status quo.

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Figure 5: Status Quo and Development Potentials

Status quo Potential

 Road network connectivity Basic  Maturity of site development conditions  Strengthening logistics location  Enhancement of competitiveness

 Available land area Infrastructure  Intermodality  Access to railway infrastructure

 Logistics and transport services Enterprise  Logistics intensive Industries and Trade  Railway operator

High Development potential: Medium Low

As the assessment of development potential shows, the future ILC at ZIA offers favourable basic conditions (road network connectivity, advanced maturity of ZIA site development, air cargo terminal), good infrastructure potentials (land availability, envisaged direct railway link, future access of projected north-south road corridor) and in particular potentials for the implementation of efficient logistics and transport services. In summary the initial identified needs and site requirements of potential private sector stake- holder and partners are:  Transport infrastructure - new capable and well accessible road access from/to main TRACECA road M4 (Yerevan –Sevan – Dilijan – Ijevan - Tbilisi) - new accessible road access from/to highways M2 (Yerevan - Angarak) to Iranian border and M1 (Yerevan – Ashtarak – Gyumri) to Turkish border and Georgian border - direct railway access to TRACECA railway line  Facilities and logistics services - general warehousing facilities enabling air-conditioned and temperature-controlled storage (agricultural or food processed products), - distribution centre, - customs services, - bonded warehousing available for long-term and temporary storage, - open and closed high security storage areas, - container terminal and container service centre, - multipurpose handling facilities and storage area for project cargo  Management and operation - cooperation with international experienced operators and partners, - professional ILC administration, management and marketing

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Based on these conditions as well as in accordance with the demands of the major stakeholders and potential partners for the future ILC site the following three functional areas and categories will be defined:  Logistics Services (land allocation: about 60%)  Container Terminal (land allocation: about 20%)  Logistics Intensive Industries and Trade (land allocation: about 20%) Figure 6: Specification of the Functional Areas and Categories Logistics-Intensive Industries and Trade Logistics Services Logistics of value  Advancement of manufactured  Consolidation point  Location for cooperative chains products for the food industry for trade and distrib- logistics products ution of consumer  Supply chain management goods (SCM) Enterprise  Spare part logistics for  Distribution centres  General and refrigerated development agricultural machinery, aviation for the agricultural warehousing and automotive sector, sector  Distribution logistics  Settlement of industries  Entertainment  Forwarding and transportation of high creation of value: electronics  Service centre: administration, - Food processing,  Trading ventures for office, bank, agencies etc. - White/brown goods, textiles - Aviation industry,  Truck service centre: truck port - Automotive industry. for repair, maintenance, gas station, tyre sales and repair etc.  Hotel, restaurant, cafeteria, kiosk, social facilities Modular  Land allocation: approximately  Land allocation: approximately planning concept 20% 60% The functional area of the Container Terminal includes a combined transhipment module rail- road, container service centre with container depot, open storage area, customs clearance, container packing, container repair and cleaning (land allocation: about 20%). Further development of the ILC site requires a target-orientated selection of complementary enterprises and logistics services. The identified future logistics trends and development potentials have been considered and applied to the three functional areas (Logistics Services, Container Terminal, Logistics intensive Industries and Trade) of the site (see Figure 7).

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Figure 7: Overview of Potential Functional Areas

Data sources: OpenStreetMap (2010), Zvartnots International Airport

Border ILC Area for Logistics Services Projected Road Area for logistics intensive Industries and Trade Projected Railway Area for Container Terminal

Author: INROS LACKNER AG 4.1.6 Functional Concept and Intermodal Operations The functional concept development is based upon the basic layout (confirmed available area size, see Figure 4) with the marked area boundaries and external transport connections. The available areas are clearly marked. They represent the future development potential for the proposed ILC at ZIA. The future ILC area is envisaged north of the runway of ZIA next to the existing air cargo terminal. The potential area will have a direct road access which is connected, via highway M5, to highways M1 and M2 (transit corridor from Georgia to Iran). Actually, all the traffic from the existing air cargo terminal, as well as from the M1 to the M2; pass through Yerevan. The objective of a feasibility study (April 2010) from the Asian Development Bank and the Ministry of Transport and Communications of Republic of Armenia is to prepare the North-South Road Corridor Development Project, comprising the M1 and the M2 from the Georgian border at Bavra to the Iranian border at Agarak. A sub-project is the estimated construction of a new western Yerevan road bypass, about 500 m west of the future ILC area. This project would provide a more coherent road access. The existing access road which connects the land plot with highway M5 is in acceptable condition, but crosses residential areas. With the new logistics centre in operation, road traffic will increase. Therefore it will be necessary to upgrade the road infrastructure capacity.

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The envisaged area in the east of ZIA territory is situated 1.3 km distance from the TRACECA railway line (Yerevan–Tbilisi–Poti). The future ILC will be linked to the railway line via a connecting point at the existing old trunk line. The site is directly located at the ZIA territory and provides good perspectives for the development of further airport and aircargo related services and the intermodality of the future ILC. Modern technologies and operating procedures for cont- ainer handling, storage and services as well as rail-road transshipment could also offer interest- ing development prospects. The future parcelling of individual functional modules due to different customers‟ demands (size categories of the envisaged facilities) enables a flexible adaptation to the space requirements. According to the estimated requirements (see Chapter 4.1.5), three functional areas for “logistics services“, “container terminal“ and “logistics-intensive industries and trade“ have been delineated. The functional area “logistics services” will be developed with its focus on transport, handling and storage facilities for logistics providers and operators (like warehousing, distrib- ution centres, truck port etc.). The functional area “container terminal“ will include a combined transshipment module for the rail-road handling of containers, semi-trailers and swap bodies as well as project cargo. Furthermore a container service centre with container depot, customs clearance, container packing, container repair and cleaning will be implemented. The functional area “logistics intensive industries and trade” will be developed with its focus on the settlement of logistics-intensive industrial companies (like food processing companies or agricultural machinery, aviation and automotive industries) and commercial enterprises (distrib- ution centres for retailers). The functional concept is based upon the general alignment of the functional areas in the figure below. The scheme shows the development axes as well as envisaged road and rail connections to the overall transport network.

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Figure 8: General Alignment of the Functional Areas

Logistics Intensive Industries and Trade ca. 7,6 ha

Container Terminal ca. 7,1 ha

Area for logistics Services

ca. 20 ha

Area for Zvartnots development

Data sources: OpenStreetMap (2010), Zvartnots International Airport

Border ILC Area for Zvartnots International Airport planning Existing Road Area for Logistics Services Projected Railway Area for logistics intensive Industries and Trade Area for Container Terminal

Author: INROS LACKNER AG Based on the functional concept, in the next step the functional modules for the preparation of the master plan are worked out in detail. With the definition of development stages, which are planned in the further processing as fully functional units, the base for the further master plan elaboration is created and the functional concept is completed. Figure 9 depicts the main important, site-specific planning guidelines such as development axes, development stages, internal transport routes like main roads and envisaged container terminal, external road and envisaged rail connections.

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Figure 9: Overview of Future Development Stages

Data sources: OpenStreetMap (2010), Zvartnots International Airport

Border ILC Area for Zvartnots International Airport planning Existing Road Area for Logistics Services Projected Railway Area for logistics intensive Industries and Trade Area for Container Terminal

Author: INROS LACKNER AG

4.2 Socio-Economic Impact Overview Economically, Armenia has been one of the more successful former Soviet republics. It has followed a thorough-going reform programme and restructured its economy, favouring the agriculture sector and SMEs over large industrial units. Between 1989 and 1994 agriculture increased its share of GDP dramatically, from 16% to 49%. The sector„s share of employment rose too, from 18% to 34%. At 11%pa (2005-08) the average GDP growth rate has been second only to oil-rich Azerbaijan„s among the five direct beneficiary countries. Moreover in 2007 Armenia ranked highest among the five in the UN Human Development Index (HDI) and Human Poverty Index (HPI). In both indices a high rank indicates good performance: Azer- Armenia Georgia Moldova Ukraine baijan HDI Rank (out of 182) 84 86 89 117 85 Score (range 0.340-0.971) 0.798 0.787 0.778 0.720 0.796 HPI Rank (out of 135) 12 50 18 22 21 Score (range 1.5%-59.8%) 3.7% 10.7% 4.7 5.9 5.8%

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Armenia also has the smallest population among the five (3.0 million3, zero growth), the highest rate of investment (39% of GDP), the lowest trade dependency (exports + imports equivalent to 41% of GDP) and the lowest government revenue ratio (21% of GDP). More significantly in the present context, Armenia also has the most dominant capital city. 1.25 million people (42% of the total population) live in the Yerevan metropolitan area4. It is not surprising, therefore, that according to official statistics Yerevan accounts for approximately:  50% of vehicle registrations and road accidents.  50% of industrial production.  60% of gross output of all goods and services.  60% of exports.  80% of imports.  90% of services. Armenia„s Gini coefficient5 of 0.34 places it one-quarter of the way down the ranked list of countries with respect to income equality, but this may hide wide regional disparities. Regional income statistics are not available, but using gross output as a proxy it appears that there is a wide difference between income in Yerevan and elsewhere. A crude calculation of per capita income produces a ratio of 3.3. Because of the primacy of Yerevan, it is inevitable that it should be the preferred location for an ILC. The project would reinforce that primacy. This is not to say that it would not have positive socio-economic impact, however. According to Onnik Krikorian6 the incidence of poverty in 2004 was very high throughout Armenia, with 50% of people living in poverty7 and 17% in extreme poverty8, with urban poverty rising. The UN HDI Report confirms the former figure, defining it as the „national poverty line‟; and shows 43% living below the internationally recognised threshold of US$2/day. It is intended that the proposed project would generate new or improved opportunities for the poor. It may do this in several ways:  By making urban and export markets more accessible to rural producers.  By enhancing the viability of industries that add value to rural products, providing a more reliable market for those products as well as jobs in the vicinity of the ILC.  By providing a platform for increased transit traffic, with the possibility of providing services.  By reducing living costs through improved transport/distribution efficiency. There is concern about traffic congestion in Yerevan. The World Bank has funded a number of projects including the Yerevan Urban Transport Project for Armenia, which aims to:

3 In addition there is a world-wide Armenian diaspora totaling an estimated 8 million. 4 The Yerevan metropolitan area is larger than the city proper, for which population statistics are given in section 4.1.3 above. 5 A measure of income inequality, ranging between 0 (perfect equality) and 1 (perfect inequality). The Gini coefficients of the five direct beneficiary countries range from 0.28 to 0.41. The median value for 141 countries included in the UN‟s Human Development Report is 0.40, with an inter-quartile range of 0.34–0.47. 6 Armenian/British journalist and blogger whose writing is published internationally. 7 Defined as living on less than US$21 per capita per month. 8 Defined as living on less than US$12 per capita per month.

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“improve urban mobility in Yerevan through: (i) increasing the traffic carrying capacity of the existing urban street network through traffic management measures and implementation of a comprehensive program of on-street and off-street paid parking; (ii) preparing for more comprehensive reforms aimed at integrated, efficient, and quality public transport services; and (iii) developing institutional capacity of Yerevan Municipality to better manage traffic and public transport in Yerevan. ” It is notable, however, that in the Bank‟s Project Information Document (PID) in 2008 there was no mention of heavy goods traffic as a contributor to congestion or as a target for amelioration efforts. The proposed project should have a positive impact because:  Its location on the urban periphery allows transfer of loads from heavy mulit-axle trucks, suited to long-haul routes, to smaller vehicles for local distribution.  Rationalisation of regional distribution/collection will improve vehicle utilisation and hence reduce the ratio of vehicle-kilometres to freight tonnage.  With improved vehicle utilisation the average age of the fleet is likely to be reduced, with consequently improved fuel efficiency and emission standards.  External costs born by the local community will be reduced, especially with regard to the provision and maintenance of infrastructure, accidents and and environmental damage.  Being an inter-modal facility, the proposed ILC will promote the use of rail as a long-haul transport mode. But it is not certain that Yerevan‟s traffic problems would be significantly improved.

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5 MASTER PLAN DESCRIPTION AND PRELIMINARY DESIGN 5.1 Land Acquisition 5.1.1 Conditions and Requirement for Land Acquisition Currently a land value of €13 per m² has been estimated. The required land is already owned or is in the process of being acquired by the Government for addition to the area already included under a 30-year concession agreement with Corporacion America. Consequently the question of land acquisition does not arise. Any specific land lease conditions and requirements should be clarified with the responsible contact persons of the Government of Armenia and ZIA. 5.2 External and Internal Transport Infrastructure 5.2.1 Access to Urban, Regional and International Transport Network The available land plot for the envisaged development of a logistics centre is situated about 12 km in the south-western outskirts of Yerevan city centre directly adjacent to the nort-eastern boundary of ZIA and air cargo terminal. There is no direct railway access but there is an existing former trunk line (partly owned by private land owners) on the northern ILC land plot boundary. This old trunk line (after reconstruction and re-establishing) with a new connection point to the envisaged ILC will provide a direct railway access to the TRACECA railway line (about 1.3 km away) as well as to the Karmir Blur railway station (about 6 km away) in the south-east and main railway freight station “Masis” (about 10 km away) in the south. According to “TRANSPROJECT” CJSC a railway project with total length of about 6.3 km is planned between ZIA airport cargo terminal and Karmir Blur railway station. This projected railway link would require the new construction of 2.6 km and rehabilitation of another existing 3.7 km railway infrastructure. The railway distance from the envisaged ILC to the Georgian Port of Poti via the TRACECA railway line (Yerevan-Tbilisi-Poti) is about 600 km. The existing main road connections between Yerevan and Georgia are the transport routes Yerevan-M3-Spitak-M6-Georgian border and from there via E117 to Tbilisi as well as Yerevan-M3-Spitak, and from Spitak via M7 and M1 to the Georgian border at Bavra, and leading further on to Poti/Batumi via Akhalkalaki and to Tbilisi via Akhalkalaki/Ninotsminda. An alternative western route between Yerevan and this Georgian border station follows M1 passing Gyumri. The envisaged ILC area will have a direct road access and connection (length: about 1,500 m) via highway M5 to the transit corridor highways M1 and M2 (about 5 km away). This already existing access road crosses residential areas and is limited in traffic capacity. Therefore it will be necessary to upgrade the road infrastructure capacity. A related road infrastructure project is the ADB funded “MFF Yerevan Sustainable Urban Transport Project”. This technical assistance project will provide the design and initialization of a multitranche financing facility (MFF), which includes the feasibility study for the envisaged construction of a new bypass road from Argavand transport node to the ZIA territory. The preliminary alignment of the envisaged new bypass road would cross the area of the functional module “Logistics Intensive Industries and Trade” in the northern sector of the future ILC land plot. But so far this preliminary road alignment is not official approved and the technical assistance project is still ongoing until end of this year. Therefore the alignment of the envisaged road bypass and further related results should be finally considered and covered in further plannings during a follow-up project.

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Figure 10: Master Plan Layout – Overall External Transport Infrastructure

Author: INROS LACKNER AG The access and connection of the envisaged ILC at ZIA with the international transport network and TRACECA corridor is already described under Chapter 3.4. “TRACECA Network Effects and Synergies”. 5.2.2 Description of Site Access Currently, there are two optional road connections to the future ILC at ZIA at the northern land plot boundary. The projected plannings for the ILC provide one new road access at the north- eastern boundary of the available land plot. The distance to the main road (Highway M5) in this direction is about 1,500 m. This road connection has to be to be upgraded because of poor condition and limited traffic capacity. The envisaged direct railway access at the northern land plot boundary will be established via a new connection point to the projected reconstruction of the existing former old trunk line. At the linked future container terminal on ILC area, two multipurpose loading tracks are projected. The operational length of each loading track is about 500 m. 5.2.3 Description of Internal Transport Infrastructure For an optimal transport connection and internal traffic system the following planning principles have been considered. 1. Road transport infrastructure:  Good connection to the urban, regional and supraregional road network.  Proper accessibility of all plot of lands with truck and passenger car.

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 Favourable traffic management and minimization of crossings.  Securing of flowing traffic by appropriate standard cross-sections.  Consideration of stationary traffic. 2. Railway transport infrastructure:  Good access possibilities to the long-distance traffic nodes and rail freight stations.  Efficient operation of trains, train units and railway cars without expensive shunting procedures.  Reduction and/or avoidance of crossing road and railway transport infrastructure.  Sufficient provision of properties with track connection. In summary all properties, buildings and facilities must be optimally accessible by the projected internal transport infrastructure of the future ILC. The projected external and internal road transport infrastructure for the final stage of develop- ment contains the following components (see also Figure 10): a) External (off-site)  Existing road access length: about 1,500m width: about 8m 2 lanes b) Internal (on-site)  Main road network: total length (projected): about 2,200m, width: 10m 2 lanes (bidirectional)  TIR-Parking and traffic areas: total area: 199,000m² Thereof - TIR-Parking area: about 36,000m² - other traffic areas: about 163,000m²  Paved loading and open storage areas: total area: 75,000 m² Thereof - Container Terminal area: about 31,000m² - Container Service Centre about 21,000m² area: - Container Depot about 13,000m² - Open Storage area: about 10,000m²

The projected external and internal railway transport infrastructure for the final stage of develop- ment contains the following components (see also Figure 11): a) External (off-site)  Railway link to main railway total length: about 1.3 km line: single track

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b) Internal (on-site)  Container Terminal – Loading total length: about 1,200m tracks: thereof 2 loading tracks a 650m and 560m (loading length: 530m and 500m

 Container Terminal – Switches: 4, thereof - 2 between loading tracks

- 2 for airport feeder line 5.3 Access to Utility Networks 5.3.1 Current Installations and Capacities Currently, the Zvartnots International Airport is connected to the essential energy and utility networks. The connecting points for drinking water, sewage and gas are in the north eastern part of the airport territory (see also Figure 10). 5.3.2 Interface Points For further planning, the interface points for energy and utilities have to be coordinated with the Zvartnots International Airport planning. So far it have determined as follows: 1. Energy supply Interface point: on the western border of the planned ILC. A transformer substation is located on the south-eastern border of the ZIA. 2. Rainwater Interface point: on the southern border of the planned ILC.There is an existing rainwater line along the access road. 3. Sewage Interface point: on the western border of the planned ILC.In the north west of the Air Cargo Terminal, near the northern border of the Airport areal, is an existing sewage pipe with a diameter of d=219 mm. 4. Drinking water Interface point: on the western border of the planned ILC. Near the sewage interface point is a large water reservoir with three pipes in western direction and one pipe in southern direction with diameters of d=159 mm. 5. Heating Interface point: on the western border of the planned ILC. Near the water reservoir is a boiler located, from which a pipe leads along the water pipe in southern direction. 6. Gas Interface point: on the western border of the planned ILC. A gaspipe leads from the east to the boiler along the northern border of the ZIA areal. 5.3.3 Upgrade and Development Needs In parallel with the current masterplanning, it was necessary to estimate and assume potential energy and utility requirements. Since the type and scale of future settlers‟ facilities and activities are still unknown, these estimates and assumptions will have to be updated.

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As the table below implies, the assumed energy requirements do not match the current electric power supply. According to the development stages and future settlers‟ needs, additional capacity may be required. Table 2: Summary - Utility Requirements

No. Position Requirements plus Allowance 30%

1 Electricity - connected load 5 318 kW 6 913 kW

2 Drinking water 2,15 m³/h 2,80 m³/h

3 Sewage 2,15 m³/d 2,80 m³/d

4 Fire fighting water 50 l/s for 2 hours

5 Rain water 96 800 m³/a

6 Telecommunication cable Cu 2 x 150 twin wire

7 Opticle fibre Table 3: Electricity Power - Utility Requirements

peak per number of No. Position unit units peak total demand factor connected load [kW] [kW] [kW] 1 Container Terminal 1.1 Gate 5 1 5 0,7 3,5 1.2 Container Terminal Administration 100 1 100 0,6 60 1.3 Reefers 11 24 264 0,7 185 2 Container Depot 2.1 Administration building 10 1 10 0,6 6 3 Container Service Centre 3.1 Service and Packing Centre 200 1 200 0,6 120 3.2 Container wash and repair 100 1 100 0,4 40 3.3 Equipment / Maintenance 10 1 10 0,6 6 4 ILC Service Centre 4.1 Gate 5 1 5 0,7 3,5 4.2 Administration building 50 1 50 0,6 30 4.3 Gas station / Car wash / Garage 100 1 100 0,6 60 4.4 Restaurant / Canteen 100 1 100 0,5 50 5 TIR-Parking 5.1 Gate 5 1 5 0,7 3,5 5.2 Administration building 50 1 50 0,6 30 6 Logistcs Service Facilities 6.1 Temperature Guided Warehouse 1500 1 1500 1 1500 6.2 General Warehouse 300 1 300 0,6 180 6.3 General Warehouse (large) 400 1 400 0,6 240 6.4 Freight Forwarding Facilitiy 300 1 300 0,6 180 7 Logistics intensive Industries and Trade 7.1 Production or processing facilities 1000 1 1000 0,7 700 7.2 Production or processing facilities 1000 1 1000 0,7 700 7.3 Production or processing and storage facilities 1200 1 1200 0,6 720 8 Roads 8.1 Lighting 500 1 500 1 500 9 total 5 318 10 plus 30 % allowance 1 595 11 total plus allowance 6 913

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Table 4: Water - Utility Requirements

Per capita Max. number of Peak total Water demand Plus allowance No. Position consumtion units per shift [l/h] [m³/h] 30% [m³/h] [l/d and employee] 1 Drinking water 50 344 2 150 2,15 2,80 1.1 Container Terminal 1.1.1 Gate 1 1.1.2 Container Terminal Administration 6 1.1.3 Container Terminal 8 1.2 Container Depot 1.2.1 Administration building 4 1.2.2 LU Storage 3 1.3 Container Service Centre 1.3.1 Service and Packing Centre 6 1.3.2 Container wash and repair 8 1.3.3 LU Handling equipment and maintenance 7 1.4 ILC Service centre 1.4.1 Gate 1 1.4.2 ILC-Administration 9 1.4.3 Gas station / Car wash / Garage 8 1.4.4 Restaurant / Canteen 9 1.5 TIR-Parking 1.5.1 Gate 1 1.5.2 Administration building 7 1.6 Logistics Service Facilities 1.6.1 Temperature Guided Warehouse 35 1.6.2 General Warehouse 30 1.6.3 General Warehouse 40 1.6.4 Freight Forwarding Facilitiy 25 1.7 Logistics intensive Industries and Trade 1.7.1 Production or processing facilities 38 1.7.2 Production or processing facilities 38 1.7.3 Production or processing and storage facilities 60 2 Sewage 2,15 2,80 Requirement Duration Water pressure [l/s] [h] [bar] 3 Fire fighting water 50 2 4 Average rainfall Average rainfall Dimension ILC Average Rainwater [mm/a] [l/s*km²] [ha] rainwater [m³/a] [l/s] 4 Rain water 277 8,77 35 3 96 800 The demand for drinking water was determined in relation to the number of employees. Process water has not been considered, since this demand will depend on the scale and nature of settler‟s activities. Therefore these estimates will have to be reviewed and updated. 5.4 Overview of Envisaged Logistics and Non-Logistics Services This chapter includes a brief overview of the envisaged logistics and non-logistics services provided by the future ILC at ZIA. The table bellow contains a summary of all defined functional modules with sub-functions and a brief description of their corresponding envisaged logistics and non-logistics services. Table 5: Functional Modules with defined functions and sub-functions No. Functional Module Description Rail-road transshipment of combined LUs 1 Container Terminal (containers, swap bodies, semi-trailers) as well as project cargo, vehicles and agricultural products . One entrance gate to terminal area 1.1 Gate area . One entrance control counter (office container) . One exit gate from terminal area with scale (see 1.2)

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No. Functional Module Description Container Terminal . CT administration and staff office 1.2 Administration . Control tower

1.3 Scale . Automatic truck weighing machine . Two multipurpose loading/unloading tracks 1.4 Loading tracks . One bypass line (optional)

1.5 Truck loading lanes . Truck entrance/exit and loading road lanes . Interim storage for loading units and equipment 1.6 LU storage lanes parking

1.7 Reefer Slots . Interim storage for reefer containers

1.8 Loading staff office . Loading personnel office (container)

Storage of empty and full containers (including 2 Container Depot reefer and dangerous goods)

2.1 Administration building . Container depot administration and staff office . Full loading units storage areas 2.2 LU storage area (including refrigerated, dangerous cargo) . Empty loading units storage areas Container Services Container services (stripping and stuffing, repair 3 Centre (CSC) and varnishing, wash) 3.1 Container repair . Container services (maintenance, repair) workshop and wash . Container varnishing . Container washing 3.2 LU handling equipment . Shed for parking of container transport and stacking and maintenance equipments . Garage for mobile equipment repair and maintenance . Petrol station for all mobile equipment (e.g. reach stacker, terminal tractor etc.) 3.3 Container packing centre . Container packing centre . Stripping and stuffing . Prepackaging of consignments ILC management, administration, control and 4 ILC Service Centre communications, petrol station, garage, canteen + restaurant . Two automatic entrance gates to ILC 4.1 Gate . Two automatic exit gates from ILC . ILC-administration, general coordination, 4.2 ILC-Administration administration, management

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No. Functional Module Description . Refuelling of heavy goods vehicles and cars Gas station/ car . Car wash 4.3 wash/garage . Repair and maintenance . Tyre change and depot . Self-service restaurant 4.4 Restaurant/Canteen . Canteen and catering services Truck parking + info and dispatcher services 5 TIR – Parking (e.g. documentation, online operational control) . Two automatic entrance gates to TIR - Parking area 5.1 Gate . Two automatic exit gates from TIR - Parking area . TIR - Parking administration, dispatcher and staff 5.2 Administration building office 5.3 Parking area . Truck parking Logistics Service General Warehousing, Temperature Guided 6 Facilities Warehousing, Freight Forwarding Facilities . Warehousing building for cold store of refrigerated Temperature Guided 6.1 goods or temperature controlled products Warehouse . Administration and staff office . General warehousing building incl. storage of 6.2 General Warehouse general cargo, administration and staff office . Distribution logistics . Open or covered storage of all kinds of goods or 6.3 Open storage area LU‟s . General warehousing building incl. storage of 6.4 General Warehouse general cargo, administration and staff office . Distribution logistics . Intersection between long-distance and short- Freight Forwarding distance traffic 6.5 Facility . Handling and consolidation of consignments . Administration and staff office Logistics intensive Settlement of logistics intensive production or 7 Industries and Trade processing facilities . Light industry facility: e.g. Production or processing - Food processing, 7.1 facilities - Assembling of white/brown goods, - Aviation or automotive sector . Light industry facility: e.g. Production or processing - Food processing, 7.2 facilities - Assembling of white/brown goods, - Aviation or automotive sector . Light industry facility: e.g. - Food processing, Production or processing 7.3 - Assembling of white/brown goods, and storage facilities - Aviation or automotive sector . Storage areas for general and project cargo

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No. Functional Module Description

8 Road System Site access and ILC internal road traffic system . Road access from/to main road 8.1 Road access . Control counter (office container) and gate with two entrance and two exit lanes (see also 4.1)

Parking areas . ILC internal parking areas (trucks, equipments, (see Legend of Master private cars) Plan)

Internal road system . ILC internal road traffic distribution and connection (see Legend of Master system Plan)

9 Rail track system Site access and ILC internal railway system . Railway link between existing siding track and 9.1 Rail access container terminal railway yard The future services provided by the ILC administration mainly will include the general admin- istration and management; real estate development, acquisition and marketing; facility manage- ment; security services; IT-services; and other support services (accounting, communication etc). 5.5 Specification and Dimensioning of the Functional Modules The Master Plan layout (see Figure 11) for the final stage of development gives the following information:  Basic outline and boundary of the ILC at ZIA.  External and internal main road network infrastructure, including the site accesses and gates.  External and internal main rail network infrastructure including the site accesses and connection point to the existing siding tack.  Connection and interface points to existing utility network and facilities.  Functional modules outline, dimensions and internal arrangements of areas, transship- ment and storage facilities, special equipments and buildings.  Fencing of the ILC operational areas (Container Terminal and TIR-Parking).  Systematic numbering of all main and sub functional modules and buildings.

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Figure 11: Overall Master Plan Layout

Author: INROS LACKNER AG

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The main functional modules defined for the final stage of development in the Master Plan layout are systematically structured and numbered as depicted in Table 6. Table 6: Overview - Main Functional Modules No. Functional Module Description Rail-road transshipment of combined LUs 1 Container Terminal (containers, swap bodies, semi-trailers) as well as project cargo, vehicles and agricultural products Storage of empty and full containers (including 2 Container Depot reefer and dangerous goods) Container Services Centre Container services (stripping and stuffing, repair 3 (CSC) and varnishing, wash) ILC management, administration, control and 4 ILC Service Centre communications, petrol station, garage, canteen + restaurant Truck parking + info and dispatcher services 5 TIR – Parking (e.g. documentation, online operational control) General Warehousing, Temperature Guided 6 Logistics Service Facilities Warehousing, Freight Forwarding Facilities Logistics intensive Industries Settlement of logistics intensive production or 7 and Trade processing facilities 8 Road System Site access and ILC internal road traffic system

9 Rail track system Site access and ILC internal railway system

5.5.1 Specification of Main Functional Modules The specifications and dimensions of the main functional modules for the final stage of develop- ment have been outlined in the following corresponding overview tables.

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1. Container Terminal (No.1) Table 7: Overview Container Terminal – Dimensions and Specification No. Functional Description Remarks and justification Modules 1 Container Terminal Dimensions Total area of CT 31.000 sqm 1.1 Gate staff office gross area [m²] 15 size (length and width) 6 m x 2,50 m 1.2 Container Terminal Administration gross area [m²] 300 office building for administration, size (length and width) 20 m x 15 m dispach management, control tower height 2 floors 1.3 Scale one automatic weighing machine for size (length and width) 25 m x 3,50 m trucks 1.4 Loading tracks total length: stage 1: 0 m size stage 2: 1,210 m stage 3: 1,210 m gauge 1520 mm stage 1: 0 number of tracks stage 2: 2 stage 3: 2 stage 1: 0 operational track length stage 2: 500 m / 530 m stage 3: 500 m / 530 m 1.5 Truck loading Lanes number of lanes inbound: 2 Truck entrance/exit and loading road outbound: 1 lanes 1.6 LU Storage Lanes size (length and width) number of lanes 3 number of slots (TEU) 50 x 3 = 150 ground slots stack height: 4 = 600 TEU 5 = 750 TEU 1.7 Reefer Slots size (length and width) 25m x 11m 3 Stacking height Reefer Slots for 40'-Container number of ground slots 10 Interim storage for loading units total number of slots (40'- 30 Cont.) 1.8 Loading Staff office gross area [m²] 15 size (length and width) 6 m x 2,50 m container construction height 1 floor The potential throughput capacity for the development stages 2 - 3 (final stage) of the Container Terminal has been calculated as follows:

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Development Stages 2 - 3  Two loading tracks with loading length of 500m  Average railway platform wagon (PW) length of 19,6m  Loading capacity per track: 500m/19,6m = 25 railway platform wagon  Total track loading capacity: 2 x 25 PW = 50 railway platform wagon  Throughput capacity per day: (2) x 2 x 25 PW x 1,6 TEU/PW x 1,3 (TOF) = 208 TEU per day - (2) = inbound and outbound - TOF = track occupancy factor  Throughput capacity per year: 250 WD per year x 208 TEU per day = 52.000 TEU per year - WD = working day  Mobile handling equipment: - 2 x reach stacker (lifting capacity 42t) - handling capacity: max. 20 LU per hour Figure 12: Container Terminal – Cross-Section of Multipurpose Transshipment Module

Author: INROS LACKNER AG 2. Container Depot (No.2) Table 8: Overview Container Depot – Dimensions and Specification No. Functional Description Remarks and justification Modules 2 Container Depot Dimensions

Total area of CD 13.000sqm 2.1 Administration Building gross area [m²] 300 size (length and width) 20m x 15m height 1 floor 2.2 LU Storage Area

ground slots 178 paved area, heavy construction Full loading units storage areas (incl. stacking height / 4 high = 712 TEU Refrigerated, dangerous cargo) number of total slots 5 high = 890 TEU Empty loading units storage areas

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3. Container Service Centre (No.3) Table 9: Overview Container Service Centre – Dimensions and Specification No. Functional Description Remarks and justification Modules 3 Container Service Centre Dimensions

Total area of CSC 27.000sqm 3.1 Container Wash, Container Repair gross area [m²] 1.350 Container services, varnishing, washing, workshop with integrated size (length and width) 50m x 40m office facilities, height 1 floor lightweight construction (concrete, steel, light metal, wooden clear height 6,50m truss)

3.2 LU handling Equipment gross area [m²] 1.200 workshop with integrated office size (length and width) 40m x 30m facilities, lightweight construction height 1 floor (concrete, steel, light metal, wooden truss) clear height 6,50m 3.3 Container Service and Packing Centre gross area [m²] 3.200 stripping and stuffing of containers, size (length and width) 80m x 40m lightweight construction, (concrete, height 1 floor steel, light metal) clear height 6,50m

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4. ILC Service Centre (No.4) Table 10: Overview ILC Service Centre – Dimensions and Specification

No. Functional Description Remarks and justification Modules 4 ILC Service Centre Dimensions

Total area of lLC Service Centre 27.500 sqm 4.1 Gate staff office two automatic entrance lanes to ILC- gross area [m²] 15 area, two automatic exit lanes from size (length and width) 6 m x 2,50 m ILC- area 4.2 ILC-Administration gross area [m²] 600 size (length and width) 20m x 30m office building for administration, height 1 floor dispach management clear height 3,00m 4.3 Gas-Station, Car Wash, Garage gross area [m²] 2.100 workshop with integrated office, size (length and width) 70m x 30m lightweight construction, (concrete, height 1 floor steel, light metal,) clear height 6,5m 4.4 Restaurant/ Canteen gross area [m²] 1.800 size (length and width) 60m x 30m lightweight construction height 1 floor (concrete, steel, light metal, wooden truss) clear height 3,00m

5. TIR-Parking (No.5) Table 11: Overview TIR-Parking – Dimensions and Specification No. Functional Description Remarks and justification Modules 5 TIR PARKING

Dimensions

Total area of TIR-Parking 36.000sqm 5.1 Gate staff office two entrance lanes to TIR-Parking gross area [m²] 15 area, two exit lanes from TIR - Parking area size (length and width) 6 m x 2,50 m 5.2 Administration gross area [m²] 300 size (length and width) 20m x 15m lightweight construction height 1 floor (concrete, steel, light metal, wooden clear height 3,00m truss) 5.3 Parking Area gross area [m²] 36.000 Truck parking lot size (length and width) 22 m x 3,5 m number of parking lots appr. 80

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6. Logistics Service Facilities (No.6) Table 12: Overview Logistics Service Facilities – Dimensions and Specification No. Functional Description Remarks and justification Modules 6 Logistics Service Facilities Dimensions

Total area of logistics service facilities 133.000sqm 6.1 Temperature Guided Warehouse gross area [m²] 5.000 storage of goods in various temperature zones with size (length and width) 85m x 60m administration and staff office, lightweight construction (concrete, height 1 floor steel, light metal, glass, wooden truss) additional 5.000 sqm clear height 8,00m extension 6.2 General Warehouse gross area [m²] 5.000 general cargo warehouse with size (length and width) 100m x 50m integrated office facilities, lightweight construction height 1 floor (concrete, steel, light metal, glass, clear height 8,00m wooden truss) 6.3 Open Storage Area gross area [m²] 10.000 size (length and width) 100m x 100m 6.4 General Warehouse gross area [m²] 12.800 administration and staff office, size (length and width) 160m x 80m lightweight construction (concrete, height 1 floor steel, light metal) clear height 8,00m 6.5 Freight Forwarding Facility gross area [m²] 9.600 Intersection between long-distance size (length and width) 160m x 60m and short-distance; administration and staff office, lightweight height 1 floor construction (concrete, steel, light clear height 6,50m metal, glass, wooden truss)

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7. Logistics Intensive Industries and Trade (No.7) Table 13: Logistics Intensive Industries and Trade – Dimensions and Specification No. Functional Description Remarks and justification Modules 7 Logistics Intensive Industries and Trade Dimensions Total area of LIIT 76.000 sqm 7.1 Production or processing facilities gross area [m²] 7.200 Light industrie facilities; lightweight construction size (length and width) 120m x 60m (concrete, steel, light metal, wooden height 1 - 2 floor truss) 7.2 Production or processing facilities gross area [m²] 7.200 Light industrie facilities; lightweight construction size (length and width) 120m x 60m (concrete, steel, light metal, wooden height 1 - 2 floor truss) 7.3 Production oder Processing and Storage Facilities

gross area [m²] 10.200 Light industrie facilities; Storage areas for general and project cargo, size (length and width) 120m x 60m + 100m x 30m lightweight construction (concrete, steel, light metal, wooden height 1- 2 floor truss)

5.5.2 Stationary and Mobile Equipment In this chapter the main required mobile equipment as well as stationary technical equipment for the future ILC are listed and including key technical parameters.

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1. Container Terminal (no. 1) Table 14: Container Terminal – Survey of Mobile Handling Equipment no. description number technical specification example: of manufacturer 1 Reachstacker 2 e.g. Kalmar stage 1: 0 operating data stage 2: 2, - lifting capacity, max.: 42 tons stage 3: 2 - stacking capacity: 5

2 Fork Lift - Diesel 1 e.g. STILL stage 1: 0 operating data stage 2: 1, - loading capacity: 6 tons see also technical information stage 3: 1 - service weight: 8.8 tons - e.g. STILL R 70-60 - front axle load fully loaded: 13.4 tons

3 Terminal Tractor 2 e.g. Kalmar, MAFI stage 1: 0 operating data stage 2: 1, - vertical load capacity: 74,800 kg (fifth wheel) stage 3: 2 - pulling capacity: 108,000 kg (fifth wheel) - service weight: 6,600 kg - front axle load: 4,000 kg - rear axle load: 2,600 kg

dimensions - lengths: 4.993 mm - width: 2.500 mm - height: 3.655 mm - turning radius: 6.126 mm

power unit - diesel engine - engine power: 179 kW 4 Chassis 8 e.g. Houcon, D-TEC stage 1: 0 dimensions stage 2: 4, - lengths: 14.120 mm stage 3: 8 - width: 2.500 mm - height: 1.180 mm

2. Container Depot (No.2) Table 15: Container Depot – Survey of Mobile Handling Equipment no. description number technical specification example: of manufacturer 1 Reachstacker 1 e.g. Kalmar stage 1: 1 operating data stage 2: 1, - lifting capacity, max.: 42 tons stage 3: 1 - stacking capacity: 5 2 Empty Reachstacker (optional) 1 e.g. Kalmar stage 1: 0 operating data optional and on demand stage 2: 1, - lifting capacity, max.: 10 tons in stage 2 + 3 stage 3: 1 - stacking capacity: 5

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3. Container Service Centre (no. 3) Table 16: Container Service Centre – Survey of Mobile Handling Equipment no. description number technical specification example: of manufacturer 1 Fork Lift Truck- Diesel 1 e.g. Kalmar stage 1: 1 operating data stage 2: 1, - loading capacity: 16 tons Container repair workshop and stage 3: 1 - service weight: 23 tons wash (no. 3.1) - lifting height: 5.000 mm - frontspreader: Drehtrainer type FSPR 2 Fork Lift - Electric 3 e.g. STILL CFS container packing centre (no. stage 1: 3 operating data 3.3): 2 pc, stage 2: 3, - loading capacity: 2.2 tons LU handling equipment and stage 3: 3 - service weight: 4.1 tons maintenance (no. 3.2): 1 pc - front axle load fully loaded: 5.7 tons

power supply - operational voltage: 400 V - input supply voltage: 20 kV - net short circuit power: 500 MVA

5.5.3 Information and Communication Systems This subchapter provides a recommendation for future information and communication systems, with the main focus on the Container Terminal, Container Service Centre and Container Depot. In the Container Terminal, Container Service Centre and Container Depot almost all defined main operational processes should be supported by the computerised Communication and Control System (CCS). Basic requirements for a CCS are:  All ingoing and outgoing movements of cargoes and load units (loaded or empty) and vehicles on the rail-sides (trains, wagons and their cargoes) as well as on the road-sides (trucks and their cargoes) must be identified, and their data must be captured in the central database.  All movements of cargoes and vehicles between the different functional areas and their actual positions and status data must be captured and updated in the central database.  The unique data sets of each object (order, cargo unit, wagon, train) data should only be captured once, during the order process further status and position data are added.  By this way, it must be insured that the actual position and status data of each single cargo unit and vehicle is available for online-retrieval (by authorised functions and personnel) at any time (tracking and tracing function based on real-time order processing status data base).  All authorised management and operational staff must have “full visibility” of the actual position and status and progress of “their” cargo units and vehicles as well as occupation and “work status” of their facility and equipments.  Customers and partners (other railways) must be served on requests for actual tracking and status data for their cargo unit or vehicle via data interfaces (Internet) or via telephone or fax.  Customers and partners must be served for booking their cargo transport via online booking interface (Internet) or via telephone or fax.

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 Exchange of train and wagon data with partners (other railways) must follow European rail standards and interoperability requirements. The CCS should be located in the Container Terminal Administration building (no. 1.2) including appropriate computer hardware and software (database and communication servers). Furthermore a central logistics management and information system which supports and informs the ILC customers should be implemented by the ILC administration. The further specification and implementation of such information and communication systems shall be done in close cooperation with the potential operators of the ILC and Container Terminal. 5.6 Soil Investigation Programme 5.6.1 Description of Required Soil Properties The area of the dedicated logistics centre covers a length of 1000 m and a width between the most northern and the most southern part of 620 m, comprising a total area of approx. 360.000 m². The area should be suitable for heavy duty traffic and heavy loads in general. The functional design of the area considers the following items:  Traffic and parking areas  Rail tracks  Business and administration module  Container handling and container service facilities  Storage facilities (general warehouses, temperature guided warehouses, open storage area)  Areas for industries and logistics service activities  Service areas (energy supply, waste and water treatment, restaurant, gas station and garage, facilities for maintenance)

The investigation has to contain recommendations for construction and foundation of the paved area under consideration of the following loading parameters: 1. Container stack  Maximum gross weight (DIN-ISO 668) 1 container 40‟: 30.48 t ≈ 304.8 kN  Loading parameter: container stack, stacking height -> 4 container F= (4*304.8)/4 = 304,8 kN  Dimensions of container support area: b x l = 0.19 m x 0.20 m = 0.038 m²

 Бstack = 304.8 kN / 0.038 m² = 8021 kN/m² 2. Reach stacker  Front axle load of reach stacker with 40‟ container = 115 t ≈ 1150 kN  Wheel support area: 0.55 m x 0.525 m 0 0.289 m²

 Бwheel = 1150 kN / (4 x 0.289 m²) = 995 kN/m² Foundation and pavement in the sections of other facilities have to match the loads of the envisaged use.

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5.6.2 Specification of Soil Investigation Programme The possible expansion area is located directly in the south-east of the logistics centre at Zvartnots International Airport covers about 36 ha. The area of the future container terminal, the logistics intensive industries and trade facilities is located directly in the north of the existing access-road to the air cargo terminal. The site north of the container terminal was formerly used as a concrete factory. The old factory buildings are still situated on the territory. The eastern part of the future logistics centre is not being used except for small-scale cultivation. It is essential to receive detailed information about soil conditions in advance of further plannings. Therefore, it would be reasonable to investigate the main points of soil conditions. The trial borings have to be placed especially on the prospective areas of the railway lines, the container depot, the TIR-parking as well as on the areas of the different facilities and warehouses. The points marked in the layout plan show the places for required trial borings. Depending on the found soil layer and the envisaged utilization, the required drilling depth has to be determined. The documentation of the soil investigations has to match the standards of directives DIN EN 1997-1, DIN EN 1997-2, DIN EN ISO 14688, DIN EN ISO 22475-1 and DIN EN ISO 22475-2. The documentation has to contain the following specifications:

 Ground-water level at the time of the trial boring as well as the medium, the maximum and the 10-year ground-water level maximum  Soil types, ground classes  Moisture equivalent, consistency limit, grain-size distribution  Frost-sensitivity of the found soil layer  Compactness, allowable soil pressure of the found soil layer  Compactibility of the found soil layer  Soil infiltration ability/ water permeability of the found soil layer (the soil infiltration ability has to be evaluated)  Stiffness modulus, coefficient of subgrade reaction, density and angle of friction of the found layer  Statements to sinking sensitivity  Statements to the existing contamination

The positions of the trial boring points have to be marked on a layout plan with respect to the coordinate system and the top ground level. In consequence of the investigation, it is necessary to prepare solutions/variants/alternatives for the foundation of prospective superstructure and infrastructure. Relevant documents to submit The results have to be supplied as follows: 1. Two copies on paper, placed in a DIN A4 folder with contents as follows:  Documentation of the soil investigation  Drilling profiles  Levelling and mapping of the drilling areas on a layout plan (M 1:1000) 2. One digital copy on CD-ROM

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 Documentation of the soil investigation, saved as Word format (*.doc) or Excel format (*.xls)  Drilling profiles, saved as DWG/DXF file

All costs concerning data and plan supply shall be included in the offer and have to be defined as additional charges. 5.7 Expansion Stages and Implementation Plan The specification and overview of the envisaged stages of development have been outlined in the following sections, with a brief implementation plan. Based on the potential market and customers demand, construction specifications are recommended in three development stages. Development Stage 1 The development stage 1 includes the following main functional modules or components:  Gate (no. 4.1),  Container Depot (no.2),  Container Service Centre (no. 3),  ILC Service Centre (no.4),  TIR-Parking (no.5),  Temperature Guided Warehouse (no.6.1). Figure 13: Master Plan Layout – Development Stage 1

Author: INROS LACKNER AG

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Development Stage 2 In addition the development stage 2 contains the following main functional modules or components:  Container Terminal (no. 1) including two Loading Tracks (no. 1.4, operated by mobile handling equipment) with new Railway access,  General Warehouses (no. 6.2 and 6.4),  Open Storage Area (no. 6.3),  Freight Forwarding (no.6.5). Figure 14: Master Plan Layout – Development Stage 2

Author: INROS LACKNER AG Development Stage 3 In addition the development stage 3 includes the following main functional modules or components:  Logistics intensive Industries and Trade (no. 7), i.e. - Production or processing facilities (no. 7.1), - Production or processing facilities (no. 7.2, - Production or processing and storage facilities (no. 7.3)

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Figure 15: Master Plan Layout – Development Stage 3

Author: INROS LACKNER AG Initial Implementation Plan The following initial milestones and overall time schedule have been recommended for the future ILC development stages:  Planning and engineering period 2011 - 2012  Start implementation phase 2012  Development Stage 1 2012 - 2015  Development Stage 2 2016 - 2019  Development Stage 3 2020 - 2022  End implementation phase 2022 Remark: The new settlement of enterprises can be started from 2012 on market demand. 5.8 Estimation of Investment Needs (Capex) The first estimation of required investment needs for each of the three envisaged stages of ILC development have been outlined in the following overview tables. The more detailed tables for each development stage representing all main positions are part of the appendix of Annex 4.

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Table 17: Overview Capex – Total of Development Stages 1-3

Pos. Construction measures Investment [€] A Construction site preparation 8.320.000 B Infrastructure 4.287.000 B1 Transport infrastructure 2.260.000 B2 Utility infrastructure 2.027.000 C Transhipment and storage areas 450.000 D Buildings 6.060.000 E Handling equipment and facilities 1.110.000 F Safety and Security 334.000 G Other Facilities and Installations 639.000 subtotal (Pos. A - G) 21.200.000 H1 Planning, Surveying, Soil Investigation 2.120.000 H2 Contingency 1.060.000

total (Pos. A - G and H1 + H2) 24.379.000

Table 18: Overview Capex – Development Stage 1

Pos. Construction measures Investment [€] A Construction site preparation 6.196.000 B Infrastructure 2.618.000 B1 Transport infrastructure 1.389.000 B2 Utility infrastructure 1.229.000 C Transhipment and storage areas 0 D Buildings 3.700.000 E Handling equipment and facilities 350.000 F Safety and Security 181.000 G Other Facilities and Installations 496.000 subtotal (Pos. A - G) 13.541.000 H1 Planning, Surveying, Soil Investigation 1.354.000 H2 Contingency 677.000

total (Pos. A - G and H1 + H2) 15.572.000

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Table 19: Overview Capex – Development Stage 2

Pos. Construction measures Investment [€] A Construction site preparation 1.314.000 B Infrastructure 1.509.000 B1 Transport infrastructure 757.000 B2 Utility infrastructure 752.000 C Transhipment and storage areas 450.000 D Buildings 2.360.000 E Handling equipment and facilities 760.000 F Safety and Security 132.000 G Other Facilities and Installations 108.000 subtotal (Pos. A - G) 6.633.000 H1 Planning, Surveying, Soil Investigation 663.000 H2 Contingency 332.000

total (Pos. A - G and H1 + H2) 7.628.000

Table 20: Overview Capex – Development Stage 3

Pos. Construction measures Investment [€] A Construction site preparation 811.000 B Infrastructure 159.000 B1 Transport infrastructure 114.000 B2 Utility infrastructure 45.000 C Transhipment and storage areas 0 D Buildings 0 E Handling equipment and facilities 0 F Safety and Security 21.000 G Other Facilities and Installations 35.000 subtotal (Pos. A - G) 1.026.000 H1 Planning, Surveying, Soil Investigation 103.000 H2 Contingency 51.000

total (Pos. A - G and H1 + H2) 1.180.000 5.9 Description of Main Logistics Procedures and Operations The main internal transport and logistics processes, operations and interfaces of the main functional modules are:  Container Terminal (No.1).

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 Container Depot (No. 2)  Container Service Centre (No.3).  TIR-Parking (No.5). These modules are involved in the handling of the cargo traffic flow through the ILC, and are systematically described in the following subchapters. Furthermore the corresponding main management and information processes are outlined. Operating and main logistics procedures - Container Terminal (no. 1), Container Depot (No.2), Container Service Centre (no. 3) The combined traffic (combined trains, wagon groups and trucks) of loading units (containers, swap bodies and semi-trailers) includes the following main functional interfaces and cargo flows: A - Container Terminal The Container Terminal (CT) administration (no. 1.2) comprises all main functions of manage- ment, administration, surveillance and control of all rail traffic flows and operations, combined transshipment and gate operations. These CT administration functions are supported by the Communication and Control System (CCS). Trucks arrive using the road access to the CT gate area (no. 1.1) for entrance control and into the inside parking area. Drivers shall check in, clear their documentation (including export customs) at the CT administration counter hall and receive their entrance permit and loading guidance information. With the entrance permit and loading guidance information they drive to the assigned truck loading lane (no. 1.5) position or to the Container Service Centre. Having been unloaded/loaded trucks either drive directly back to the gate area (if exit has been cleared already during the entrance procedure) or stop at the internal parking area to receive the exit clearance (including import customs) at the CT administration counter hall. Before passing the CT gate (no. 1.1) including the exit control the trucks will pass the automatic weighing machine (no. 1.3) for the check of gross vehicle weight. 1. Arrival of combined train  The combined train (Ct-train) will arrive from the railway main line at the railway yard of Karmir Blur railway station.  The mainline locomotive will be replaced by a shunting engine. If the Ct-trains are too long for the available track loading length (500m) of the container terminal, they must be divided into half-trains or appropriate wagon groups.  The train or wagon group will be shunted by a shunting engine via the siding track and rail access into an empty multipurpose loading track (no. 1.4) of the container terminal. Technical control of platform wagons as well as cargo and platform wagons document- ation will be carried out at this loading track.  After unloading of the train or wagon group eventual defective platform wagons will be shunted out and directed to Karmir Blur railway station. 2. Unloading and loading of combined train  The unloading and loading of the train or wagon group will be carried out with reach stacker and under “standing method” procedure, whereby the train or wagon group remains in the multipurpose loading track during unloading and loading. After the plat- form wagons have reached their loading track positions the reach stacker is directed, by instruction from the CT administration, to start the unloading process.

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 The unloading of platform wagons is preferably made in the direct transshipment on the trucks which are available in the truck loading lane (no. 1.5) or in the indirect trans- shipment by the temporary LU storage lanes (no. 1.6).  Containers destined for longer storage in the container depot (No.2) or for further processing in the container service centre (No.3) are unloaded on available chassis.  The chassis are driven with terminal tractors to the container transfer area. There a reach stacker takes over the containers and takes them to the container service centre.  The loading of the platform wagons likewise preferably takes place via direct transship- ment (if empty space is already available) from the trucks arriving on the loading lane or in the indirect transshipment by the temporary LU storage lanes. Remark: The multipurpose loading tracks also are projected for an optional rail-road transshipment of project cargo and selected bulk cargoes (based on identified market demand). Potential vehicle/passenger car wagons could be unloaded or loaded with mobile vehicle loading ramps. 3. Departure of combined train  Upon completion of loading the train or wagon group the technical control of platform wagons as well as cargo and wagons documentation will be carried out at the loading track. The train or wagon group is prepared for shunting (i.e. brake test).  The train or wagon group will be shunted back by a shunting engine to the railway yard at Karmir Blur railway station.  There the train or wagon group will be composed again with other wagon groups to a complete Ct-train. The mainline locomotive is coupled and the entire Ct-train is again prepared for departure to the railway main line. B - Container Depot (no. 2) and Container Service Centre (no. 3) The Container Depot comprises the LU storage area (no.2.2) for empty and full containers (incl- uding refrigerated and dangerous cargo).LUs for long-term storage in the Container Depot are either unloaded from platform wagons direct to the transfer chassis or from the LU storage lanes to the transfer chassis. The transfer chassis are trucked to the Container Depot-transfer area and taken over by the Container Depot-mobile handling equipment. The reach stackers lift the containers and move them to the dedicated LU storage areas. In the same way loading units from customer trucks are transferred to/from the LU storage areas. The handling and transport of the loading units (loaded or empty containers and swap bodies) within the Container Depot will be done by reach stacker. The CSC service facilities comprise the container packing centre (no. 3.3), container repair workshop and wash (no. 3.1) and LU equipment and maintenance area (no. 3.2). Fork lifts and reach stackers are operated in the container packing centre and container repair workshop. The LU equipment and maintenance area also includes the petrol station for refuelling of all mobile equipment operating in the Container Terminal and CSC. Loading units (LUs) for CSC services facilities are either unloaded from platform wagon directly to the transfer chassis or from the LU storage lanes to the transfer chassis. Those LUs on transfer chassis are trucked to the CSC-transfer area and taken over by the CSC-mobile handling equipment. The fork lifts or reach stackers lift the containers and move them to the dedicated CSC service facilities. In the same way loading units from customer trucks are transferred to/from the CSC service areas.

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Operating and main logistics procedures – TIR-Parking (No. 5) The TIR-Parking comprises two automatic entrance and two automatic exit gates (no. 5.1), the Truck parking area (no. 5.3) and TIR-Parking administration (no. 5.2). The TIR-Parking administration includes all main functions of management, administration, surveillance, dispatcher services and control of truck traffic flows to/from the envisaged ILC at ZIA. Trucks arrive via the road access at gate (no. 4.1) to the gate area (no.5.1) for entrance control and into the inside Truck parking area. Drivers shall check in, clear their documentation at the TIR-Parking administration and receive their documents and dispatcher information. After clearing documentation and accordingly to the dispatcher information they drive to their final destination. ILC management and communication process The main ILC management and communication process is in general outlined in the following overview (see Figure 15). Thereby a systematically structure in five levels of control (top-down) will be recommended for the main ILC management and communication process: This top-down structure starts from the overall logistics management level (level 1) to the management levels of cargo (level 2) and train operations (level 3), container terminal security and surveillance (level 4) and the telecommunication network and interfaces as basic platform of all control processes (level 5). Figure 16: ILC Management and Communication Process Structure

ILC Management and Communication Process Structure

1. Logistics management+ control

2. Cargo management + control

3. Train management + control Rail signalling 4. Terminal security + surveillance system

External Internal Inter - 5. Telecommunication network Inter - faces faces

5.10 Organisational Structure and Operator Model The Government of Armenia already has a 30-year concession agreement with Corporacion America, which has 21 years left to run. Both the Government and the company have decided

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International Logistics Centres for Western NIS and the Caucasus to develop an ILC and FEZ in association with the airport. Figure 16 shows the intended structure and relationships between interested parties. Corporacion America is open-minded as to the nature of the contractual arrangements to be concluded with the two management companies, which are yet to be identified. Two major questions are to be settled in this regard:  Would the management companies simply sublease land from the concessionaire, or manage the FEZ/ILC on the concessionaire‟s behalf in return for a fixed or performance- related fee?  Would the management companies contribute capital to develop the FEZ/ILC, and if so on what terms? Figure 17: ZIA ILC Business Model

Government of Armenia Specialist firms 30-year concession agreement

Land Corporacion America SA* owner- Southern Cone Foundation ship Out- American International Airports LLC (AIA) sourced Armenia International Airports CJSC services

Contractual arrangements to be decided

Direct FEZ Management ILC Management oper- Company** Company** ation Operation Operation

International Logistics Centre (ILC) Zvartnots Free populated by tenants who provide International Economic services directly to customers and pay Airport Zone rent and fees to the ILC Management (ZIA) (FEZ) Company

| INTERNATIONAL LOGISTICS CENTRE | * Corporacion America is a diversified company based in Argentina. AIA is its USA-based subsidiary specialising in airport design, consultancy, operation and management, indirectly owned by Southern Cone Foundation. Armenia International Airports is a wholly-owned subsidiary of AIA set up to manage and invest in ZIA in compliance with the concession agreement. ** The FEZ and ILC Management Companies are yet to be identified.

5.11 Identification and Calculation of Required Staff and Workstations The identification and initial calculation of required staff and workstations for each of the three envisaged stages of ILC development have been presented in the following overview tables. For the future ILC operation a two shift operation (operation time per working day: 06:00 – 22:00) has been supposed.

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Table 21: Overview Required Staff and Workstations: Container Terminal

no. functional description/ number shift sum sum sum classification workplace per shift operation stage 1 stage 2 stage 3 1. Gate area (no. 1.1)

1.1 control counter 1 2 2 2 operational staff

2. Container terminal administration (no. 1.2) Central administration 2.1 terminal manager 1 1 1 1 administration staff 2.2 secretariat 1 1 1 1 administration staff 2.3 commercial clerk 1 1 1 1 administration staff 2.4 IT-manager 1 1 1 administration staff

2.5 control centre dispatcher 1 2 2 2 operational staff 2.6 scheduler 1 2 2 2 operational staff Customs clearance 2.7 customs officer 1 1 1 1 operational staff 2.8 employee - customs clearance and control 1 2 2 2 operational staff

3. Loading tracks (no. 1.4) 3.1 driver reach stacker 2 2 4 4 operational staff 3.2 driver fork lift truck- diesel 1 2 2 2 operational staff 4. Truck loading lanes (no. 1.5) 4.1 driver terminal tractor 1 2 2 2 operational staff 4.2 driver terminal tractor (stage 3) 1 2 2 operational staff

5. Loading staff office (no. 1.8) 5.1 loading master 1 2 2 2 operational staff 5.2 waggon inspector 1 2 2 2 operational staff total sum - Container Terminal 16 24 27

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Table 22: Overview Required Staff and Workstations: Container Depot no. functional description/ number shift sum sum sum classification workplace per shift operation stage 1 stage 2 stage 3 1. Administration building (no. 2.1) 1.1 manager 1 1 1 1 1 administration staff 1.2 secretariat 1 1 1 1 1 administration staff 1.3 commercial clerk 1 1 1 1 1 administration staff 1.4 clerical worker 1 1 1 1 1 administration staff 2. LU storage area (no. 2.2) 2.1 employee - instructor and coordinator 1 2 2 2 2 operational staff 2.2 employee - instructor and coordinator (stage 2+3) 1 2 2 2 operational staff 2.3 driver reach stacker 1 2 2 2 2 operational staff total sum - Container Depot 7 8 10 10 Table 23: Overview Required Staff and Workstations: Container Service Centre

no. functional description/ number shift sum sum sum classification workplace per shift operation stage 1 stage 2 stage 3 1. Container repair workshop and wash (no. 3.1) 1.1 manager 1 1 1 1 1 administration staff 1.2 commercial clerk 1 1 1 1 1 administration staff

1.3 employee - repair 1 2 2 2 2 operational staff 1.4 employee - repair (stage 2+3) 1 2 2 2 operational staff 1.5 subsidiary worker 1 2 2 2 2 operational staff 1.6 employee - cleaning and wash 1 2 2 2 2 operational staff

1.7 employee - cleaning and wash (stage 2+3) 1 2 2 2 operational staff 1.8 driver fork lift truck- diesel 1 2 2 2 2 operational staff 2. LU handling equipment and maintenance (no. 3.2)

2.1 manager 1 1 1 1 1 administration staff 2.2 secretariat 1 1 1 1 1 administration staff 2.3 commercial clerk 1 1 1 1 1 administration staff 2.4 employee - repair and maintanenance 1 2 2 2 2 operational staff

2.5 employee - repair and maintanenance (stage 2+3) 1 2 2 2 operational staff 2.6 driver fork lift - electric 1 2 2 2 2 operational staff 3. Container packing centre (no. 3.3) 3.1 manager 1 1 1 1 1 administration staff

3.2 commercial clerk 1 1 1 1 1 administration staff 3.3 employee - stripping and stuffing 2 2 4 4 4 operational staff 3.4 driver fork lift - electric 2 2 4 4 4 operational staff total sum - Container Service Centre 20 27 33 33

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Table 24: Overview Required Staff and Workstations: ILC Service Centre no. functional description/ number shift sum sum sum classification workplace per shift operation stage 1 stage 2 stage 3 1. Gate (no. 4.1) 1.1 control counter 1 2 2 2 2 operational staff 2. ILC administration (no. 4.2) 2.1 managing director 1 1 1 1 1 administration staff 2.2 assistant 1 1 1 1 1 administration staff 2.3 secretariat 1 1 1 1 1 administration staff 2.4 commercial clerk (stage 2+3) 1 1 1 1 administration staff 2.5 commercial management 1 1 1 1 1 administration staff 2.6 manager logistics 1 1 1 1 1 administration staff 2.7 IT manager 1 1 1 1 1 administration staff 2.8 manager security 1 1 1 1 1 administration staff 2.9 security staff supervisor 1 3 3 3 3 operational staff 3. Gas station/car wash/garage (no. 4.3) 3.1 manager 1 1 1 1 1 administration staff 3.2 secretariat 1 1 1 1 1 administration staff 3.3 commercial clerk 1 1 1 1 1 administration staff 3.4 employee - repair 1 2 2 2 2 operational staff 3.4 employee - repair (stage 2+3) 1 2 2 2 operational staff 3.5 employee - car wash 1 2 2 2 2 operational staff 3.5 employee - car wash (stage 2+3) 1 2 2 2 operational staff 3.6 filling station attendant 1 2 2 2 2 operational staff 4. Restaurant/canteen (no. 4.4) 4.1 manager 1 1 1 1 1 administration staff 4.2 secretariat 1 1 1 1 1 administration staff 4.3 commercial clerk 1 1 1 1 1 administration staff 4.4 employees - restaurant and canteen 6 2 12 12 12 operational staff total sum - ILC Service Centre 27 36 41 41 Table 25: Overview Required Staff and Workstations: TIR - Parking no. functional description/ number shift sum sum sum classification workplace per shift operation stage 1 stage 2 stage 3 1. Gate (no. 5.1) 1.1 control counter 1 2 2 2 2 operational staff 2. Administration building (no. 5.2) 2.1 manager 1 1 1 1 1 administration staff 2.2 secretariat 1 1 1 1 1 administration staff 2.3 commercial clerk 1 2 2 2 2 administration staff 2.4 clerical worker (stage 2+3) 1 2 2 2 administration staff 2.5 dispatcher 2 2 4 4 4 operational staff 2.6 customs officer 1 2 2 2 2 operational staff total sum - TIR-Parking 8 12 14 14

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Table 26: Overview Required Staff and Workstations: Logistics Service Facilities no. functional description/ number shift sum sum sum classification workplace per shift operation stage 1 stage 2 stage 3 1 Temperature guided warehouse (no. 6.1) 1.1 sum - administration staff 5 1 5 5 5 administration staff 1.2 sum - operational staff 30 2 60 60 60 operational staff 2 General warehouse (no. 6.2) 2.1 sum - administration staff 5 1 5 5 administration staff 2.2 sum - operational staff 25 2 50 50 operational staff 3 General warehouse (no. 6.4) 3.1 sum - administration staff 5 1 5 5 administration staff 3.2 sum - operational staff 35 2 70 70 operational staff 4 Freight forwarding facilitiy (no. 6.5) 4.1 sum - administration staff 5 1 5 5 administration staff 4.2 sum - operational staff 20 2 40 40 operational staff total sum - Logistics Service Facilities 130 65 240 240 Table 27: Overview Required Staff and Workstations: Industries and Trade no. functional description/ number shift sum sum sum classification workplace per shift operation stage 1 stage 2 stage 3 1. Production or processing facilities (no. 7.1) 1.1 sum - administration staff 8 1 8 administration staff 1.2 sum - operational staff 30 2 60 operational staff 2. Production or processing facilities (no. 7.2) 2.1 sum - administration staff 8 1 8 administration staff 2.2 sum - operational staff 30 2 60 operational staff Production or processing and storage facilities 3. (no. 7.3) 3.1 sum - administration staff 10 1 10 administration staff 3.2 sum - operational staff 50 2 100 operational staff total sum - Industries and Trade 136 0 0 246 The total sum of required staff for all main ILC functional modules at the final stage of development has been calculated as 344 per shift. Thereof the sum of indicated required staff for the main functional modules “Logistics intensive industries and trade” and “Logistics service facilities has been calculated at 266 per shift. Basis for this calculation have been average operating benchmark figures from comparable standard and modern facilities in Western Europe, which were adapted to practical experience in the current Armenian transport and logistics sector.

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6 OVERVIEW AND ASSESSMENT OF STAFF KEY QUALIFICATIONS 6.1 Labour Market Overview As an indicator for the ease of employing labour force in Armenia, the World Bank‟s Doing Business Index gives a quick overview of the labour market. The World Bank Index is based on a detailed survey of employment regulations completed by local lawyers and public officials in Armenia. The index encompasses the following indicators measured on a scale from (0 – 100), where 0 corresponds to the level of easy and 100 to difficult. The five indicators included in the index are:  The difficulty of hiring index, measures the applicability and maximum duration of fixed-term contracts and minimum wage for trainee or first-time employee.  The rigidity of hours index, measures the scheduling of non-standard work hours and annual paid leave.  The difficulty of redundancy index, measures the notification and approval require- ments for termination of a redundant worker or a group of redundant workers, obligation to reassign or retrain and priority rules for redundancy and reemployment.  The rigidity of employment index - a simple average of the difficulty of hiring index, the rigidity of hour‟s index, and the difficulty of redundancy index.  The firing cost, measures the notice requirements, severance payments and penalties due when terminating a redundant worker, expressed in weeks of salary. Table 28: Overview World Bank’s Doing Business Index - Armenia Eastern Europe OECD Indicator Armenia & Central Asia Average Difficulty of hiring index (0-100) 33 31.9 26.5 Rigidity of hours index (0-100) 20 29.9 30.1 Difficulty of redundancy index (0-100) 10 25.9 22.6 Rigidity of employment index (0-100) 21 29.2 26.4 Redundancy costs (weeks of salary) 13 27.8 26.6

The Armenian overall ranking of the Doing Business Index for 2010 is 62, which places Armenia close to the best third of the scale for the 183 countries assessed in the survey. 6.2 SWOT analysis of labour market in Yerevan region In order to assess the staff key qualifications and the labour market conditions in the transport and logistics sector of Armenia, a SWOT analysis has been undertaken. In general strengths and weaknesses should be seen as factors directly influencing the labour market, while opportunities and treats should be seen as external factors potentially influencing the labour market. The results of the SWOT analysis are presented in the matrix below.

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Table 29: SWOT Analysis: Labour Market in Yerevan Region - Transport and Logistics Sector

Strengths Weaknesses  In general the labour force in Armenia is  Not much experience in the logistics well educated. industry.  Proximity to the State Engineering  A rather limited available work force. University of Armenia  No variety of training institutions for the transportation industry.

Opportunities Threats  High unemployment rate – though going  Isolated economic position of the country down – risk of being bypassed on the main  Import trainers and training modules in transport routes logistics from EU countries.  (Historic) disagreements with neighbour-  Potentials for enhanced trade cooperation ing countries (Turkey and Azerbaijan) with Iran.  Economic and transport policy reforms needed to strengthen the Armenian labour market. The overall objective of the SWOT analysis is to turn weaknesses and threats into respectively strengths and opportunities. The key strategy for this is training programmes for both workers with high management, middle management as well as operational and administrative staff within the transport and logistics sector. 6.3 Specification and Assessment of required Key Qualifications With the establishment of the new ILC at ZIA site the staff requirements come down to a small team of professionals that are responsible for the final preparatory work before the actual inauguration of the Logistics Centre. The team should consist of the following members:  A General Manager: general specialist of the logistics sector with good networking and negotiation capabilities, good knowledge about cooperation between private and public stakeholders  A technical manager with a background in engineering and construction of logistic centres  A lawyer with specialisation in construction contracts for the owners or leasers of lots and facilities. The General Manager is also a vital member of the ILC management team after the opening of the ILC. Here the General Manager should work as Managing Director of the ILC and be in charge of further ILC development, expansion, new business opportunities as well as working acting as contact person for the Logistics Centre outwards to the public and the logistics industry. The technical manager and the lawyer will assist the general manager in the recruit- ment process for the Logistics Centre staff. Overall the educational background and professional experience required for the different levels of staff at a Logistics Centre can be summarized as follows: Table 30: Overall Required Educational Background and Professional Experience Management level Educational background: Professional experience ISCED High management University degree (M.Sc.) 5-10 years 5

Middle management – University degree 1-5 years 5 (administration staff) (B.Sc./M.Sc.)

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Management level Educational background: Professional experience ISCED Middle management Vocational education and 1-5 years 3 (operational staff) training Operational and Secondary school + 1-3 years 3 administrative staff vocational training

It should be noted that sufficient years of professional experience can replace the required education (e.g. a person with 10-20 years experience from low till high level in the transport and logistics sector, does not necessarily need an university degree to be able to fulfil his tasks satisfactory). With reference to the staff calculations and structure performed in chapter 5.11 the following matrixes for the staff key qualifications and need for professional training and general experiences have been made. In this context the required key qualifications for the overall management of the ILC are summarized in the section “ILC administration” (see Table 34). For the tables the following abbreviations are used to distinguish between (a) = administration staff and (o) = operational staff.

Container Terminal (no. 1) Table 31: Overview Required Staff Key Qualifications: Container Terminal Gate area: Control counter (o) - secondary school, vocational training logistics, security certificate Central administration: - university degree (economics, administration), 5 years experience in Terminal manager (a) transport and logistics sector, languages (English and Armenian) - secondary school, secretary training, languages (English and Secretariat (a) Armenian) - secondary school, commercial training certificate, languages (English Commercial clerk (a) and Armenian), 1 year experience IT-manager (a) - university degree IT, min. 3 years experience similar job - vocational education transport & logistics, 1-3 years experience similar Control centre dispatcher (o) job - vocational education transport & logistics, 1-3 years experience similar Scheduler (o) job Customs clearance: - vocational education transport & logistics, customs certificate, 1 to 3 Customs officer (o) years experience similar job Employee - customs - vocational education transport & logistics, customs certificate clearance and control (o) Loading tracks: Driver reach steaker (o) - vocational education transport & logistics, driving license reach stacker Driver fork lift – diesel (o) - vocational education transport & logistics, certificate forklift driver Truck loading lanes: Driver terminal tractor (o) - vocational education transport & logistics, driving license tractor

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Loading staff office: - vocational education transport & logistics, course planning and Loading master (o) dangerous goods, 3 year working experience in transport and logistics sector - vocational education transport & logistics, course inspection, 1 year Wagon inspector (o) working experience in similar job

Container Depot (no. 2) Table 32: Overview Required Staff Key Qualifications: Container Depot Administration building: - university degree (economics, administration), 3 years experience in Manager (a) transport sector, languages (English, And Armenian) Secretariat (a) - secondary school, secretary training, English and Armenian language - secondary school, commercial training certificate, English and Commercial clerk (a) Armenian language, 1 year experience Clerical worker (a) - vocational training in administration LU storage area: Employee - instructor and - vocational education transport & logistics, 5 year experience in similar coordinator (o) job Driver reach stacker (o) vocational education transport & logistics, driving license reach stacker

Container Service Centre (no. 3) Table 33: Overview Required Staff Key Qualifications: Container Service Centre Container repair workshop and wash: - university degree (transport/technical or related), 3 years experience in Manager (a) transport and logistics sector, languages (English and Armenian) - secondary school, commercial training certificate, English and Commercial clerk (a) Armenian language, 1 year experience Employee – repair (o) - technical vocational education Subsidiary worker (o) - technical vocational education Employee - cleaning and - technical vocational education or secondary school wash (o) Driver fork lift truck- diesel - vocational education transport & logistics, certificate forklift driver (o) LU handling equipment and maintenance: - university degree (transport/technical or related), 3 years experience in Manager (a) transport and logistics sector, languages (English and Armenian) Secretariat (a) - secondary school, secretary training Commercial clerk (a) - secondary school, commercial training certificate, 1 year experience Employee - repair and - technical vocational education maintenance (o) Driver fork lift – electric (o) - vocational education transport & logistics, certificate forklift driver

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Container packing centre: - university degree (transport/technical or related), 3 years experience in Manager (a) transport and logistics sector, languages (English and Armenian) - secondary school, commercial training certificate, English and Commercial clerk (a) Armenian language, 1 year experience Employee - stripping and - vocational education transport & logistics stuffing (o) Driver fork lift – electric (o) - vocational education transport & logistics, certificate forklift driver

ILC Service Centre (no. 4) Table 34: Overview Required Staff Key Qualifications: ILC Service Centre Gate: Control counter (o) - secondary school, security certificate ILC administration: - university degree (transport/technical or related), 5-10 years Managing director (a) experience in transport and logistics sector, languages (English and Armenian) - university degree (transport/technical or related), 1 year experience in Assistant (a) transport and logistics sector, languages (English and Armenian) Secretariat (a) - secondary school, secretary training, English and Armenian language - secondary school, commercial training certificate, English and Commercial clerk (a) Armenian language, 1 year experience Commercial management - university degree (marketing), 3 years experience in transport and (a) logistics sector, languages (English and Armenian) - university degree (transport/logistics), 3 years experience in transport Manager logistics (a) and logistics sector, languages (English and Armenian) IT manager (a) - university degree (IT), 3 years experience in similar job - university degree (transport), security training certificate, 3-5 years Manager security (a) experience in transport and logistics sector, languages (English and Armenian) - vocational education, 3-5 years experience in transport and logistics Security staff supervisor (o) sector, languages (English and Armenian) Gas station/car wash/garage: - university degree (transport/technical or related), 3 years experience in Manager (a) management Secretariat (a) - secondary school, secretary training Commercial clerk (a) - secondary school, commercial training certificate, 1 year experience Employee – repair (o) - technical vocational training Employee - car wash (o) - technical vocational education Filling station attendant (o) - technical vocational education Restaurant/canteen: - university degree (food / catering business), 3 years experience in Manager (a) restaurant sector Secretariat (a) - secondary school, secretary training Commercial clerk (a) - secondary school, commercial training certificate, 1 year experience Employees - restaurant and - secondary school canteen (o)

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TIR Parking (no. 5) Table 35: Overview Required Staff Key Qualifications: TIR parking Gate: Control counter (o) - secondary school, security certificate Administration building: - university degree (transport/technical or related), 3 years experience in Manager (a) management, languages English and Armenian Secretariat (a) - secondary school, secretary training, languages English and Armenian - secondary school, commercial training certificate, languages English Commercial clerk (a) and Armenian, 1 year experience Clerical worker (a) - vocational training in administration - vocational education transport & logistics, languages English and Dispatcher (o) Armenian - vocational education transport & logistics, customs certificate, 1 to 3 Customs officer (o) years experience similar job

Logistics Service Facilities (no. 6) Table 36: Overview Required Staff Key Qualifications: Logistics Service Facilities Temperature guided warehouse: Administration staff (a) - vocational training administration, logistics management, marketing Operational staff (o) - technical vocational training, forklift certificate General warehouse: Administration staff (a) - vocational training administration, logistics management, marketing Operational staff (o) - technical vocational training, forklift certificate Freight Forwarding facility: Administration staff (a) - vocational training administration, logistics management, marketing Operational staff (o) - technical vocational training, forklift certificate

As can be seen from the tables a higher education, similar to ISCED level 5, is mainly expected for staff with managerial responsibility. ISCED level 5 is similar to education at university level. While for others, a vocational education similar to ISCED level 3, education at upper secondary level, is required to perform the necessary tasks satisfactory. For many of the positions 1-3 years of experience within the transport and logistics sector is required. Due to possible limited experience and expertise within the local transport and logistics sector, the employment of workers with less experience than 3 years will be needed. For positions with managerial and administrative responsibility it is important that the holders are strategically focused and visionary; are good in coaching and team building, have exper- ience in project management and process optimizing; are aware of quality management systems; and have the foundation for creating good collegial management styles. For the operational staff good characteristics are ICT and e-skills; technical knowledge; analytical and process optimizing skills; and flexibility. According to the database on education from UNESCO‟s Institute for Statistics, a total of 15.955 students graduated from tertiary education programmes in Armenia in 2007. The number of students graduating is 2.300 higher than in 2006, suggesting a strong positive trend in the level of education in Armenia. However, the number of graduates is still low compared to the size of

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International Logistics Centres for Western NIS and the Caucasus the country. Tertiary level graduates with a possible future within transport and logistics are split within the following educations. Table 37: Graduates in Different Programmes, Tertiary Level

2006 2007 Graduates in Education 2,517 2,491 Graduates in Social Science, Business and Law 4,004 4,712 Graduates in Science 55 92 Graduates in Engineering, Manufacturing and Construction 723 1.079 Graduates in Services 435 495

The large numbers of available graduates within the fields of business and engineering indic- ates a high availability of skilled and qualified work force for several of the administrative positions as well as for some the operational positions at the Logistics Centre. The total labour force was 1,481,000 in Armenia in 2007. The labour force by sector in 2006 was: 46.2% in agriculture, 15.6% in the industrial sector and 38.2% in the service sector. The CIA fact book shows an unemployment rate of 7.1% in 2007, suggesting a good opportunity for filling positions that requires less academic or vocational training. 6.4 Recommendations for Selected Trainee and Qualification Programmes At the State Engineering University of Armenia students can obtain degrees in different trans- port related fields at the campuses of Gyumri and Vanadzor. At the the State Agricultural University of Armenia students can obtain a degree in Transportation and Road Traffic Organis- ation and Management. The results and training programmes from the ongoing TRACECA project Strengthening of Transport Training Capacities in NIS countries, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Tajikistan, Turkmenistan, Ukraine, Uzbekistan could make a good starting point for an additional logistics training programmes for B.Sc. and M.Sc. students at the State Engineering University of Armenia and at the Agricultural University of Armenia. During contacts to the learning environment in the TRACECA countries, particular interest was shown in components concerning training of trainers and development of training materials as an e- learning module. The expert team therefore advises that the e-learning module established on 3 is used as a very good starting point for training courses and seminars in transport and logistics. The contents of the reports on the tracecatraining homepage is made in a way where both academics and non-academics can learn from them, although the training courses themselves should preferably be split between administrative and operational staff as the contents of the proposed courses is mainly made for people already having an academic background or being underway to obtaining a such. The training modules proposed includes the following modules:  Transport Planning  Investment Appraisal  Multimodal Transport  E-learning and Teaching Methods The module on Multimodal Transport could be of high significance for the operational staff, while the Transport Planning and Investment Appraisal modules are mainly for the administrative staff. As the Logistics Centre develops and traffic flows grow, there might be need for additional training in ICT systems and Supply Chain Management, but as a starting point the materials

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International Logistics Centres for Western NIS and the Caucasus from the above mentioned project could deliver a good foundation which could be built upon. A benefit of the above mentioned program is that it has been adapted to the specific conditions and logistics tasks and challenges in the TRACECA countries and at the same time the training program is up to date (developed 2009-2010) Overall the program will ensure that employees have access to the training modules listed in Table 388 below. Table 38: Overview of Required Trainee and Qualification Programmes

Learning module Mainly dedicated towards: Transport modelling Administrative personal and management Transport Policy and Infrastructure Planning Administrative personal and management Infrastructure Financing and Investment Appraisal Administrative personal and management CBA and Economic analysis Administrative personal and management Financial analyses and feasibility studies Administrative personal and management Logistics and supply chain management All staff Inland Waterway Transports and multimodality All staff Air and land transport modalities and multimodality All staff Logistics terminals in Central Asia All staff

Depending on which modalities the Logistics Centre serves, the training focus can be respect- ively increased or decreased to suit the requirements of the staff. In addition to the above mentioned learning modules, training courses needs to be established with regards to the following:  Risk management (Transport safety and security regulations, accident prevention)  ISO 9000 quality management standards  ISO 14000 environmental management  Dangerous goods handling  Courses in additional and updated IT and ICT skills  Courses in repair services and maintenance  Where needed – language courses in English. The structuring of such courses should be done in a way, where the training needs for the individual worker is assessed initially. The Association of Armenian Freight Forwarders is also well experienced in the field of giving professional training for the transport and logistics industry and can assist with training courses. Finally, organisations like the European Logistics Association (ELA), the European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) and the International Federation of Freight Forwarders Associations (FIATA) all offer assistance and guidance for managing logistics for all transport modes. As an additional service it is proposed that the employees at the new ILC at ZIA be taught the content of the training modules at seminars and workshop through on-the job training, which also could include the utilisation of the e-learning module. This will require training facilities within the ILC, which should be established fully in line with the principals of cost sharing of common facilities.

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7 ENVIRONMENTAL IMPACT ASSESSMENT 7.1 General Objectives of the Environmental Investigations The investigation was effected on a 2,000 m corridor around the planned ILC area (about 36 ha). The investigation area (about 1,800 ha) is characterized by residential areas and agriculture areas (as seen in Figure 18). The available land plot for the logistics centre develop- ment is located between the villages or townparts Malatia-Sebastian in the east, Arbat and Getapnya in the south, Parakar in the north and Musaler and Arevashat in the west. The distance to Parakar village is about 1 km. There is industry in a proximate distance in western and northern direction. Some roads and north-south rail tracks pass through the investigation area, besides the Hrazdan River is tangent to the area. 7.2 Definition of the Investigation Area The investigation area is defined by residential areas, industrial areas and areas for agriculture. The nearest residential area is located 200 m east of the planned ILC. Near the projected ILC area there are only already industrial areas or agricultural land (see Figure 18). To the south of the projected ILC area is the “Zvartnots International Airport”. The city of Yerevan is located about 12 km in eastern direction. So far there is no information about the soil or groundwater conditions for the investigation area available. The climate of Yerevan is a semi-arid, continental climate (Köppen climate classification BSk), with hot and dry summers and cold and snowy winters. This is attributed to the fact that Yerevan is located on a plain surrounded by mountains and to its distance to the sea and its effects. The summers are usually very hot with the temperature in August reaching up to 40 °C (104 °F), while winters generally carry snowfall and freezing temperatures with January being often as cold as −15 °C (5 °F). The amount of precipitation is small, amounting annually to about 318 millimetres (12.5 in). Yerevan's weather is subject to an average of 2,700 sunlight hours per year. There are no national or international nature protection areas in the investigation area. The vegetation in the investigation area is an agricultural cover (see Figure 19). The whole investigation area is characterized by anthropogenic modifications, consequently the vegetation is not the original. It is not likely that there are special animals living on the investigation area. This investigation is not based on any animal research results. The conditions of the investigation area (including the projected ILC area) are not very favourable to be the habitat for all kinds of birds. The landscape of the investigation area is mostly flat at some parts only slightly hilly. The existing impact in the investigation area is made by many industrial areas, the Zvartnots International Airport, waste disposal facilities (soil) - therefore, dominating impacts are noise and air pollution.

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Figure 18: Land Utilization Inside the Investigation Area

Author: INROS LACKNER AG

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Figure 19: View of the Development Area

Figure 20: Cargo-Terminal of Zvartnots International Airport

7.3 Overview and Conditions of the used Data Basis For this investigation the Consultant used maps, visits, aerophotos as well as internet inform- ation (Google Maps and Wikipedia). Some data still lack details, but it is not necessary in the

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International Logistics Centres for Western NIS and the Caucasus scope of a follow-up project to improve the data because it seems not very likely that additional measurements to those mentioned in chapter 1.6 will be required (e.g. noise reduction). 7.4 Main Assessment of Environmental Risk The project has been examined with respect to its likely environmental effects, taking into account the present status of the investigation area. The results of this examination may be seen in Figure 21. Figure 21: Sensivity in Relation to the Projected ILC Area

Author: INROS LACKNER AG About 65% of the investigation area has a sensitivity assessed as „middle‟, „low‟ or even „very low‟ (see Figure 22). The overall assessment of environmental risk is „low‟ but because of the added relevance for valuation the total assessment of environmental risk is „low‟ to „middle‟.

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Figure 22: Statistic Overview about the Sensivity

Author: INROS LACKNER AG Table 39: Main Assessment of Environmental Risk

Main Assessment of Very Environmental Risk: Very low Low Middle High high Classification Explanatory statement Environmental balance sheet for the investigation area (1) Environmental risks The investigation area has A very high environmental risk On 0% of the investigation area

A high environmental risk On 35% of the investigation area (residential area and cemetary) (2) Concernment of residential areas On 16.8 % of the investigation area Relevance for assessment: Yes (3) Ecological risks International nature protected Areas On 0 % of the investigation area (according IUCN definition) Relevance for assessment: No National/regional nature protected On 0 % of the investigation area Areas (i.e. Natural Parks) Relevance for assessment: No Reclamation of special soil (like On 0 % of the investigation area fenland) Relevance for assessment: No

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(4) Landscape risks Reclamation of unimproved areas for On 0 % of the investigation area the project Relevance for assessment: No Excavation, reclaiming On 0 % of the project area Relevance for assessment: No Special methods of soil stabilization On 0 % of the project area Relevance for assessment: No Supplementary assessment criteria (1) Barrier effects (space resistance at the No level “very high” and “high”, also combined with residential areas (2) Large-scale effects (on protected No areas) (3) Initial level of pollution No (noise, air, soil, water) (4) Interaction with other projects Yes (ZIA, industrial area) (5) Miscellaneous (Short description) No Added relevances of assessment criteria none for valuation Result of the Environment Risk Assessment The level of the project risk of environmental impacts is mainly low to middle.

7.5 Potential Conflicts with Environmental Factors According to the plan only a part of the residential areas in the investigation area is impacted by the projected ILC. The impacts caused by the ILC development are due to noise (traffic and logistics activities) and pollution (mostly by traffic). The noise from the airport will cover the noise from the ILC operation. It is unlikely that the effect would be additional. The reclaiming of land is the greatest impact of the projected ILC, because that reduces the biomass production. Potential land for biological processes will be lost. Noise and air pollution do not have a heavy influence on the residential areas, because of the nearby airport, which is likely to cover most of the pollution. It is not likely that the groundwater will be influenced by the ILC project, if state-of-the-art technical measures are built in (for example oil separators for all water collecting on traffic areas, collecting of waste water and recycling of water in the container washing plants). It will be necessary to protect the river against pollution from traffic and spoiling, therefore it will be necessary to clean the waste water before leading it into the river. 7.6 Conclusions and Prospective Compensation Needs Most of the planned area is in use or anthropogenic overbuilt, therefore no compensation is considered necessary. Nor is there any wild life in the vicinity which is likely to be adversely affected by the proposed use of the land, to the extent that remedial action is needed.

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8 BUSINESS PLAN 8.1 General Project Description The airport occupies a large site on which it has been decided by the Government, as land- owner, and the concessionaire to develop both a free economic zone (FEZ) on 15ha and an international logistics centre (ILC) on 36ha. It has also been decided to provide rail acces and improved road access to the site. Thus Yerevan, Armenia‟s political and commercial capital, will have three complementary facil- ities on a single site: an international airport, an FEZ and a tri-modal ILC. The ILC is the subject of this business plan (BP). It would be the only tri-modal logistics facility in the country and, at the time of writing, in the South Caucasus region. Because of Armenia‟s landlocked status, and the present closure of its borders with two of its four immediate neighbours, it is of critical importance to have efficient north-south transport connections:  To Georgia, and so to the Black Sea.  To Russia.  To Iran, and so to the Caspian Sea and the Persian Gulf. The proposed ILC will comprise three fnctional areas:  Logistics services (warehousing, freight forwarding etc).  Logistics intensive industries and trade.  Container terminal. The capital cost has been estimated at €24.4M at constant prices. 8.2 Legal and Regulatory Matters Zvartnots International Airport (ZIA) is owned by the Government of Armenia, but operated under a 30-year concession agreement signed in 2001 with diversified Argentinean company Corporacion America. The following year a local subsidiary (Armenia International Airports CJSC) was created to implement the concession agreement, which entails operating the airport, planning its renovation and expansion and undertaking an agreed level of investment. In 2007 a new international terminal was opened. Another is due for completion by the end of 2011. Armenia International Airports is a wholly-owned subsidiary of US-registerd American Inter- national Airports LLC (AIA) which in turn is owned by Lichtenstein-registered Southern Cone Foundation. The ultimate owner of all the concerned entities is Eduardo Eurnekian, an Argentinean of Armenian descent9 The Government of Amenia, will retain ownership of the airport and the adjacent land on which the FEZ and the ILC will be developed. There are pockets of privately owned land within the area required for development. This land is of little value to the owners: there is a prohibition on building in order to preserve it for possible airport expansion. There is also private land along the route of a former railway line, which the Goverment now intends to re-establish to serve the airport, FEZ and ILC. In both cases the Government is addressing the issue of acquisition. The Consultant is not aware of any other legal or regulatory obstacles to the development of the ILC as proposed in this document. If any such obstacles arise it is expected that they will be overcome with a minimum of difficulty, in view of:

9 Information extracted from ADB RRP document „Proposed Loan: Zvartnots Airport Expansion Project (Phase 2) (Armenia), March 2010.

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 The project‟s close alignment with national strategic interests, and hence the Govern- ment‟s strong interest in its success.  The momentum already created by the concession agreement with AIA; establishment of an air cargo facility; creation of an FEZ; initial rehabilitation work to improve access and and clear the site of obsolete buildings; and the involvement of several international financial institutions (ADB, DEG, EBRD and World Bank).  Armenia‟s record of pragmatic reform since its independence from the Soviet Union in 1991, embracing economic restructuring, privatisation, price liberalisation and prudent fiscal policies. 8.3 Technical Matters The technical details and master plan layouts are already described in Chapter 5 “Master Plan Description and Preliminary Design”. 8.4 Assumptions 8.4.1 Cargo Throughput The most reliable relevant statistics relate to foreign trade. For the base year (2007) these show exports of 1.0Mt and imports of 3.7Mt. Of these volumes, 19% and 21% respectively are deemed to be containerisable and therefore suitable for handling at an ILC. Official regional statistics show that Yerevan enjoys an unusual degree of primacy. Demo- graphic and economic statistics suggests that Yerevan is responsible for about two-thirds of Armenia‟s demand, to which the Consultant allocates a 20% share of logistics demand outside Yerevan. This takes Yerevan‟s total share to 66.7% + (33.3% × 20%) = 73%. Consequently the base-year logistics market for which an ILC at Yerevan would compete is estimated at:  [ (1.0Mt × 19%) + (3.7Mt × 21%) ] × 73% = 0.7Mt. The IMF expects Armenia‟s GDP to recover to its 2007 level in 2012-2013, which is when the ILC is expected to open, and to experience long-term growth of 4.5%pa. This is broadly in line with likely growth in Armenia‟s main trading partners. It is reasonable to expect that trade volumes will move in proportion to economic activity. This analysis excludes domestic traffic, transit traffic and the possibility of new market opport- unities being developed. However, the Consultant recognises positive aspects of Armenia‟s economic development to date and future prospects, and consequently has added an undefined cargo category labelled „Future potential‟, with a base-year volume of 0.05Mt and an above- average growth rate. The proposed ILC would have only one serious competitor in the medium term: Apaven, which operates a small container terminal with some warehousing capacity in the southern part of Yerevan city on a site which has limited expansion capacity. The owner, Apaven Ltd, has expressed interest in developing its business beyond what is possible at its present location, and is considered a stakeholder for the ILC. This total market has been disaggregated into the main cargo categories, distinguishing between exports, imports and transit cargo, and projected to 2032. This is the final year of the 20-year appraisal period for CBA purposes. The BP is based on a 10-year appraisal period. 8.4.2 Revenue to the ILC Operator It is uncertain under what contractual conditions the government as landowner, the franchisee and the two management companies (for the FEZ and the ILC) will operate. The BP is written from the point of view of a composite entity, without making assumptions about how the expensies and revenues will be shared.

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It is expected that the ILC will be operated in such a way that the only substantial revenue will be in the form of rent paid for land, buildings and other infrastructure and superstructure that the investors may install. In addition to such rental revenue, computed on the the basis of monthly rental rates per square metre, the management company is expected to earn revenue from providing a range of auxillary sevices to tenants and users. These may include facility management, security, equipment hire, marketing, logistics management and training. 8.4.3 Expenditures Capital expenditure (capex) has been estimated for each phase of development by:  Estimating unit costs, based on consultation with stakeholders and reference to known unit costs for other projects.  Esimating quantities, based on the master plan. This results in total capital expenditure of €24.4M at constant prices, phased as follows:  Phase I ...... €15.6M  Phase II ...... €7.6M  Phase III ...... €1.2M Operating expenditure has been estimated for the final phase of development when the facility operating at full capacity. This ultimate figure has been used to estimate expenditure in each preceding year by making a judgement about the proportion of each expenditure item that:  Is fixed, irrespective of the sale of the facility or activy level.  Varies in proportion to scale, represented by cumulative capital investment in €.  Varies in proportion to activity, represented by total cargo throughput in tonnes. Initially all expenditures were estimated at constant prices (base year: 2009-10) before applying a projected inflation rate of 3%pa. The same inflation rate was applied to rentals and other revenue rates. 8.4.4 Financing Plan Four IFIs are currently involved with the airport, the FEZ and the transport sector generally:  The ADB, DEG, EBRD and World Bank have variously financed the construction of passenger and cargo terminals at ZIA. One of the loans has already been repaid.  The World Bank has earmarked US$100M for the Life Line project to develop roads linking rural areas to main transport arterials; and has another US$60M available for allocation at the request of the Government.  The World Bank is also carrying out a feasibility study for the FEZ. It is undertood that most or all of these institutions are willing to continue their involvement with AIA and the airport, and to support economically and financially feasible development of the FEZ and the proposed ILC. An important condition is that the FEZ and ILC should be operated by companies with the appropriate expertise. A financing plan is proposed in the full BP 8.4.5 Financial Parameters It is assumed that the ILC Management Company will be taxed normally with regard to its operation of the ILC at ZIA:  Profit tax ...... 20% × profit conventionally defined.  Dividend tax ...... 10% × dividends paid, in addition to profit tax.

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 Social insurance ...... 10% × all remuneration expenses, paid by the employer10. It is further assumed that the company will adopt the following generally conservative financial management policies:  Depreciation: A depreciation reserve will be built up using the rates of depreciation allowed under the Armenian tax system.  Dividends: 70% of residual cash flow after making provision for depreciation, the remaning 30% going into a general reserve.  Working capital: Assumed to be equivalent to 20% of annual gross revenue, financed by commercial bank borrowing. A financial discount rate of 15%pa (nominal, equivalent to 11.65%pa in real terms) is used to compute present values. This is considered to be a reasonable profit expectation of private investors in the present investment climate. 8.5 Marketing Approach, Strategy and Plan 8.5.1 Strategic Relevance of the Project Armenia is landlocked. It has borders with four countries: Azerbaijan, Georgia, Iran and Turkey. Currently the borders with Azerbaijan and Turkey are closed, leaving Armenia dependent on its road and rail links to Georgia and Iran; on those countries‟ ports; and on onward connections to trading partners in the EU, Russia, Turkey and North America. The trade gap is very wide: US$2 billion in 2009, equivalent to 23% of GDP. In that year imports were equivalent to 31% of GDP while exports were equivalent to only 8%. Armenia is able to sustain such a wide gap because of remittances from its large diaspora, supplementing inflows of foreign aid, loans and direct investment. Nevertheless there is an urgent need to improve transport and logistics infrastructure and systems in order to:  Promote and diversify exports, which remain dominated by bulk mineral products despite recent growth of the value of food exports.  Allow more efficient sourcing and movement of imports, saving foreign exchange and reducing costs to industry and consumers. An efficient tri-modal logistics facility at Yerevan would facilitate containerisation of suitable cargo – particularly food exports and a wide range of consumer and intermediate imports – and operation of block trains to the Georgian ports and to Russia via Georgia. When the borders with Azerbaijan and Turkey are opened to trade there will be much larger potential for more efficient transportation. 8.5.2 Market Considerations Yerevan accounts for 34% of Armenia‟s population, 64% of GDP and 79% of imports. This degree of primacy suggests that the proposed ILC‟s hinterland would exend well beyond the capital city itself. For some traffics it would extend to the whole country. There are already four other intermodal road/rail terminals in Yerevan, all private. Together they handle more than 20,000 containers per year plus some bulk materials. They mainly serve traffic through the Georgian port of Poti and provide customs clearance services. Not all have warehousing. Refrigerated cargoes are accommodated.

10 This is an estimated average. There is a sliding scale ranging from a minimum of AMD7,000/month (for an individual with a salaray of up to AMD20,000/month) to 5% of salary (for an individual with a salary exceeding AMD100,000/month).

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It is possible that one of the existing terminal operators will be contracted to manage the proposed ILC at ZIA. 8.5.3 Promotion Approach The ILC concept suggests a two-dimensional marketing approach: 1. Comprehensive marketing of the whole ILC concept (promotion of whole spectrum of services at one hub) among investors and users. 2. Specialised marketing of specific functional areas of the logistics centre (selective pro- motion) among investors and users. The ILC Management Company is recommended to establish a marketing department, directly responsible for business development and positioning of the ILC in the freight and logistics market, with an adequate budget for marketing and promotional work directed to both public and private sectors. In the public sector, the following major stakeholders have to be involved in the marketing approach:  Ministry of Transport and Communicaton (MoTC) which is responsible for transport policy, regulation and planning.  Railway Authority, which is located within the MoTC with a remit to facilitate concession arrangements in the railway sector.  General Department of Civil Aviation (GDCA), for which the Prime Minister‟s Department is responsible). 8.5.4 Marketable benefits A number of important marketable benefits should be promoted to potential investors, tenants and customers:  Location at ZIA allows tri-modal exchange.  The 40ha site allows not only a larger scale of operation than can be accommodated at any of the existing sites, but also a wide range of mutually supporting services and activities. These are specifically provided for in the master plan.  This scale and diversity will support innovations in the transport sector, in particular block trains linking Yerevan to Georgia, the Black Sea ports of Poti and Batumi, Russia and Iran; and eventually to Turkey, Azerbaijan and the Caspian Sea when border restrictons are eased.  Scale and synergies will also generate cost savings, for exporters, importers, manu- facturers and distributors to the local market. 8.5.5 Development Approach The development of the logistics centre requires attracting both investors and users, and an appropriate marketing strategy for each group. Private Developers/Investors The extent to which AIA and the yet-to-be-identified ILC Management Company will contribute equity capital for the development of the proposed ILC has yet to be defined. There will certainly be a need for loan capital, possibly supplemented by grant funds (for example from the NIF, if at least one of the financiers is an eligible European Public Finance Institution such as EBRD or EIB.

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The most likely sources of capital are ADB, DEG, EBRD and World Bank, all of which are already involved in funding the airport and/or the FEZ. In each case a likely requirement would be the contracting of well-qualified companies to manage the ILC and to run the container terminal (CT). Attraction of investors should be implemented both using formal tools, such as investor conferences or transport exhibitions and direct contacts to target groups. However, to enhance concrete commitments work has to be on a bilateral basis with the interested companies. It is important to keep regular intensive contact to such companies or development institutions. It is also equally important to follow up the initiatives. Such actions have to be supported by PR activities to increase awareness of the proposed ILC. The Consultant recommends using Europlatforms for publications and networking. Core Users (Transport and Logistics Companies) Due to the fact that the capital level of the local companies is limited and is preferably applied to mobile equipment, leasing logistics facilities is preferable to investment. So, all facilities will be mainly leased to tenants: warehousing, open storage areas, buildings intended for other com- mercial and manufacturing activities, parking areas and the container terminal (CT). For attracting core users, PR activities are needed. For instance press publications, present- ations and personal contacts are seen as the most effective marketing channels. But it is also necessary to identify and approach specific companies which are known to have the necessary qualifications, experience and financial strength. This is crucial to the success of the ILC as a whole and of the CT, and to creating confidence on the part of potential financiers. Other Users Potential users have to be contacted across a broad spectrum. As with core users PR activities should underpin a campaign of identifying and approaching companies that have reasons to locate some or all of their activities in the ILC. In general, the BP assumes that infrastructure (including on-site and off-site road and rail connections), warehousing and office accommodation will be built by the ILC Management Company, in some degree of collaboration with AIA. Users will therefore be able to lease the space they need and invest only in mobile equipment. But the 7ha area allocated to logistics intensive industries and trade will be leased long-term to companies that will construct their own buildings and other facilities. 8.5.6 Summary of Marketing Recommendations  Establishment of a marketing department, with adequate funding, directly responsible for the business development and positioning of the ILC at the freight and logistics market. The day-to-day work could be outsourced to a specialised company, which is common practice in the EU.  Organisation of marketing promotion at public and private levels at least among potential investors and users.  A two-fold marketing approach for the whole ILC concept among investors and users, and for specific function areas of the logistics centres (selective promotion) among investors and users.  High priority to identifying and securing well-qualified companies to manage the ILC as a whole and the CT. This may be a prerequisite to securing loan funding from any source.  Establishment of a partnership with key public sector stakeholders: MoTC, Railway Authority and General Department of Civil Aviation.

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 Establishment of a partnership with the South Caucasus Railways  Channelling the marketable advantages to investors and users.  Attraction of investors by formal tools, as investor‟s conference or transport exhibitions and bilateral contacts.  Regular contact to targeted companies or development institutions and follow up.  Use of the EUROPLATFORMS for publishing the ILC idea and networking  Targeting manufacturing and other added-value activities that would benefit from access to substantial land areas, first-class tri-modal transport access and the FEZ. 8.6 Operations Plan A business model has been proposed, illustrated in Figure 17 above. The Government of Armenia would retain ownership of the site, comprising airport, FEZ and ILC. The franchisee would be responsible for all three components but enter into contractual arrangements with suitably qualified companies to manage the FEZ and ILC. 8.7 Financial Performance The financial performance of the planned ILC is shown in six standard tables in the full BP:  Cargo Projection.  Financing Plan.  Profit and Loss.  Cash Flow.  Balance Sheet.  Performance Indicators. The project appears to be profitable, with a financial internal rate of return (FIRR) of 16%pa (nominal), both to the project and to the owners/managers collectively. The Consultant believes this to be a sufficient return to attract private equity. In some other ILC projects the operator has the prospect of long-term capital gain with rising land values, which may make investors willing to accept a lower rate of return from operating income. This prospect does not apply in the case of ZIA because ownership of the site will remain with the Government.

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9 COST BENEFIT ANALYSIS 9.1 Socio-Economic Context and Project Objectives Amenia is a land-locked country and the borders with two of its four neighbours (Azerbaijan and Turkey) are closed, leaving the country dependent on trade routes through Georgia to the north and Iran to the south. This fact gives added strategic need for efficient transport and logistics. It also limits Armenia‟s attractiveness as a provider of transit services. It has been pointed out in secton 4.2 above that Armenia has achieved a more successful transition many former Soviet republics with superior natural advantages. This is reflected in the scale of sectoral restructuring in favour of agriculture; in Armenia‟s HDI and HPI scores; in an exceptonally high investment rate (38% of GDP) and a relatively sound fiscal performance (the budget decifit in 2009 was equivalent to 6.4% of GDP – the lowest of the five direct beneficiary countries). But there is still widespread poverty, especially in rural areas, and a strong need for improved agricultural labour productivity which is only 17% of labour productivity in the industrial sector. While the most direct impact of the project would be to reduce the cost of supplying the urban population of Yerevan, and consequently reducing living costs, it is intended that the project would also improve rural producers‟ access to domestic and export markets. This would be achieved mainly through providing a reliable cold chain and the possibility for intermodal trans- shipment of containerised cargoes. More broadly, the project would significantly improve the efficiency of Armenia‟s crucial trans- port links to the north and south, offering intermodal facilities and range of logistics services that are largely lacking a present. These advantages will also apply to transport links to the east and west, if and when there is a resumption of direct trade with Azerbaijan and Turkey. The resultant benefits would be spread throughout the Armenian economy and population. 9.2 Project Identification The project consists of an international logistics centre (ILC) to be developed adjacent to a free economic zone and Zvartnots International Airport (ZIA). The costs are all on-site: land and its preparation; paving of open storage areas; infrastructure; and selected superstructure. The ILC will comprise the following functional areas:  Container terminal, with direct road and rail access.  Container depot.  Container service centre.  ILC service centre.  TIR parking.  Logistics service facilities.  Logistics intensive industries and trade. Most measurable benefits will accrue to settlers/tenants of the international logistics centre (ILC); and through them a wide range of producers, suppliers, consignors, distributors and consumers. A proportion of these benefits will be captured by the ILC operator in the form of rent and fees, and this revenue forms the basis for valuing such benefits. In addition there will be benefits that accrue to the community at large and are not susceptible to capture. These will result from:

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 Increased road vehicle load factors, allowing the same transport task to be performed with fewer vehicle-kilometres.  Modal shift away from road transport in favour of rail. They will take the form of reduced external logistics costs, chiefly:  Transport infrastructure construction and maintenance.  Road accidents.  Air pollution.  Noise pollution.

 Climate change, in particular CO2 emissions. Reduced road congestion also also result, but for two reasons there is no attempt to place a value on it:  There is no local traffic study which would allow an adequate estimate to be made.  In principle transport infrastructure costs embrace congestion costs, since they relate to provision of a fixed level of service for the prevailing traffic volume. Additional traffic necessitates additional investment and maintenance to preserve the level of service. The project is also expected to enhance corridor competitiveness and, through efficiency gains, to promote economic development in Armenia and corridor-wide. This in turn is expected to have a beneficial impact on employment and poverty alleviation. These are potentially the most significant benefits, but they are also the most difficult to quantify. Consequently the consultant has chosen to discuss them qualitatively but to exclude them form the quantitative analysis – which may therefore be considered conservative. 9.3 Project Feasibility and Alternatives The without-project case (or business-as-usual case) is continuation of the present situation. There are four existing intermodal transhipment facilities in Yerevan, orientated to the transport of goods to and from the Georgian Black Sea ports. They offer limited capacity and a narrow range of services. None offers tri-modal interchange facilities or land for the establishment of logistics intensive industries. Other alternatives to the with-project and without-project case were considered, but only within certain parameters. These corresponded to the consultant‟s understanding of an ILC as intended in the Terms of Reference and defined in the Inception Report. A 2-stage selection process was followed, and reported on:  In view of the capital‟s primacy it was concluded early in the study that there was no realistic alternative to Yerevan as a general location for an ILC.  Two specific sites in Yerevan were identified and assessed: a) the existing container terminal owned and operated by Apaven Co Ltd (which scored 71 in a multi-criteria analysis); and b) Zvartnots International Airport (which scored 66). This stage of the selection process was documented in Progress Report I. Following submission of this report the Government of Armenia selected the airport site. Subsequent analysis has shown that an ILC with the features listed above, is likely to be profit- able, both commercially and socially. 9.4 Financial Analysis Financial costs, both capital and operating, are taken directly from the Business Plan (BP) with- out any adjustment. The same applies to the ILC operator‟s revenue, used conservatively as a

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International Logistics Centres for Western NIS and the Caucasus proxy for internal project benefits. Details of the methodology are set out in Annex 3, Section 3.6.6. The project-specific input data for external benefits are summarised in the table below, in the form of average values across the range of cargo categories. In general, it has been estimated that:  Short-haul load factors would increase by 10 percentage points, and long-haul load factors by 5 percentage points.  In all cargo categories there would be a 10 percentage point shift of cargo from road in favour of rail. Table 40: Input Data

Average Enhanced load factors Cargo by road, without ……………………………...…%[a] 100% Average haul ……………………………………..………..km 30 LF without project …………………………...……………% 40%

Short-haul LF with project …………………………………..………% 50% Cargo by road, without …………………………….……%[a] 90% Average haul ………………………………………….…..km 500 LF without project …………………………………….……% 60%

Long-haul LF with project ………………………………………...…% 65% Modal shift from road to rail Cargo % shifted ……………… %[a] 10% Average haul before modal shift Road ……………………………………………….………km 500 Rail …………………………………………….…………….km 0 Average haul after modal shift Road ……………………………………………….………km 100 Rail …………………………………………….…………….km 400

a % relates to total cargo volume within a cargo category.

The ouput of the analysis takes the form of a cash flow projection to the year 2032 and a set of standard performance indicators. These are presented in Table 41below. It appears that:  80% of the measurable benefits are internal – i.e. they are susceptible to capture by the ILC operator. As pointed out in the Methodology (Annex 3), this is a very conservative estimate of internal benefits.  Of the external benefits, those attributable to enhanced load factors are significantly greater than those attributable to modal shift.  The EIRR is more than adequate at 19%pa. Other performance indicators are robust. 9.5 Economic Analysis In the economic analysis costs and benefits were re-valued by applying shadow prices. See Annex 3, Section 3.6.7, for an explanation. The results are presented in Table 42 below. The structure of this table is identical to that ofTable 41, but with the addition of summarised results of the risk analysis. These appear as NPV values at five percentiles in the probability distribution.

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Table 41: Cash Flow and Performance Indicators (Financial)

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Capital expenditure A Construction site preparation ……………………………6.2 1.3 0.8 B Infrastructure …………………………………………2.6 2.0 0.2 C Storage facilities ………………………………………4.1 3.1 D Transshipment facilities/equipment …………………0.2 0.1 0.0 E Miscellaneous ………………………………………….2.5 1.1 0.2 O&M expenditure A Personnel ……………………………………………………0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 B Utilities ………………………………………………………..0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 C Equipment ……………………………………………..0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 D Miscellaneous ……………………………………………0.4 0.4 0.4 0.4 0.6 0.6 0.6 0.6 0.6 0.6 0.6 Benefits 1 Internal benefits ………………………..………………………...………0.6 1.3 2.3 2.3 4.5 5.1 5.2 5.3 5.9 6.1 6.1 6 Congestion cost savings ...... 7 Enhanced load factor …………………………………….……………...….0.1 0.3 0.4 0.4 0.7 0.7 0.7 0.7 0.8 0.8 0.9 8 Modal shift …………………………………………………………..…………..0.1 0.2 0.2 0.2 0.4 0.4 0.4 0.4 0.4 0.5 0.5 Totals: Costs ...... 16.4 0.8 0.8 0.8 8.7 1.1 1.1 1.1 2.4 1.2 1.2 Benefits ...... 0.8 1.8 2.9 3.0 5.5 6.1 6.3 6.4 7.1 7.4 7.5 Net benefits ...... -15.5 1.0 2.1 2.1 -3.3 5.0 5.2 5.3 4.8 6.2 6.3

2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Capital expenditure A Construction site preparation …………………………… B Infrastructure ………………………………………… C Storage facilities ……………………………………… D Transshipment facilities/equipment ………………… E Miscellaneous …………………………………………. O&M expenditure A Personnel ……………………………………………………0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 B Utilities ………………………………………………………..0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 C Equipment …………………………………………….. 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 D Miscellaneous …………………………………………… 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 Benefits 1 Internal benefits ………………………..………………………...………6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6 Congestion cost savings ...... 7 Enhanced load factor …………………………………….……………...….0.9 1.0 1.0 1.1 1.1 1.1 1.2 1.2 1.3 1.3 8 Modal shift …………………………………………………………..…………..0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7 0.7 Totals: Costs ...... 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 Benefits ...... 7.6 7.7 7.7 7.8 7.9 7.9 8.0 8.1 8.2 8.2 Net benefits ...... 6.4 6.5 6.5 6.6 6.7 6.7 6.8 6.9 6.9 7.0

Performance indicators Social Discount Rate (SDR) Note 5.5% 10% 12% NA a EIRR Economic Internal Rate of Return ...... %pa 19% b MIRR Modified Internal Rate of Return ...... %pa 9% 12% 14% c NPV Net Present Value ...... EUR M 36 17 11 d Switching values: e Costs could change by ……………………………% 104% 59% 43% Benefits could change by ……………………………% -51% -37% -30%

Notes a A range of SDRs is used in order to satisfy the needs of different donors and lenders. b EIRR is that discount rate which produces a zero NPV. c MIRR introduces the assumption that net benefits (+ or -) are reinvested at the SDR. d The present value of the stream of net benefits, discounted at the SDR. In the risk analysis, NPV is also presented as a probability distribution. e Switching values are proportional changes in costs and benefits that give a zero NPV.

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Table 42: Cash Flow and Performance Indicators (Economic)

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Capital expenditure A Construction site preparation …………………………… 5.7 1.2 0.7 B Infrastructure ………………………………………… 2.1 1.6 0.1 C Storage facilities ……………………………………… 3.2 2.5 D Transshipment facilities/equipment ………………… 0.1 0.1 0.0 E Miscellaneous …………………………………………. 2.1 0.9 0.2 O&M expenditure A Personnel …………………………………………………… 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 B Utilities ……………………………………………………….. 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 C Equipment …………………………………………….. 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 D Miscellaneous …………………………………………… 0.3 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Benefits 1 Internal benefits ………………………..………………………...………0.6 1.2 2.1 2.1 4.0 4.6 4.7 4.8 5.3 5.5 5.5 6 Congestion cost savings ...... 7 Enhanced load factor …………………………………….……………...….0.1 0.3 0.4 0.4 0.6 0.6 0.6 0.7 0.7 0.8 0.8 8 Modal shift …………………………………………………………..…………..0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.4 0.4 0.4 0.4 Totals: Costs ...... 13.9 0.7 0.7 0.7 7.2 1.0 1.0 1.0 2.0 1.0 1.0 Benefits ...... 0.7 1.6 2.7 2.7 4.9 5.5 5.7 5.8 6.4 6.6 6.7 Net benefits ...... -13.2 0.9 1.9 1.9 -2.3 4.6 4.8 4.8 4.4 5.6 5.7 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Capital expenditure A Construction site preparation …………………………… B Infrastructure ………………………………………… C Storage facilities ……………………………………… D Transshipment facilities/equipment ………………… E Miscellaneous …………………………………………. O&M expenditure A Personnel …………………………………………………… 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 B Utilities ……………………………………………………….. 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 C Equipment …………………………………………….. 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 D Miscellaneous …………………………………………… 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Benefits 1 Internal benefits ………………………..………………………...……… 5.5 5.5 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 6 Congestion cost savings ...... 7 Enhanced load factor …………………………………….……………...….0.8 0.9 0.9 1.0 1.0 1.0 1.1 1.1 1.2 1.2 8 Modal shift …………………………………………………………..…………..0.4 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.7 Totals: Costs ...... 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Benefits ...... 6.8 6.9 7.0 7.0 7.1 7.2 7.2 7.3 7.3 7.4 Net benefits ...... 5.8 5.9 5.9 6.0 6.1 6.1 6.2 6.2 6.3 6.4

Performance indicators Social Discount Rate (SDR) Note Risk analysis 5.5% 10% 12% NA a Note EIRR Economic Internal Rate of Return ...... %pa 21% b Percentile NPV f MIRR Modified Internal Rate of Return ...... %pa 10% 12% 14% c 2.5 €M 10 g NPV Net Present Value ...... EUR M 34 16 12 d 25 €M 14 Switching values: e 50 €M 17 h Costs could change by …………………………… % 117% 69% 52% 75 €M 19 Benefits could change by …………………………… % -54% -41% -34% 97.5 €M 24 g

Notes a A range of SDRs is used in order to satisfy the needs of different donors and lenders. b EIRR is that discount rate which produces a zero NPV. c MIRR introduces the assumption that net benefits (+ or -) are reinvested at the SDR. d The present value of the stream of net benefits, discounted at the SDR. In the risk analysis, NPV is also presented as a probability distribution. e Switching values are proportional changes in costs and benefits that give a zero NPV. f For NPV calculation the default SDR is 10%pa. Values are in €M. g Percentles 2.5 and 97.5 are shown in preference to minimum and maximum values, which may be extreme. h The median value will be close to (but not identical to) the 'Most Likely' NPV.

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It appears that:  The economic performance is rather better than the financial, because the economic conversion factors (ECFs) applicable to costs are generaly lower to those for benefits.  There is negligible risk that the NPV of the proposed project would fall below zero using any of the three social discount rates.  The project is, from a social point of view, worth supporting. 9.6 Risk Assessment The quantitative risk analysis applies a triangular probability function to each broad category of economic costs and benefits; runs the economic analysis 1,000 times with random numbers generated within those probability functions; and produces a probability distribution in place of a single economic net present value (NPV). The probability distribution is summarised numerically as five percentile values (presented in Table 42 above. It is presented graphically below. Figure 23: Net Present Value as a Probability Distribution

-10 0 10 20 30 40 NPV (EUR million at constant prices)

This quantitative analysis forms part of a wider risk assessment. The chief risks to the success of the proposed project are:  Continued closure of Armenia‟s borders with Azerbaijan and Turkey, which serously restricts potential growth of trade and economic development.  Lower than expected demand, either because of slow recovery from the GFC; unrealistic estimation of the size of the catchment area; or under-achievement of expected market share.  Inability to identify a suitable ILC management company and negotiate mutually accept- able terms.  Reluctance by consignors and transport service providers to take advantage of enhanced intermodal transport options.  Reluctance by transport and logistics stakeholders, nationally and corridor-wide, to coordinate activities to the extent needed to achieve potential synergies. The principal strategies to counter these risks are:  To give high priority now to identifying and negotiating with at least one suitably qualified and financialy sound management company.

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 To phase the development of the ILC only as warranted by growing demand, and in a way that is responsive to the nature of that growth. 9.7 Distribution Analysis Not only the scale of project benefits is of interest. An analysis has also been made of the distribution of net benefits among beneficiary groups. Financial and economic inflows to the project, and outflows from it, are drawn from the analysis described above in accordance with the ADB‟s standard methodology11. The following beneficiary groups are identified:  Producers and consignors. These include farmers, manufacturers and traders, within the country and abroad.  Consumers. In the case of exports, these are foreigners.  Transport and logistics providers.  Private investors and financiers. These comprise ILC owners, operators and tenants; and private banks that lend money for capital investment or as working capital.  Governments – local, regional and national. They capture a proportion of benefits, mainly through taxation. They lose revenue because of efficiency gains – e.g. reduced fuel usage – but this should be more than balanced by increased economic activity and consumption.  Donors and IFIs. They are net losers, financially. In the case of IFIs, their real interest rates are typically below accepted social discount rates, the difference representing a negative benefit (or subsidy) that is shared among other beneficiary groups. Estimates are made of the proportion of net benefits that accrue to each of these groups. These can only be approximations. They are presented in the shaded cells in Table 43 below. Table 43: Distribution Analysis (1)

NPV, EUR million % distribution, by beneficiary group Producers Transport Private Econ- Fin- Differ- Con- Govern- Donors/ & con- & logistics investors/ Total omic ancial ence sumers ments IFIs signors providers financiers

Inflows Project benefits 40.5 40.5 15% 15% 15% 40% 15% 100% Financing Private shareholders 9.2 -9.2 100% 100% Government grants 100% 100% Donor grants 0.9 -0.9 100% 100% Borrowing 11.9 -11.9 100% 100% Outflows Project costs Capital -16.4 -19.4 3.0 100% 100% O&M -7.7 -9.0 1.3 100% 100% Financing (including capitalised fees) Interest -4.4 4.4 100% 100% Principal repayments -7.0 7.0 100% 100%

16.5 -17.7 34.2

11 For an explanation, see the ADB‟s Handbok on Poverty and Social Analysis at www.adb.org /Documents/Handbooks/Poverty_Social.

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The results of applying these estimated proportions to computed net benefits appear in Table 44 together with an estimate of the share of the poor (as locally defined) in each group. This last step allows computation of the proportion of net benefits that flow to the poor: the poverty impact ratio (PIR) which is used by some donors and IFIs in project selection. Table 44: Distribution Analysis (2)

NPV, EUR million EUR million, by beneficiary group Producers Transport Private Econ- Fin- Differ- Con- Govern- Donors/ & con- & logistics investors/ Total omic ancial ence sumers ments IFIs signors providers financiers

Inflows Project benefits 40.5 40.5 6.1 6.1 6.1 16.2 6.1 40.5 Financing Private shareholders 9.2 -9.2 -9.2 -9.2 Government grants Donor grants 0.9 -0.9 -0.9 -0.9 Borrowing 11.9 -11.9 -11.9 -11.9 Outflows Project costs Capital -16.4 -19.4 3.0 3.0 3.0 O&M -7.7 -9.0 1.3 1.3 1.3 Financing (including capitalised fees) Interest & fees -4.4 4.4 4.4 4.4 Principal repayments -7.0 7.0 7.0 7.0

Total net benefits accruing 6.1 6.1 6.1 11.4 6.1 -1.5 34.2 Poor as % of total group 5% 20% 43% 12% Share of the poor in net benefits 0.3 1.2 2.6 4.1 The PIR is 12%. The poor are necessarily under-represented among producers and consumers, and assumed to be absent among other beneficiary groups. More than 60% of the net benefits accruing to the poor do so through the medium of governments, which are assumed to provide services and subsidies to their citizens equally on a per capita basis. There are a number of definitions of poverty in use in Armenia. The figure of 43% in the last row of the table corresponds to the proportion of the population living below the internationally recognised threshold of US$2 per capita per day.

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10 RECOMMENDATIONS FOR PUBLIC PROMOTING AND SUPPORT In one sense the project is well advanced. The airport is being expanded with substantial international loan funding and access to international management expertise. The Government is considering the acquisition of additional land adjacent to the airport for the development of the FEZ and ILC, which the concessionaire is willing to operate through sub-contractors or sub- lessees with appropriate expertise. However, additional borrowing for FEZ and ILC development is unlikely to be available until those sub-contractors or sub-lessees have been identified and specific agreements have been negotiated with them. The Government of Armenia has a clear role in:  Continuing efforts to achieve a re-opening of the borders with Azerbaijan and Turkey for trade. This is known to be a high priority in Armenia‟s foreign policy.  Starting the necessary land acquisition.  In collaboration with the concessionaire, undertaking trial borings for soil testing.  Working with the concessionaire to identify FEZ and ILC Management Companies and ensure contractual arrangements that satisfy all interested parties.  Facilitate a contribution of the South Caucasus Railways to the project, either as operator of the CT or investor into external infrastructure, or as both.  Facilitating successful loan negotiations with financial institutions, in particular those which are already engaged in development of the airport and FEZ: ADB, DEG, EBRD and World Bank.  Ensuring trouble-free connection to the the road and rail networks and utilities and integration of the project into existing project in the Yerevan urban transport sector.  Supporting the case for a NIF grant to complement IFI lending.  Providing loan guarantees if necessary. But in the case of the ADB loan for the Zvartnots Airport Expansion Project (Phase 2), the loan was made directly to Armenia International Airports without a government guarantee.  Active collaboration with the private sector to develop the skills needed to take advantage of higher-level opportunities in the logistics sector; and to enable un- and under-employed people in the region to contribute to the faster economic growth for which the project is expected to be a catalyst.  In particular, implementation of recommendations included in this report: Establishment of additional logistics programmes at B.Sc. and M.Sc.levels at the State Engineering University of Armenia and at the Agricultural University of Armenia, based on the findings of the TRACECA project Strengthening of Transport Training Capacities in NIS countries‟. Introduction of selected e-training modules (Transport Planning, Investment Appraisal, Multimodal Transport and E-learning and Teaching Materials) developed by the same project, for which course materials can be downloaded from the website: www. tracecatraining.org.

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11 APPENDICES

Layouts Master Plan and Expansion Stages

Capex Items Tables

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No. of Length Width Area Height/ Volume Investment Pos. Construction measures Unit price [€] Unit Pos. [m] [m] [m²] Depth [m] [m³] [€] A Construction site preparation 6.196.000 A1 Land acquisition 360.000 13 m² 4.680.000 A2 Earthworks: backfilling, leveling, compaction 150.000 1 150.000 10 m³ 1.500.000 A3 green spaces (20% of pos. B1.2 + traffic and parking area) 15.600 1 m² 16.000 B Infrastructure 2.618.000 B1 Transport infrastructure 1.389.000 B1.1 Internal road system (no. 8) 1.030 10,0 10.300 30 m² 309.000 B1.2 TIR parking area (no. 5.3) 36.000 30 m² 1.080.000 Container terminal - Loading tracks (no. 1.4) B1.3 350 m 0 incl. railway access to projected airport feeder line B1.4 Container terminal - switches (no. 1.4) 25.000 pc. 0 B2 Utility infrastructure 1.229.000 B2.1 Electricity 1.860 100 m 186.000 B2.2 Water (potable water, fire fighting water) 1.860 200 m 372.000 B2.3 Drainage 1.200 200 m 240.000 B2.4 Sewage 1.050 120 m 126.000 B2.5 Separator 1 45.000 pc. 45.000 B2.6 Communication 1.860 140 m 260.000 C Transhipment and storage areas 0 C1 Open storage area (no. 6.3) 45 m² 0 D Buildings 3.700.000 D1 Administration building: TIR - Parking (no. 5.2) 300 m³ 0 D2 Office ILC administration (no.4.2) 600 4 2.400 300 m³ 720.000 D3 Restaurant/canteen (no.4.4) 1.200 400 m² 480.000 D4 Temperature guided warehouse (no. 6.1) 5.000 500 m² 2.500.000 D5 General warehouse (no. 6.2) 400 m² 0

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No. of Length Width Area Height/ Volume Investment Pos. Construction measures Unit price [€] Unit Pos. [m] [m] [m²] Depth [m] [m³] [€] E Handling equipment and facilities 350.000 E1 Forklift truck diesel (6 tons), (no. 1.5) 50.000 pc. 0 E2 Reachstacker (42 tons), (no. 1.5, 2.2) 1 350.000 pc. 350.000 E3 Mobile loading ramp (no. 1.4) 10.000 pc. 0 F Safety and Security 181.000 F1 Gate - Container Terminal (no. 1.1) 55.000 pc. 0 F2 Gate - Road access (no. 4.1) 1 55.000 pc. 55.000 F3 Gate - TIR Parking (no. 5.1) 1 30.000 pc. 30.000 F4 Fence (Hight 2 m) 2.200 24 m 53.000 F5 Fire Alarm System 1 30.000 pc. 30.000 F6 Security cameras 6 500 pc. 3.000 F7 Signage system 1 10.000 pc. 10.000 G Other Facilities and Installations 496.000 G1 Scale -weighing machine (no. 1.3) 35.000 pc. 0 G2 Loading staff office container (no. 1.8) 20.000 pc. 0 G3 Car wash for trucks (no. 4.3) 1 200.000 pc. 200.000 G4 Garage (no. 4.3) 1 120.000 pc. 120.000 G5 Gas station (no.4.3) 1 70.000 pc. 70.000 G6 Lighting (every 50 m) 20 2.000 pc. 40.000 G7 Floodlighting (TIR Parking, Container Depot) 6 6.000 pc. 36.000 G8 IT-System 1 30.000 pc. 30.000 subtotal (Pos. A - G) 13.541.000 H1 Planning, Surveying, Soil Investigation 10% 1.354.000 H2 Contingency 5% 677.000 total (Pos. A - G and H1 + H2) 15.572.000

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No. of Length Width Area Height/ Volume Investment Pos. Construction measures Unit price [€] Unit Pos. [m] [m] [m²] Depth [m] [m³] [€] A Construction site preparation 1.314.000 A1 Land acquisition 360.000 m² 0 A2 Earthworks: backfilling, leveling, compaction 130.000 1 130.000 10 m³ 1.300.000 A3 green spaces (20% of pos. B1.2 + traffic and parking area) 13.600 1 m² 14.000 B Infrastructure 1.509.000 B1 Transport infrastructure 757.000 B1.1 Internal road system (no. 8) 790 10,0 7.900 30 m² 237.000 B1.2 TIR parking area (no. 5.3) 30 m² 0 Container terminal - Loading tracks (no. 1.4) B1.3 1.200 350 m 420.000 incl. railway access to projected airport feeder line B1.4 Container terminal - switches (no. 1.4) 4 25.000 pc. 100.000 B2 Utility infrastructure 752.000 B2.1 Electricity 690 100 m 69.000 B2.2 Water (potable water, fire fighting water) 670 200 m 134.000 B2.3 Drainage 1.300 200 m 260.000 B2.4 Sewage 1.230 120 m 148.000 B2.5 Separator 1 45.000 pc. 45.000 B2.6 Communication 690 140 m 97.000 C Transhipment and storage areas 450.000 C1 Open storage area (no. 6.3) 10.000 45 m² 450.000 D Buildings 2.360.000 D1 Administration building: TIR - Parking (no. 5.2) 300 4 1.200 300 m³ 360.000 D2 Office ILC administration (no.4.2) 300 m³ 0 D3 Restaurant/canteen (no.4.4) 400 m² 0 D4 Temperature guided warehouse (no. 6.1) 500 m² 0 D5 General warehouse (no. 6.2) 5.000 400 m² 2.000.000

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No. of Length Width Area Height/ Volume Investment Pos. Construction measures Unit price [€] Unit Pos. [m] [m] [m²] Depth [m] [m³] [€] E Handling equipment and facilities 760.000 E1 Forklift truck diesel (6 tons), (no. 1.5) 1 50.000 pc. 50.000 E2 Reachstacker (42 tons), (no. 1.5, 2.2) 2 350.000 pc. 700.000 E3 Mobile loading ramp (no. 1.4) 1 10.000 pc. 10.000 F Safety and Security 132.000 F1 Gate - Container Terminal (no. 1.1) 1 55.000 pc. 55.000 F2 Gate - Road access (no. 4.1) 55.000 pc. 0 F3 Gate - TIR Parking (no. 5.1) 30.000 pc. 0 F4 Fence (Hight 2 m) 2.090 24 m 50.000 F5 Fire Alarm System 1 20.000 pc. 20.000 F6 Security cameras 4 500 pc. 2.000 F7 Signage system 1 5.000 pc. 5.000 G Other Facilities and Installations 108.000 G1 Scale -weighing machine (no. 1.3) 1 35.000 pc. 35.000 G2 Loading staff office container (no. 1.8) 20.000 pc. 0 G3 Car wash for trucks (no. 4.3) 200.000 pc. 0 G4 Garage (no. 4.3) 120.000 pc. 0 G5 Gas station (no.4.3) 70.000 pc. 0 G6 Lighting (every 50 m) 16 2.000 pc. 33.000 G7 Floodlighting (TIR Parking, Container Depot) 6.000 pc. 0 G8 IT-System 1 40.000 pc. 40.000 subtotal (Pos. A - G) 6.633.000 H1 Planning, Surveying, Soil Investigation 10% 663.000 H2 Contingency 5% 332.000 total (Pos. A - G and H1 + H2) 7.628.000

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No. of Length Width Area Height/ Volume Investment Pos. Construction measures Unit price [€] Unit Pos. [m] [m] [m²] Depth [m] [m³] [€] A Construction site preparation 811.000 A1 Land acquisition 360.000 m² 0 A2 Earthworks: backfilling, leveling, compaction 80.000 1 80.000 10 m³ 800.000 A3 green spaces (20% of pos. B1.2 + traffic and parking area) 10.600 1 m² 11.000 B Infrastructure 159.000 B1 Transport infrastructure 114.000 B1.1 Internal road system (no. 8) 380 10,0 3.800 30 m² 114.000 B1.2 TIR parking area (no. 5.3) 30 m² 0 Container terminal - Loading tracks (no. 1.4) B1.3 350 m 0 incl. railway access to projected airport feeder line B1.4 Container terminal - switches (no. 1.4) 25.000 pc. 0 B2 Utility infrastructure 45.000 B2.1 Electricity 100 m 0 B2.2 Water (potable water, fire fighting water) 200 m 0 B2.3 Drainage 200 m 0 B2.4 Sewage 120 m 0 B2.5 Separator 1 45.000 pc. 45.000 B2.6 Communication 140 m 0 C Transhipment and storage areas 0 C1 Open storage area (no. 6.3) 45 m² 0 D Buildings 0 D1 Administration building: TIR - Parking (no. 5.2) 300 m³ 0 D2 Office ILC administration (no.4.2) 300 m³ 0 D3 Restaurant/canteen (no.4.4) 400 m² 0 D4 Temperature guided warehouse (no. 6.1) 500 m² 0 D5 General warehouse (no. 6.2) 400 m² 0

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No. of Length Width Area Height/ Volume Investment Pos. Construction measures Unit price [€] Unit Pos. [m] [m] [m²] Depth [m] [m³] [€] E Handling equipment and facilities 0 E1 Forklift truck diesel (6 tons), (no. 1.5) 50.000 pc. 0 E2 Reachstacker (42 tons), (no. 1.5, 2.2) 350.000 pc. 0 E3 Mobile loading ramp (no. 1.4) 10.000 pc. 0 F Safety and Security 21.000 F1 Gate - Container Terminal (no. 1.1) 55.000 pc. 0 F2 Gate - Road access (no. 4.1) 55.000 pc. 0 F3 Gate - TIR Parking (no. 5.1) 30.000 pc. 0 F4 Fence (Hight 2 m) 800 24 m 19.000 F5 Fire Alarm System pc. 0 F6 Security cameras 4 500 pc. 2.000 F7 Signage system pc. 0 G Other Facilities and Installations 35.000 G1 Scale -weighing machine (no. 1.3) 35.000 pc. 0 G2 Loading staff office container (no. 1.8) 1 20.000 pc. 20.000 G3 Car wash for trucks (no. 4.3) 200.000 pc. 0 G4 Garage (no. 4.3) 120.000 pc. 0 G5 Gas station (no.4.3) 70.000 pc. 0 G6 Lighting (every 50 m) 8 2.000 pc. 15.000 G7 Floodlighting (TIR Parking, Container Depot) 6.000 pc. 0 G8 IT-System pc. 0 subtotal (Pos. A - G) 1.026.000 H1 Planning, Surveying, Soil Investigation 10% 103.000 H2 Contingency 5% 51.000 total (Pos. A - G and H1 + H2) 1.180.000

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No. of Length Width Area Height/ Volume Investment Pos. Construction measures Unit price [€] Unit Pos. [m] [m] [m²] Depth [m] [m³] [€] A Construction site preparation 8.320.000 A1 Land acquisition 360.000 13 m² 4.680.000 A2 Earthworks: backfilling, leveling, compaction 360.000 1 360.000 10 m³ 3.600.000 A3 green spaces (20% of pos. B1.2 + traffic and parking area) 39.800 1 m² 40.000 B Infrastructure 4.287.000 B1 Transport infrastructure 2.260.000 B1.1 Internal road system (no. 8) 2.200 10,0 22.000 30 m² 660.000 B1.2 TIR parking area (no. 5.3) 36.000 30 m² 1.080.000 Container terminal - Loading tracks (no. 1.4) B1.3 1.200 350 m 420.000 incl. railway access to projected airport feeder line B1.4 Container terminal - switches (no. 1.4) 4 25.000 pc. 100.000 B2 Utility infrastructure 2.027.000 B2.1 Electricity 2.550 100 m 255.000 B2.2 Water (potable water, fire fighting water) 2.530 200 m 506.000 B2.3 Drainage 2.500 200 m 500.000 B2.4 Sewage 2.280 120 m 274.000 B2.5 Separator 3 45.000 pc. 135.000 B2.6 Communication 2.550 140 m 357.000 C Transhipment and storage areas 450.000 C1 Open storage area (no. 6.3) 10.000 45 m² 450.000 D Buildings 6.060.000 D1 Administration building: TIR - Parking (no. 5.2) 300 4 1.200 300 m³ 360.000 D2 Office ILC administration (no.4.2) 600 4 2.400 300 m³ 720.000 D3 Restaurant/canteen (no.4.4) 1.200 400 m² 480.000 D4 Temperature guided warehouse (no. 6.1) 5.000 500 m² 2.500.000 D5 General warehouse (no. 6.2) 5.000 400 m² 2.000.000

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No. of Length Width Area Height/ Volume Investment Pos. Construction measures Unit price [€] Unit Pos. [m] [m] [m²] Depth [m] [m³] [€] E Handling equipment and facilities 1.110.000 E1 Forklift truck diesel (6 tons), (no. 1.5) 1 50.000 pc. 50.000 E2 Reachstacker (42 tons), (no. 1.5, 2.2) 3 350.000 pc. 1.050.000 E3 Mobile loading ramp (no. 1.4) 1 10.000 pc. 10.000 F Safety and Security 334.000 F1 Gate - Container Terminal (no. 1.1) 1 55.000 pc. 55.000 F2 Gate - Road access (no. 4.1) 1 55.000 pc. 55.000 F3 Gate - TIR Parking (no. 5.1) 1 30.000 pc. 30.000 F4 Fence (Hight 2 m) 5.090 24 m 122.000 F5 Fire Alarm System 1 50.000 pc. 50.000 F6 Security cameras 14 500 pc. 7.000 F7 Signage system 1 15.000 pc. 15.000 G Other Facilities and Installations 639.000 G1 Scale -weighing machine (no. 1.3) 1 35.000 pc. 35.000 G2 Loading staff office container (no. 1.8) 1 20.000 pc. 20.000 G3 Car wash for trucks (no. 4.3) 1 200.000 pc. 200.000 G4 Garage (no. 4.3) 1 120.000 pc. 120.000 G5 Gas station (no.4.3) 1 70.000 pc. 70.000 G6 Lighting (every 50 m) 44 2.000 pc. 88.000 G7 Floodlighting (TIR Parking, Container Depot) 6 6.000 pc. 36.000 G8 IT-System 1 70.000 pc. 70.000 subtotal (Pos. A - G) 21.200.000 H1 Planning, Surveying, Soil Investigation 10% 2.120.000 H2 Contingency 5% 1.060.000 total (Pos. A - G and H1 + H2) 24.379.000

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