Coordination Team Final Report Eng

The European Union’s Tacis TRACECA programme for Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan

TRACECA Co-ordination Team

For Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan,

Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey,

Turkmenistan, Ukraine, Uzbekistan

Final Report

January 2004

TRANSTEC

This project is funded by A project implemented by the European Union Dornier Consulting Gmbh / Transtec SA

HBCP Monthly Report February – March 2003

Report Cover Page

Project Title: TRACECA Co-ordination TEAM

Project Number: 01-0186

Countries: Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan

Local operator EC-Consultant Name: National Secretaries Consortium Dornier Consulting – Transtec SA Address: Zeppelin-Werftgelaende 31 Postfach 1307 D-88003 Friedrichshafen Germany

Tel. number: +49 7545 85306 Fax number: +49 7545 85447 e-mail: martin.both@dornier- consulting.com Contact persons: Dr. Martin Both

Signatures

Date of Report: January 2004 Reporting Period: June 2003 – January 2004 Author of Report: DORNIER Consulting Gmbh / TRANSTEC SA

EC M & E team

(Name) (Signature) (Date)

EC Delegation

(Name) (Signature) (Date)

Tacis Bureau Efstathios (Task Manager) DALAMANGAS (Name) (Signature) (Date)

TRACECA Co-ordination Team - Completion Report January 2004 2

Local Counterparts

IGC - TRACECA

Name: Mr A. Manukyan Minister of Transport Address: Ministry of Transport and Communication 375010 28, Nalbadyan str. P.O.Box 69 YEREVAN Contact person: Mr Grigoryan, National Secretary

PERMANENT SECRETARIAT OF IGC TRACECA

Name: Mrs Ludmilla Trenkova Secretary General of “PS IGC TRACECA” Address: 8/2, Aliyarbekov str., Az 1005 BAKU

Tel. number: (99412) 982718, 989234 Fax number: (99412) 986426 e-mail: [email protected]

Name: Mr Zviad KVATCHANTIRADZE Executive Secretary of “PS IGC TRACECA” Address: 8/2, Aliyarbekov str., Az 1005 BAKU

Tel. number: (99412) 982718, 989234 Fax number: (99412) 986426 e-mail: [email protected]

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Armenia

Name: Mr A. Manukyan Minister of Transport and Communications Address: Mr Grigoryan, National Secretary Ministry of Transport and Communication 375010 28, Nalbadyan str. P.O.Box 69 YEREVAN Tel. number: (3741) 523862 – (3741) 561859 Fax number: (3749) 606968 – (3741) 151446 e-mail: [email protected]

Azerbaijan

Name: Mr Abid SHARIFOV – Vice Prime Minister, Cabinet of Ministers Address: Mr A. Mustafayev, National Secretary 8/2, Aliyarbekov str., Az 1005 BAKU Tel. number: (99412) 933776 Fax number: (99412) 933776 e-mail: [email protected]

Bulgaria

Name: Mr N. Vassilev, Vice Prime Minister and Minister of Transport and Communications Address: Mrs A. Kroushkova, National Secretary Ministry of Transport and Communications 9, Diakon Ignaty str, 1000 SOFIA Tel. number: (3592) 9409410; (3592) 9409546 Fax number: (3592) 9871261 e-mail: [email protected]

Georgia

Name: Mr G. Nijaradze, First Deputy Minister of Transport and Communications Address: Mr G. Gogiashvili, National Secretary Ministry of Transport and Communications 12, Rustaveli ave., TBILISI Tel. number: (99532) 250563 Fax number: (99532) 941765 e-mail: [email protected]

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Kazakhstan

Name: Mr NAGMANOV, Minister of Transport and Communications Address: Mr Suleymenov, National Secretary Ministry of Transport and Communications, Transport Tower, Levoberejye, ASTANA Tel. number: 7(3172) 328639 Fax number: 7(3172) 328639 e-mail: [email protected]; [email protected]

Kyrgyzstan

Name: Mr ZHUMALIYEV, Minister of Transport and Communications Address: Suleyman ZAKIROV – National Secretary Ministry of Transport and Communications, 42, Isanov str. BISHKEK Tel. number: (996312) 530547 Fax number: (996312) 530548 e-mail: [email protected]

Moldova

Name: Mr V. IOVV, First Deputy Prime Minister Address: Mr V. Teleman – National Secretary Ministry of Transport and Communications, 34, Stephan Sel Mare str CHISINAU 2018 Tel. number: (3732)-743736; (3739) 454468 (mob.) Fax number: (3732)-743736 e-mail : [email protected]

Romania

Name: Mr MITREA, Minister of Public Works, Transport and Housing Address: National Secretary: Mrs. Ana-Maria Popescu, 1, Piata Victorie Ro- 71201, BUCHAREST ROMANIA Tel. number: (4021) 212 69 74 Fax number: (4021) 223 29 81 e-mail: [email protected]

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Tajikistan

Name: Mr SALIMOV, Minister of Transport and Roads Address: S. Muminov – National Secretary Ministry of Transport and Roads, 80 Rudaki Ave, DUSHANBE

Tel. number: (992372) 210970 Fax number: (992372) 210970 e-mail: [email protected]

Turkey

Name: Mr Binali Yildirim, Minister of Transport Address: Mr Baris Tozar, National Secretary Ulastirma Bakanligi, Emek/ANKARA Tel. number: (90312) 2124993 Fax number: (90312) 2127937 e-mail: [email protected] ; [email protected]

Ukraine

Name: Mr Georgiy Kirpa, Minister of Transport Address: Mr Tertyshnik, National Secretary Ministry of Transport, KIEV 7/9, Schors str. Tel. number: (38044) 2681374; (38044) 2024112 (mob.) Fax number: (38044) 2692321 e-mail: [email protected]

Uzbekistan

Name: Mr YUNUSOV, Deputy Prime Minister Address: Mr Khashimov, National Secretary House of Government, Mustakillik Ave. TASHKENT Tel. number: (99871) 1372605 / 1339893 Fax number: (99871) 1372605 / 1372610 / 136 23 44 e-mail: [email protected]

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Contents

1 Project Synopsis - Project No 01-0186 ...... 8 2 Summary of the project progress since the start...... 12 2.1 Coordination of members/beneficiaries of the TRACECA Programme ...... 12 2.2 Co-ordination of TRACECA Projects...... 14 2.3 Co-ordination of Other Donors/Financiers/Investors/Associations ...... 14 2.4 Global Feasibility Study...... 15 2.5 Dissemination...... 15 2.6 Project Management ...... 15 3 Project progress in final project period ...... 17 3.1 Main Activities TRACECA Co-ordination Team during the reporting period until January, 2004...... 17 3.1.1 General Aspects ...... 17 3.1.2 Organisational support for Conferences and meetings ...... 18 3.2 Task A: Co-ordination of TRACECA-Programme Activities...... 18 3.2.1 Supervision of the Permanent Secretariat:...... 18 3.2.2 Participation in Meetings - Conferences - Exhibitions: ...... 19 3.2.3 National Secretaries/National Commissions: ...... 20 3.2.4 Local Contact Points: activities in respective countries...... 20 3.2.5 Black Sea PETrA: ...... 20 3.3 Task B: TRACECA Projects ...... 21 3.3.1 Projects...... 21 3.3.2 New projects: ...... 22 3.3.3 Project Pipeline:...... 24 3.4 Task C: Co-operation with IFI and other Potential Investors ...... 24 3.5 Task D Global Feasibility Study ...... 25 3.6 Dissemination...... 25 3.7 Project Management ...... 27 4 Overall report on the total project ...... 27 4.1 Coordination of members/beneficiaries of the TRACECA Programme ...... 27 4.2 Co-ordination of TRACECA Projects...... 32 4.3 Co-ordination of Other Donors/Financiers/Investors/Associations ...... 35 4.4 Global Feasibility Study...... 35 4.5 Dissemination...... 35 4.6 Project Management ...... 36 PROJECT PROGRESS REPORT...... 38 RESOURCE UTILISATION REPORT ...... 39 OUTPUT PERFORMANCE REPORT (Part 1)...... 40 OUTPUT PERFORMANCE REPORT (Part 2)...... 41 OUTPUT PERFORMANCE REPORT (Part 3)...... 42 OUTPUT PERFORMANCE REPORT (Part 4)...... 43 OUTPUT PERFORMANCE REPORT (Part 5)...... 44 5 Lessons learnt and recommendations ...... 45 PLAN OF OPERATIONS FOR THE NEXT PERIOD ...... 47

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1 Project Synopsis - Project No 01-0186

Wider Objectives: Promoting the Transport Corridor Europe Caucasus Asia (TRACECA) in order to develop and improve trade within the region as well as the integration into the international economic structure (access to world market).

Specific Project Objectives: Facilitate the co-ordination of the TRACECA Programme and its cohesion with other regional community-funded initiatives, other donors and improve information and communication channels via dissemination to the beneficiaries.

Outputs: The following outputs will be provided:

A Co-ordination of TRACECA-programme components and of TRACECA activities with other related programmes and community-funded initiatives is supported and supervised.

• Regular funding of Permanent Secretariat and National Commissions is ensured

• Communication network and information system is established.

• Regular annual IGC meetings and 2 PETrA steering committee meetings as scheduled.

• Regular meetings with Transport Authorities and other high level transport-related decision makers have taken place.

B On-going and scheduled TRACECA-projects are co-ordinated and future activities are programmed.

• Assessments of project reports are made.

• Programming for next periods is in time and in line with EU-guidelines and rules and co-ordinated with other investors and financing institutions.

C Investments are facilitated through establishing and maintaining excellent contacts with international financing institutions and other potential investors.

• Contact to donor organisations is established and maintained

D Feasibility Study shows the past and actual competitive situation and the future prospects of the TRACECA transport corridor.

• Feasibility Study is based on updated traffic data base and presents a clear image of the impacts, chances, risks and challenges of TRACECA.

E Information on TRACECA activities is readily accessible and TRACECA - programme is well perceived and aware beyond directly involved stakeholders and beneficiary countries.

• Until the end of the project there are two new TRACECA brochures, 1 updated

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TRACECA map, up to 6 posters and 7 quarterly issued magazines with about 12 pages each available and distributed among stakeholders.

• TRACECA and PETrA web-pages are redesigned and updated at least 4 times during project duration, in cases of special events there are additional updates in between.

Activities:

Activities of core task/output number A

A1. funding and supervising the Permanent Secretary

A2. establishing project offices in Odessa and Tashkent (= mobilisation phase including staffing and equipping)

A3. organising hand-over of TRACECA co-ordination and supervision of the Permanent Secretariat to the Co-ordination Team (= mobilisation)

A4. setting-up TRACECA contact points in the beneficiary countries by appointing local experts to follow-up specific TRACECA projects (network of local experts)

A5. assisting beneficiaries in implementing the MLA, i.e. collect, assess and distribute relevant information

A6. organising meetings and working groups for TRACECA beneficiaries

A7. providing secretarial support to these meetings

A8. assist beneficiaries in the co-ordination with Black Sea PETrA contractors and activities

A9. organising two steering group meetings of the Black Sea Pan European Transport Area

Activities of core task/output number B

B1. relating with contractors, project beneficiaries and stakeholders

B2. providing information

B3. identifying critical interfaces

B4.political and technical embedding with stakeholders and target groups of projects

B5.follow-up of projects through analysis of project outputs, and reports

B6.advisory services for the programming of future activities

B7.advising the beneficiaries on the definition and financing options for new projects

B8. assisting in elaboration of ToR for new projects and activities in close co-operation with beneficiaries and task manager

B9. coordination of the projects optical fibre cable in the Caucasus

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Activities of core task/output number C

C1. assisting beneficiaries in the co-ordination of other donors and investors in cases of transport related projects in the TRACECA-corridor

C2. maintaining contacts to all donor offices in the region on a regular basis

C3. informing IFI’s representatives on actual status of activities within the overall TRACECA- programme on a regular basis

C4. exchanging information among (potential) donors and investors concerning on-going and scheduled activities along TRACECA corridor on a regular basis

C5. inviting representatives of IFI’s, to attend workshops, meetings etc. carried out within TRACECA programme

C6. getting involved in formal and informal donor co-ordination meetings

C7. informing commercial operators and all interested parties about TRACECA- activities

C8. assistance to the national secretaries in organising regular meetings with commercial operators and interested parties in each country

Activities of core task/output number D

D1. ensuring regular updating of the traffic data base via the permanent secretariat

D2. evaluating past, current and future socio-economic developments along TRACECA-corridor

D3. analysing the evolution of traffic flows along TRACECA corridors and along alternative routes (based on the updated traffic data base)

D4. analyse transport-related costs and benefits on the TRACECA corridor

D5. benchmarking TRACECA-corridor with other corridors

D6. analyse impacts of the Basic Multi-Lateral Agreement as well as of the TRACECA projects

D7. developing scenarios and providing recommendations and proposing further developments

D8. presentation of the findings of the study during workshops and conferences

D9. assisting in the integration of study results in the programming of the next TRACECA - activities

Activities of core task/output number E

E1. organising the hand-over of TRACECA and Black Sea PETrA websites to the co-ordination team

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E2. updating and improvement of TRACECA brochures

E3. updating of TRACECA map

E4. issuing quarterly information magazine about TRACECA activities

E5. producing and designing up to 6 posters during the contract period on actual events or request of the task manager

E6. managing the hosting of TRACECA and Black Sea PETrA web-sites

E7. maintaining the site technically and making sure it functions properly at all times

E8. updating the home page and reporting major TRACECA events

E9. updating the „Marco Polo“ section of articles regarding the TRACECA states area

E10. to maintain the technical library

Target Group: Cabinets of Ministers & Ministries of Transport of TRACECA Member States National Secretaries, National Commissions and General Secretary.

Project starting date : November 19, 2001

Project duration: 26 months

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Final Report January 2004

2 Summary of the project progress since the start

2.1 Coordination of members/beneficiaries of the TRACECA Programme

Project Offices have been set up in Odessa and Tashkent. A Network of Local Contact points has been set up in Caucasus, in Central Asia and for the Black Sea Region. Close contacts with National Secretaries/National Commissions have been organised in all TRACECA Member States and a monthly report scheme introduced.

With the assistance of the co-ordination team the Permanent Secretariat prepared and organised various conferences and meetings. The co-ordination team was heavily involved in these meetings especially in the preparation of documents and protocols. The meetings and workshops held are listed in chapter 4 of this report.

The co-ordination team was participating in various International Conferences, Working Groups and Meetings organised in the region and related to transport and the activities of TRACECA. In chapter 4 these meetings are listed.

Assistance to missions of European Commission officials or EC nominated persons

The co-ordination team especially the team–leader and the co-ordinators have been heavily involved in various missions of EC officials into the regions and EC-appointed persons for the evaluation of the TRACECA Programme. In addition to that a DaimlerChrysler convoy had to be assisted in the Caucasus and Central Asia. The main events are listed under point 4 of this report.

Intergovernmental Commission (IGC) A remarkable step has been agreed upon during the Yerevan Conference in October 2003. The signatory countries of the Multilateral Agreement (MLA) have agreed to contribute to the cost of the Institutional set ups of TRACECA. The Countries will take over 15 % of the running costs for the Year 2004. This amount should be increased Year by Year. In same conference the countries Afghanistan and Iran have been welcomed as members of the Intergovernmental Commission TRACECA.

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under execution and implementation by involving the National Secretaries of the IGC TRACECA in national working groups.

The bids for the project “Review of Railway Rehabilitation in Central Asia (including links with other transport modes in Central Asia)” has been evaluated on October 27, 2003. The successful company is Italfer from Italy. ToR for the new project (Action Plan 2003) on Maritime training (for Azerbaijan, Georgia, Kazakhstan, Turkmenistan, Ukraine) has been drafted in September 2003. Two ToRs for new investment project (Action Plan 2003) on Moldova/Ukraine Border Crossings Infrastructure Improvement were drafted and under EC de-centralisation policy handed over to EU Delegation in Kiev in October 2003. An Action Plan has been drafted in close collaboration with PS of IGC TRACECA (Annex I).

BS-PETrA Co-ordination with BS-PETrA was established and continued in the scope of the support function towards Steering Committee. Both the 6th (March 2003) and 7th (November 2003) BS PETrA SC meetings were organised together with the Ministry of Transport of Ukraine and held in Odessa. Fourth Meeting of the Working Group on the Infrastructure Related to Ports and their Hinterland Connections to Corridors for the BS PETrA was organised and held in Istanbul on September 26, 2003.

Co-ordination with Steering Committee of Pan-European Corridor IX, southern branch, has been strengthened in context with the tasks to link TRACECA with the Pan-European Corridors. As the MoT of Ukraine, with support of Odessa office, took over the chairmanship of BS PETrA SC, special attention was paid to the co-ordination of the horizontal projects with BS-PETrA Action Plan 2003-2004 and the Working Programme 2004-2006. Three TRACECA project fiches as the proposals for the new TRACECA Action Plan 2004-2006 which could contribute for BS PETrA were revised and agreed with the beneficiaries countries.

National Secretaries The National Secretaries of the TRACECA countries could be convinced to obtain statistical data for various TRACECA Projects. Especially the situation in Ukraine could be managed with the help of the National Secretary. Further to that, the National Secretaries are not only deeply involved in the before mentioned “new generation projects but also responsible for the National Working Groups on Common Legal Base for Transit Transportation.

Public Awareness and information A TRACECA Information day in Brussels has been organised in July 2002 and a Presentation on the development of TRACECA has been performed.

A second TRACECA Information day in Brussels has been organised in September 2002, at the request of DG TREN.

A presentation of the TRACECA Programme in the “1st International Transport Conference and Exhibition on I&S in the Caspian and the Black Sea Countries” in Istanbul (February 2003) , in the “2nd Azerbaijan International Transport and Logistics Exhibition – Trans Caspian 2003” (May 2003) in Baku and the Speca Conference in Almati (November 2002) has been done.

A DaimlerChrysler Press conference devoted to Humanitarian Aid Convoy along the TRACECA Route from Brussels to Kabul/ Afghanistan was organised with the support of Coordination Team in PS IGC TRACECA in Baku on September 19, 2003 (Annex II).

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Strategy discussion and Strategy papers In addition to that the Co-ordination Team was heavily involved in the strategy discussion about the future of the TRACECA Projects and the programming activities.

A proposal for TRACECA Project Identification based on the new TACIS Regional Co-operation Strategy Paper and Indicative Programme 2004-2006 has been developed. The criteria of selection of projects are:

• Improvement and development of the TRACECA Corridor including implementation and development of the Multi Lateral Agreement (MLA) • To link the TRACECA Corridor with Trans-European Networks (TEN’s) • Increase intra-NIS trade flows via TRACECA Corridor • Leverage IFI investment and the involvement as private sector • Improve safety, security, economic and environmental performance in different transport modes

The transport sectors involved are the road, maritime, rail and air transportation as well as the transport legislation and transport regulation. It has to be pointed out, that the air transportation additionally has been included in the TRACECA Programme.

2.2 Co-ordination of TRACECA Projects

Close contact with Task Manager, DG AIDCO and EU-Delegations has been maintained, as well as with National Co-ordination Units in the TRACECA Countries, the Europe Houses, EU Member States’ Embassies and TACIS Monitoring Teams. Conflicts between contractors and beneficiaries could be solved in projects in the Caucasus (optical fibre cable) and in Central Asia (Railway telecommunication and New Railway link Verghana Valley – Bishkek and Kashgar (China). Several coordination meetings were held both at the Ministry of Transport of Ukraine and Odessa office in order to agree on the main border crossings points for Feasibility Study and for the new investment project on infrastructure improvement of one Moldova/Ukraine selected border crossing. Two Steering Committee meetings were held under this project.

Team leaders and experts of both UPTFT and HBCP have been guided and supported on implementing project results. The TRACECA Projects guided and supervised during the contract period are listed in chapter 4 of this report.

2.3 Co-ordination of Other Donors/Financiers/Investors/Associations

Co-operation with IFIs / Donors/Investors was established to create synergies and avoid duplication of efforts. Regular meetings were organised with the representatives of IFI’s (EBRD, WB, ADB, UN ESCAP). In addition the internet publications of the Donors/IFIs were used to receive project information.

This co-operation has made it possible to manage the participation of the TRACECA Project “Harmonisation of Border Crossing Procedures” in a common training activity of the United Nations and the USA for the Termez (Uzbekistan) border crossing to Afghanistan.

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A meeting with freight forwarders was organised in Frankfurt (April 2002) in order to introduce the most favourable conditions for the Transport of Humanitarian Goods to Afghanistan through the TRACECA Corridor. Various meetings have been held with International acting Forwarding Companies, Ports and Container Operators. Especially with the Management of the Odessa Port Container Terminal (Operated by the German situated Hamburg Port Consult (Mr. Battermann) , the Klaipeda State Seaport Authority and the Block-train Operator POLZUG – Silk Road Express permanent contacts have been established.

As examples for the co-operation with donor organisation two projects should be mentioned in which the co-ordination team has been involved. Caucasian Highway Project includes the supervision of Donor financed bridges and the Feasibility Study of the Road Sari Tash- Dushanbe Termez includes the alignment and detailed design of a section not included in the ADB road rehabilitation. A common Trade Facilitation Working Group with World Bank for three South Caucasus Countries has been established. Contacts with World Bank Representatives in Central Asia have been established and input has been given for a new World Bank Strategy “Infrastructure Development for Central Asia”. Meetings with the contractors of the USAID “Pragma Corporation” in respect of projects in the Transport and Trade Facilitation Sector have been held. Hand outs with information for the members of the second and third Inter-ministerial Conference on Central Asian economic co-operation have been prepared and given to the participants.

2.4 Global Feasibility Study

The Global Feasibility Study has been finalised and is attached to this report. (Annex III)

2.5 Dissemination

Dissemination activities have been implemented: • The TRACECA Logo has been updated two times. • The dissemination materials have been published. • Restructuring and redesign of the TRACECA Website has been performed. • Activation of the new dynamic website has been performed. • Regular (6 times) update and maintaining of the Website has been done. • BS PETrA website has been reregistered and completely redesigned. The owner is the Steering Committee. The website has been managed and regularly updated by the Odessa Office. The formulation of the input is made together with MoT of Ukraine as the acting Chair of the SC. Link is available to TRACECA website and all other concerned parties. The Draft of the BS PETrA map was placed on the website for consideration and comments by member states. • Redesign and finishing of the TRACECA Image Brochure has been done. This brochure has been distributed. The second brochure is ready for distribution. • The TRACECA life magazines have been published and distributed 7 times, the last magazine has been issued in November 2003

2.6 Project Management

In order to clarify the project’s intervention logic during the course of this project, it was found necessary to reorganise the structure of the Coordination Team:

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The Supervisor of the Permanent Secretariat is the Team Leader, and there are two regional coordinators in Odessa (Black Sea Region) and Tashkent (Central Asia). By November 18th, 2003 the Contract for the Co-ordination team has been extended for two months. Based on budget reasons and availability of key personnel within this two month the Co- ordinator for Central Asia took over the position of the Team Leader and Supervisor of the Permanent Secretariat of the Intergovernmental Commission TRACECA. The coordination tasks in Central Asia are executed with local staff members under the guidance of Baku. The Team in the beginning of the projects was:

Team Leader: Marc Graille 8/2 Aliyarbekov Street az 1005 Baku Azerbaijan Tel: +994 12 98 56 73 Fax: +994 12 98 64 26 e-mail: [email protected]

Co-ordinator Central Asia: Bodo Rössig 68 Pushkhin St. Tashkent 70000 Uzbekistan Tel: +998 71 136 74 39 +998 71 136 74 49 Fax: +998 71 136 74 76 e-mail: [email protected]

Co-ordinator Black Sea Manfred Schlaack 6 Primorskaya Street Yachtclub Office 108 65026 Odessa / Ukraine Tel: +38 048 72 93 548 Fax: +38 048 72 93 958 e-mail: [email protected] the team leader has been replaced by 18 November 2003 through

Bodo Roessig 8/2 Aliyarbekov Street az 1005 Baku Azerbaijan Tel: +994 12 98 56 73 Fax: +994 12 98 64 26 e-mail: [email protected]

In addition and at the request of the European Commission the financing support to National Secretaries, General Secretary and Executive Secretary has been extended till the January 18, 2004.

In order to prepare the TRACECA new strategy (2004-2006) AIDCO has decided to launch an evaluation for the TRACECA PROGRAMME (to cover the period 1998-2002). The evaluation took

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place and the Co-ordination Team has accompanied the evaluators during their mission in the following states: Armenia, Azerbaijan, Georgia, partly Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan as well as in a later stage Moldova and Ukraine.

In the Monitoring Report for Baku dated October 21, 2002 and prior to that in the Monitoring Report on the Inception Phase it was highlighted that the Commission Service has been advised to request the contractor to develop concrete indicators/scoring systems for the selection of projects and a manual on basic requirements for preparation of proposals.

The National Commission of the Member States of the Basic Multilateral Agreement is in charge for the preparation of proposals for new projects. Since the beginning of the co-ordination activities the project proposals have a form containing the basic requirements / selection criteria. (See completion report of the Project “Inter-Governmental Commission for the Implementation of the Multi-Lateral-Agreement” - Axis 1999). This document has been updated in line with the new TACIS Regional Cooperation – Strategy Paper and Indicative Programme for 2004 – 2006.

In the scope of project provisions, Odessa Office was able to reactivate the work of BS PETrA and improve the link between TRACECA and Pan-European Corridors. The work is still far from being sustainable and needs to be redesigned in the light of EU enlargement process.

3 Project progress in final project period

3.1 Main Activities TRACECA Co-ordination Team during the reporting period until January, 2004.

3.1.1 General Aspects

Co-operation with European Commission: ! The relation between the EU – Delegations in Tbilisi and Almaty have been intensified. ! The Task manager has visited the Caucasus and Central Asia. ! During these missions the Co-ordination Team has organised the meetings with the transport officials and operators in each of the countries visited. ! The relation between the EU – Delegation in Kiev has been intensified. Several visits and meeting have been conducted, namely when discussing de-centralisation tasks. ! Head of the EC Kiev Delegation visited Odessa office in occasion of discussion with Governor about investment strategies and other issues. ! Per Eklund, Head of EC/Aidco Unit, together with expert group, spent a day in Odessa to become more acquainted with TRACECA programme and Co-ordination team project. ! During and after the Yerevan conference the co-ordination team has made TRACECA presentations in the presence of the Head of the European Delegation and the Member State Ambassadors in Yerevan and Tbilisi as well as in Baku with the Special Envoy and the Ambassadors. Information was given about the development of TRACECA and the outcome of the Yerevan conference.

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3.1.2 Organisational support for Conferences and meetings

Support was given as already explained before. Special attention was given to the organisation of the first Council of Head of Railways, Ports and Shipping Companies, the Working Group of the National Secretaries and the 3rd Annual Conference of the IGC TRACECA in Yerevan. The outcome of this meetings/conference is described in the Annex IV. Highlights are the welcome to Afghanistan and Iran as new members of the Multilateral Agreement, the financial participation of the TRACECA Member Sates (MLA signatory countries) in an amount of 15 % of the IGC Budget and the appointment of Mrs. Ludmilla Trenkova as the new Secretary General of the Permanent Secretariat of IGC TRACECA.

The newly developed TACIS Regional Co-operation Strategy paper and Indicative Programme for 2004-2006 have been used for the Guidelines for TRACECA Project identification. The European Commission has appointed the British Outfit of the US-Consultancy Jacobs with an evaluation of the TRACECA – Projects. Within the period of March to May, 2003 the co-ordination team has organised the missions for the evaluators, the meetings with the authorities, beneficiaries and stakeholders of the transport industry.

Cooperation with National Co-ordination Units: The co-operation with the National Co-ordination Units in most TRACECA countries have been maintained and met whenever possible. Their input on technical-administrative issues is still invaluable. As Baku and Tashkent are concerned the “European House Concept” and its responsibilities are still a little bit unclear. The strategy of the European Commission as well as the regional approach and the relation to TRACECA so far are not clearly identified. Contacts with Ukraine National Co-ordination Unit have been maintained and project proposals have been discussed. The co-ordination team has participated in the Central Asian Regional conferences of the NCUs.]

3.2 Task A: Co-ordination of TRACECA-Programme Activities

3.2.1 Supervision of the Permanent Secretariat:

The activities were concentrated on:

• Request of the Islamic Republic of Iran to become a member of the TRACECA corridor (Meeting and Mission to Iran – June 2002) • Request of Afghanistan to become a member of the TRACECA corridor. • Organisation of the third IGC TRACECA Annual meeting (Yerevan, October 2003) • Organisation of the TRACECA IGC Annual Meeting in Armenia. • Preparation of the Action Programme 2004-2006. • Signature of the memorandum of Understanding between the Permanent Secretariat TRACECA and UIC (Union Internationale des Chemins de fer). • Memorandum on Creation of the most Favourable Conditions for Special and Humanitarian Goods Transported to Afghanistan and Central Asia along the Transport Corridor TRACECA” that established special basic tariffs for the goods transportation • Preparation of TRACECA Magazines and TRACECA Brochure • Preparation and participation in several meetings/conferences. This includes logistical support as well as preparation of all the necessary documentation, the finalisation and distribution of those after the events.

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• Development of a working plan for the follow up of the activities of the National Secretaries in respect of the implementation process of decisions made in the Intergovernmental Commission.

3.2.2 Participation in Meetings - Conferences - Exhibitions:

June, 2003: Participation in the 2nd International Exhibition on Transport, Ports and Intermodal Transportations “INTERTRANSPORT 2003” and in the 2nd International Conference “The Black Sea Area Transport Network Formation” in Odessa, Ukraine Meeting with EU Delegation in PS of IGC TRACECA in Baku.

July, 2003 The Second Road Transit Fee and Tariff Working Group within the framework of the project Unified Policy on Transit Fees and Tariffs, Baku, Azerbaijan Round Table Meeting on Oil Transportation across the Caucasus within the framework of the project Railway Transit Oil Logistical Centre, Baku, Azerbaijan Meeting of Heads of Railways, Ports and Shipping companies of the TRACECA Countries at the Ministry of Transport of Azerbaijan

September, 2003 DaimlerChrysler – Press Conference in PS of IGC TRACECA in Baku devoted to convoy of humanitarian aid for the reconstruction of Afghanistan along the TRACECA route from Brussels to Kabul, Afghanistan. UN – Conference on Landlocked Countries , Almati 2003, Ministerial Conference The Fourth Meeting of the BS PETrA Working Group on Infrastructure in Istanbul. Transport Ministries of Bulgaria, Turkey and Ukraine present. The Second Steering Committee Meeting in the framework of the Project “Feasibility Study for improvement of rail and road border crossings between Moldova and Ukraine and for Multimodal terminals in Moldova and Ukraine” in Ilyichevsk.

October, 2003 3rd Roads Transit Fee and Tariff Working Group in Baku

Regional National Co-ordination Meeting, Dushanbe

Working Group Meeting of National Secretaries in Yerevan

Third Annual Meeting of the IGC TRACECA

November 2003 The 7th BS PETrA Steering Committee Meeting in Odessa

CARDS steering Committee in Paris.

Second Ministerial Conference on Central Asia Economic Cooperation - organised by ADB

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Second and Third Inter-ministerial Conference on Central Asia Economic Co – Operation in Tashkent.

3.2.3 National Secretaries/National Commissions:

Regular contacts with the National Secretaries and National Commissions have been maintained whenever possible.

Contacts/meetings concentrated on preparation of Working Groups, other Meetings, and the development of specific topics and specific projects. The TRACECA Co-ordination Team gave support with clarification, explained technical issues, assisted with balancing different views and informed on the on-going and future work.

The co-ordination team assisted the National Secretaries in the set up of the Working Groups dealing with the projects Common Legal Bases for Transit Transportation, Harmonisation of Border Crossing Procedures and Unified Policy of Transit Fees and Tariffs.

3.2.4 Local Contact Points: activities in respective countries

The network of local contact points (local experts) has been fully established in the reporting period and was approved by the Task Manager with the exception of Kazakhstan. The local expert has left the project and a solution for the replacement is connected with the future location. It is envisaged to have the contact point instead of Almati in Astana. It is under consideration to set up a contact point in Tajikistan even it was not foreseen at the beginning of the project. For Odessa Co-ordination team Office, the Task Manager approved one more expert dealing with BS-PETrA tasks.

The Local Experts were fulfilling their tasks as was already described in Progress Report I as follows:

• close co-operation with on-going TRACECA-projects • information on projects financed either by other donors/investors or out of national budgets which complements the TRACECA programme • information on transport policy and plans in respective countries • logistical support to the TRACECA Coordination Team. • translation, interpretation • secretariat

3.2.5 Black Sea PETrA:

As in Black Sea region the BS PETrA Steering Committee has become operational, special attention has been paid to the co-ordination of the horizontal projects with BS-PETrA Action Plan and multi-annual Working Programme.

Odessa Office undertook intensive work to continue the BS PETrA activity and organised the 7th SC meeting on November, 11-12, 2003 in Odessa, together with the MoT and MfA of Ukraine. The main outcome of that meeting can be described as follows:

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- The Black Sea PETrA has activated its operation with the support of TRACECA Coordination Team project, - The work with the Working Groups was continued. The pending tasks were fulfilled, new ones defined. The Fourth Meeting of Working Group on Infrastructure was organised and held in September 2003 in Istanbul with the aim to finalise the BS PETrA map and define the criteria for priority projects. Draft Protocol on Harmonisation of Institutional Aspects of Transport and Customs Procedures was revised, agreed and updated for approval, - The Working Programme 2004-2006 defining the further strategy was prepared and approved by the 7th SC meeting, - The BS PETrA website was regularly updated and run by the TRACECA Co-ordination Team Office in Odessa.

Odessa Office coordinated the activity corresponding Action Plan 2003-2004 and Working Programme 2004-2006 for the Steering Committee were adopted. The main issue was to fit in BS PETrA into regional transport and trade development.

TRACECA Projects under execution and with activities in BS region were continuously coordinated and supervised.

Due to de-centralisation programme of EC, one project (“Feasibility Study for improvement of rail and road border crossing between Moldova and Ukraine and for multimodal terminals in Moldova and Ukraine”) was shifted to EC Delegation in Kiev. ToR for implementation of results are under its responsibility too.

3.3 Task B: TRACECA Projects

3.3.1 Projects

• Customs Facilities at Central Asian Border Crossings (Computer Solution)

The part of the Road Feasibility Study was reallocated to the road Project Bishkek (Kyrgyzstan) and Almaty (Kazakhstan) for the Border Posts on each side. The equipments for the other border crossing were identified and tender documents have been worked out. There are still ongoing discussions about the equipment for Turkmenistan and the definite date for a Workshop in Ashgabat. Both subjects will be clarified in short time.

• Harmonisation of Border Crossing Procedures (SWK)

The Project has maintained good progress and has undertaken the Activities, Tasks and Sub-tasks in-line with the original Project Objectives. With the completion of the Border Audit, Border Audit Database and Evaluation Workshop, the subsequent recommendations will strengthen the capabilities of the Customs Working Groups. The work of strengthening the institutional capabilities of the National Commissions and National Secretaries is still a vital part of the Project. There was also progress made with the CWG’s Awareness Training with the production of Discussion Papers and Case Studies relating to many areas of Harmonisation and Trade Facilitation. The evaluation and the implementation of recommendations, from these documents, will be continued through the next reporting period together with ‘lessons learned’ from the Customs Working Groups. Two regional Team leaders work closely with the offices in Tashkent and Odessa. The coordinator for the Black Sea region worked closely with the offices in Odessa and held several workshops with beneficiaries and involved entities of the concerned countries.

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The First Progress Report was issued in October 2002. Second Progress Report was issued in April 2003. Completion was issued in October 2003. The project was successfully completed in October, 2003

• Unified Policy on Transit Fees and Tariffs (SWK)

Project progress during the period since the inception phase has generally been according to the plan. Six working group meetings have been held (rail, maritime and road) established under this project, with attendance by delegates from most of the TRACECA countries. Project experts have visited most of the TRACECA Countries to discuss project objectives, elicit national tariff and transit fee policies, and to gather information for analysis and formulation of conclusions and recommendations. The Team Leader visited the Odessa office in June 2003 and had several meetings with senior managers of transport industry. The First Progress Report was issued in October, 2002. Second Progress Report was issued in May, 2003. Completion report was expected in December 2003. Time extension has been requested for three additional months. Extension of the contract has also been requested in order to implement Pilot projects on the TTT (Transit Tariff TRACECA) in Azerbaijan, Georgia and Moldova. This extension could also include the organisation of the second CHR Meeting and the first forum CARDS/TRACECA.

• Pre-feasibility Study of a New Rail Link between the Ferghana Valley, Bishkek and Kashgar (Lahmeyer)

The final report was delivered in March, 2003 and the beneficiaries have accepted the report.

• Central Asia Railways Telecommunication (ITALFER) The progress Report was issued in September, 2002. The final report was delivered in July, 2003.

• Supply of an Optical Cable System for Communication and Signalling to the Railways of Azerbaijan, Georgia and Armenia (Siemens/Finnroad)

The project was completed successfully in May 2003.

• Supply of tank wagons to Azerbaijan Railways

The contract was signed with CONEC in December, 2002. The tank wagons were delivered in March, 2003. Certificate of final acceptance will be issued in February 2004.

3.3.2 New projects:

• Common Legal Basis for Transit Transportation

The contract was signed with Lamnidis and Associates SA on the week 47, 2002, kick off meeting in Brussels took place in the same week. The project started week 48, 2002. Inception Phase / three months. Progress Reports received in May, 2003 and December 2003.

• Capacity Development for Senior Transport Officials

The contract was signed with NEA Transport Research and Training on the week 27, 2003.

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The project started in the same week. Inception report was issued in November 2003.

• Feasibility study for the improvement of the road and rail border crossings between Moldova and Ukraine and for the upgrading of the inter-modal container terminals in Moldova and Ukraine

The contract was signed with Eurecna Srl on the week 52, 2002, the kick-off meeting in the Ministry of Transport of Ukraine took place on January 27, 2003. As the involved Ministries of the two concerned countries are very interested in improvements in BC and multi-modal terminals – Co-ordination Team in Odessa was working in close contact with them.

Recommendations on Module A (Border crossings points) were agreed and submitted by the Consultant in June 2003 and approved by the Beneficiaries and EC. A coordination meeting was held together with Consultant, Coordination Team, National Secretary and Beneficiaries at the Ministry of Transport of Ukraine in July 2003. As a result the Recommendations on Module B (Multimodal terminals in Chisinau and Kiev) were submitted and approved by the Beneficiaries and EC in August 2003. Odessa Coordination office held several meetings with the Consultant team. On a base of Project results two ToRs were drafted: one for BC infrastructure improvement (near Mogilev-Podolsky) and one for upgrading of container cranes in Liski (Kiev) and in Chisinau. Due to EC initiative on decentralisation of the project management in Ukraine and Moldova to EU Delegation in Kiev, these drafts of ToRs were handed over to EU Delegation in Kiev. The Second Project Steering Committee Meeting was held in Ilyichevsk in September 2003.

The First Progress Report was issued in May, 2003. The Second Progress Report was issued in August, 2003.

• Rehabilitation of Caucasus Highways

The contract was signed with Louis Berger on the week 48, 2002. The kick-off meeting in the Azeravtoyol took place on the week 4, 2003. The First Progress Report was issued in July, 2003. The Second Progress Report was issued in September, 2003. The contractor has been in regular contacts with the co-ordination team.

• Railway Transit Oil Logistical Center

The contract was signed with Uniconsult on the week 49, 2002. The Progress Report was issued May, 2003

• Supply of Aids to Navigation Equipment to the Ports of Aktau (Kazakhstan), Baku (Azerbaijan) and Turkmenbashi (Turkmenistan)

The contracts were signed with Transas Europe GmbH (DE) on the week 6, 2003 and with Pintsch Bamag Antriebs- und Verkehrstechnik GmbH (DE) on the week 8, 2003. The equipment is delivered and installed in all three Ports.

• Supervision and Training for the Supply of Navigational Aid Equipment

The contract was signed with HPTI in January, 2003. The Inception and Technical report was issued in May, 2003, a progress report in December 2003. Within the contract period

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the contractor has to assist the Port of Aktau in purchase a tug boat. The contractr expires in July 2004.

In addition, three projects related to the establishment of the transhipment station of the ferry terminal at Batumi started during the reporting period. These projects are financed within the TACIS National budget of Georgia but will be coordinated by the TRACECA Coordination Team.

• Rail ferry terminal in Batumi Port – Caucasus - Georgia Supply contract – Railway Material Contractor / Hansel

• Supply of handling equipment to Batumi Port – Caucasus – Georgia Supply contract – Handling Equipment Contractor / Holtrade

• Supervision of the supply for the Ferry terminal at the Port of Batumi Service contract Contractor/ HPC

3.3.3 Project Pipeline:

The actions plans of Tbilisi and Tashkent have been revised together with the Task Manager and a list of project proposals to be financed out of the TRACECA and Regional Budget has been developed. In Tashkent Working Group Meeting of National Secretaries the Task Manager has presented TRACECA 2004 - 2006 showing the priorities of the new strategic approach, the priorities, expected results and indicators.

Action Plan for 2003 has been approved by EC in September 2003 (Annex I). The tenders will be opened first quarter 2004.

Action Plan for 2004, 2005-2006 has been proposed to EC for approval . (Annex I).

3.4 Task C: Co-operation with IFI and other Potential Investors

Contacts with IFI’s have been established throughout the TRACECA region. These contacts have been maintained to secure an exchange of information about the TRACECA programme in general and specific activities, approaches of the IFI and other potential donors on their regional and country-specific strategies and activities. In the Caucasus region the relations and co-operations with IFIs are since long very good and various projects have been based on the work of TACIS TRACECA projects. However, these dialogues have to be maintained and especially in Central Asia the contacts and co-operation with EBRD, ADB and World Bank have been intensified.

The need to exchange information and to co-ordinate specific projects where similar objectives are assumed in common understanding as well as the need for the detailed technical co-operation in areas with co-financing and close co-operation where duplication of efforts has been accounted for by the co-ordination team.

In addition to that, the co-ordination team in each location has been working on the collection of data from the investment plans of the involved Railways, Shipping Lines, Ports and other stakeholders of the Transport Industry.

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The activities within the National Co-ordination Units to establish a data base of projects financed by donor organisation are not finalised.

Close contacts and good working relationships with EBRD, WB, ADB, UN ESCAP, and all other parties connected with the development of the TRACECA Corridor should be maintained and enlarged. Especially the relations with the Steering Committee of the Black Sea PETrA and the Steering Committee of the TEN Corridor IX southern part should be renewed and intensified. TRACECA action plans will be discussed with World Bank, EBRD, Islamic Development Bank and Asian Development Bank where appropriate.

In Black Sea region, the relationship with Forwarding Associations and private transport industry has been intensified. The intention of the BS-PETrA SC to install a new Working Group, dedicated to analyse and implement forwarders and users’ interests, will be discussed on 7th Steering Committee meeting.

In addition the co-operation with the donor organisation avoided overlapping in a Central Asian project with the effect, that a gap in the road feasibility study / construction could be closed and in various other projects (Caucasus) the co-operation was resulting in supervision contracts financed by TRACECA for donor financed projects.

Contacts with World Bank Representatives in Central Asia have been established and input has been given for a new World Bank Strategy “Infrastructure Development for Central Asia”. Meetings with the contractors of the USAID “Pragma Corporation” in respect of projects in the Transport and Trade Facilitation Sector have been held. Hand outs with information for the member of the second and third Inter-ministerial Conference on Central Asian economic co-operation have been prepared and given to the participants.

3.5 Task D Global Feasibility Study

The Global feasibility study has been finalised and is attached hereto (Annex III).

3.6 Dissemination

• The TRACECA Logo has been updated two times • The dissemination materials have been published; • Restructuring and redesign of the TRACECA Website have been performed. • Activation of the new dynamic website has been performed • Permanent (6 times) update and maintaining of the Website has been done. • Redesign of the TRACECA Image Brochure has been done and the brochure has been distributed. The second brochure is ready for distribution. • The TRACECA Life Magazine has been distributed 7 times and the 7th edition was distributed in November 2003.

Website: The permanent process of updating the TRACECA Website has made this dissemination tool as topical as possible. The Website was out of access from November until mid of January because the hosting company was not in the position to reorganise the Webpage after a serious hardware problem. In addition to that the ownership of the Website was unclear and actions have been taken

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to solve these problems. Effective January 16th, 2004 the Website is accessible under the following address: www.traceca-org.org.

This will be a temporary solution until the ownership transfer of the Website to the Permanent Secretariat of the Intergovernmental Commission has been done. All contact addresses have been informed by e-mail about this change.

Black Sea PETrA website is registered under Steering Committee. The BS PETrA website was updated several times and fully maintained by Odessa Office. Placing banner advertisement for TRACECA Corridor on the professional freight forwarders website www.cargoinfo.com.ua for the project contract time.

The new BS PETrA Logo was designed and introduced.

Brochure: The concept of the new brochure was approved by the Task Manger and the distribution started since the beginning of December, 2002. 1500 copies have been published. The Brochure was updated in November 2003 and 1500 updated copies were published in January 2004.

Magazine: The seventh edition of TRACECA Life Magazine was published in November, 2003. The TRACECA Life Magazine has been distributed in all TRACECA Countries, the EC Delegations, IFIs, Embassies of the EC and TRACECA Member States, National Co-ordination Units and the Ministries and Institutions of the TRACECA Member States. The forwarding and transport Industry has also been receiving the magazines and even at border crossing points in the regions, magazines and maps are being distributed to customs and border control officers.

In total: • 500 TRACECA Life Magazines, the first edition No.00 • 1000 TRACECA Life Magazines, the second edition No. 01 • 1000 TRACECA Life Magazines, the third edition No. 02 • 1000 TRACECA Life Magazines, the fourth edition No. 03 • 1500 TRACECA Life Magazines, the fifth edition No. 04 • 1000 TRACECA Life Magazines, the sixth edition No. 05 • 1000 TRACECA Life Magazines, the seventh edition No. 06 have been published and distributed in the reporting period.

The seventh edition of the magazine “TRACECA life” is available since November, 2003.

Posters: Six new posters were developed during the reporting period. These posters were distributed in all TRACECA Countries, EC Delegations, IFIs, Embassies of the EC and TRACECA Member States, the Ministries and Institutions of the TRACECA Member States.

In total 3000 TRACECA Image Posters have been published in the reporting period.

Maps:

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In total: • 3000 Maps A-3 • 500 Unfolded Maps A-1 • 3000 Folded Maps-A1

have been published in the reporting period.

Another 1500 folded TRACECA maps A1 have been issued in January 2004..

3.7 Project Management

The Team leader and coordinators continuously assisted the Task Manager in the management of the projects. The team-leader was officially replaced as of 19 December 2003 and the new Team-Leader is Bodo Roessig who was in charge for Central Asia before.

Financing support to National Secretaries, General Secretary and Executive Secretary was made until January 18, 2004.

4 Overall report on the total project

4.1 Coordination of members/beneficiaries of the TRACECA Programme

With the assistance of the co-ordination team the Permanent Secretariat prepared and organised the following conferences and meetings:

• Working Group Meeting in Ashgabat (February 2002),

• Working Group and the Second Annual Meeting of IGC TRACECA in Tashkent (April 2002),

• Working Group Meetings of National Secretaries and Legal Experts in Baku (January 2003),

• Working Group Meeting of National Secretaries and legal Experts in Tashkent (May 2003) within the framework of the project “Common Legal Basis for Transit Transportation” (CLBTT),

• Working Group Meeting on Rail and Maritime Tariffs in Baku (June 2002),

• Working Group Meeting on Rail and Maritime Tariffs in Baku (October 2002),

• Working Group Meeting on Rail and Maritime Tariffs in Baku ( April, 2003),

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• Working Group Meetings on Road Transit Fees and Tariffs in Baku (November, 2002) within the framework of the project “Unified Policy on Transit Fees and Tariffs“ (UPTFT),

• Working Group Meetings on Road Transit Fees and Tariffs in Baku (July 2003) within the framework of the project “Unified Policy on Transit Fees and Tariffs“ (UPTFT),

• Working Group Meetings on Road Transit Fees and Tariffs in Baku (October 2003) within the framework of the project “Unified Policy on Transit Fees and Tariffs“ (UPTFT),

• Council of Heads of Railways, Ports and Shipping Companies in Baku (July 2003) within the framework of the project “TRACECA Coordination Team”,

• Border Harmonisation Evaluation Workshop in Baku (September, 2002) within the framework of the project “Harmonisation of Border Crossing Procedures”,

• Border Harmonisation Evaluation Workshop in ,Baku (July, 2003) within the framework of the project “Harmonisation of Border Crossing Procedures”

• Working Group meeting of National Secretaries in Yerevan (October 2003-11-03),

• The Third Annual Meeting of IGC TRACECA in Yerevan (October, 2003),

• Working Group Meetings on Road Transit Fees and Tariffs in Baku (October 2003) within the framework of the project “Unified Policy on Transit Fees and Tariffs“ (UPTFT)

• Working Group Meeting of the Project “Oil Logistic Centre” in Baku (November 2003)

• Meeting of National Legal Working Group of Azerbaijan on Baku (November 2004)

Participation of the co-ordination team in International Conferences, Working Groups and Meetings not organised by TRACECA

• BSEC Conference in Kiev (March 2002)

• BSEC Meeting of the Working Group on Transport in Istanbul ( September 2002)

• Fifth International Exhibition-Symposium on Shipping, Shipbuilding and Port’s development in (October 2002)

• Ministerial Conference “V. Pan-European Transport Corridor – operational improvement and further development” in Kiev (October 2002);

• Meeting of Association of International Freight Forwarders of Ukraine in Kiev (December 2002);

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• 6th Steering Committee (SC) meetings of the Development of the BS-PETrA (Black Sea- Pan-European Transport Area) in Odessa in March 2003

• 7th Steering Committee (SC) meetings of the Development of the BS-PETrA (Black Sea- Pan-European Transport Area) in Odessa in November 2003

• 1st Europe Day in Ukraine” in Kiev (May 2003) official TRACECA participation with an one with an one exhibition stand

• BAKUTEL 2002 conference in Baku ( October, 2002)

• TRANSCASPIAN 2002 exhibition in Baku (May 2002)

• TRANSCASPIAN 2003 exhibition in Baku (May 2003)

• 1st International Transport Conference and Exhibition on I&S Transport in the Caspian and the Black Sea Countries in Istanbul, ( February, 2003);

• Regional Co-operation Workshop organised by the Konrad Adenauer Foundation in Tashkent (June, 2003)

• the Speca Project Working Group on Transport and Border Crossing Facilitation in Almaty (September 2003)

• 1st International Exhibition on Transport, Ports and Intermodal Transportations “Intertransport” in Odessa (June 2002)

• 2nd International Exhibition on Transport, Ports and Intermodal Transportations “Intertransport” in Odessa (June 2003)

• 1st International Conferences “The Black Sea Area Transport Network Formation” in Odessa (June 2002)

• 2nd International Conferences “The Black Sea Area Transport Network Formation” in Odessa (June 2003)

• Regional National Co-ordination Unit Meeting, Bishkek (January, 2003)

• UN- Conference on Landlocked Countries , Almati ( September 2003)

• BS PETrA Working Group meeting on Infrastructure Development in Istanbul (September, 2003)

• DaimlerChrysler Mercedes – Convoy - Press Conference in PS of IGC TRACECA in Baku (September, 2003).

• Regional National Co-ordination Unit Meeting, Dushanbe (October 2003)

• CARDS Conference in Paris (October 2003)

• Second and third Inter-ministerial Conference on Central Asian Economic Co- operation in Tashkent (November/December 2003)

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Assistance to missions of European Commission officials or EC nominated persons

The co-ordination team especially the team–leader and the co-ordinators have been heavily involved in various missions of EC officials into the regions and EC-appointed persons for the evaluation of the TRACECA Programme. The main events are stated below including the days spent on these events:

January and February 2003 Mission of the Task Manager Mr. Dalamangas end of January beginning of February 2003. Totally 8 travel days have been spent. Senior transport officials in Almaty, Astana Bishkek and Tashkent have been visited.

March, and April 2003 Accompanying the TRACECA - Evaluators nominated by the European Commission during trips in the Caucasus and Central Asia. Totally 21 travel days of senior experts have been spent. Visits of senior transport officials have been made in the following countries and cities:

Armenia: Yerevan, Azerbaijan: Baku Georgia: Tbilisi, Poti, Bitumi Kazakhstan Chimkent Kyrgyzstan Bishkek Turkmenistan Turkmenbashi, Ashgabat Uzbekistan Buchara,Tashkent

May 2003 Mission of the Task Manager Mr. Dalamangas. Senior transport officials have been visited in the cities of Buchara and Tashkent. 3 travel days have been spent.

July 2003 Assistance to the preparation of the DaimlerChrysler Mercedes Convoy to Afghanistan has been given. 7 days have been spent.

September and October 2003 Senior co-ordinators have been involved in the execution of the TRACECA Convoy of the DaimlerChrysler Mercedes Company from Brussels to Afghanistan all along the TRACECA Corridor. In total 9 travel days have been spent.

October 2003 The Third Annual Meeting of the Intergovernmental Commission (IGC) TRACECA took place on October 8-10, 2003 in Yerevan. In accordance with the MLA the IGC chairmanship has been taken over by the Republic of Armenia for next period. Minister of Transport and Communications of Armenia, Mr. Andranik Manukyan will be heading the IGC during this period. Pursuant to the adopted statute of the Permanent Secretariat at the suggestion of the IGC Chairman, a new General Secretary has been elected. The representative of Bulgaria, Mrs. Lyudmila Trenkova has become the Secretary General of the Permanent Secretariat.

October 2003

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Mission of the Head of Unit A4 Mr. Sinigallia and the Task Manager Mr. Dalamangas after the Yerevan Conference. Senior transport officials in the following cities have been visited: Yerevan, Tbilisi and Baku and a site visit in Azerbaijan (bridge building project). 7 travel days have been spent.

Financing support to Secretary General, Executive Secretary, National Secretaries and Permanent Secretariat has been ensured until January 18th, 2004 under the request of the European Commission stated in the Addendum 3,4 and 5 of the Contract. The financing of Secretary General, Executive Secretary and National Secretaries for the period from November 2002 until July 2003 was covered out of the TRACECA Project “Common Legal Basis for Transit Transportation”. An important topic during the contract period were the missions with Afghan High Ranking Officials in Kabul for the purpose of informing Afghan Officials about the importance of accession to the Multilateral Agreement (MLA) for Afghanistan in the field of closer regional cooperation aimed at the development of international transport in the framework of the TRACECA Programme. Intergovernmental Commission (IGC) During the Yerevan Conference in October 2003. the signatory countries of the Multilateral Agreement (MLA) have agreed to contribute to the cost of the Institutional set ups of TRACECA. The Countries will take over 15 % of the running costs for the Year 2004. This amount should be increased Year by Year. The countries Afghanistan and Iran have were welcomed for membership in the Intergovernmental Commission TRACECA at the same conference.

Projects The three so called “New Generation Projects” Common Legal Basis for Transit Transportation, Harmonisation of Border Crossing Procedures and Unified Policy on Transit Fees and Tariffs are under execution and implementation by involving the National Secretaries of the IGC TRACECA in national working groups.

The bids for the project “Review of Railway Rehabilitation in Central Asia (including links with other transport modes in Central Asia)” has been evaluated on October 27, 2003. The successful tenderer is ITALFERR. ToR for the new project (Action Plan 2003) on Maritime training (for Azerbaijan, Georgia, Kazakhstan, Turkmenistan, Ukraine) has been drafted in September 2003. Two ToRs for new investment project (Action Plan 2003) on Moldova/Ukraine Border Crossings Infrastructure Improvement were drafted and under EC de-centralisation policy handed over to EU Delegation in Kiev in October 2003. A new Action Plan has been drafted in close collaboration with PS of IGC TRACECA (Annex I).

Co-ordination with Steering Committee of Pan-European Corridor IX, southern branch, has been strengthened in context with the tasks to link TRACECA with the Pan-European Corridors.

National Secretaries The National Secretaries of the TRACECA countries could be convinced to obtain statistical data for various TRACECA Projects.

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Public Awareness and information A TRACECA Information day in Brussels has been organised in July 2002 and a Presentation on the development of TRACECA has been performed.

A second TRACECA Information day in Brussels has been organised in September 2002, at the request of DG TREN.

A presentation of the TRACECA Programme in the “1st International Transport Conference and Exhibition on I&S in the Caspian and the Black Sea Countries” in Istanbul (February 2003) and in the “2nd Azerbaijan International Transport and Logistics Exhibition – Trans Caspian 2003” (May 2003) in Baku has been done.

• Improvement and development of the TRACECA Corridor including implementation and development of the Multi Lateral Agreement (MLA) • Link the TRACECA Corridor with Trans-European Networks (TEN’s) • Increase intra-NIS trade flows via TRACECA Corridor • Leverage IFI investment and the involvement as private sector • Improve safety, security, economic and environmental performance in different transport modes

4.2 Co-ordination of TRACECA Projects

Under regional aspects, the current Project on Border Crossings between Ukraine and Moldova gained special care and support. Several coordination meetings were held both at the Ministry of Transport of Ukraine and Odessa office in order to agree the main border crossings points for Feasibility Study and for the new investment project on infrastructure improvement of one Moldova/Ukraine selected border crossing. Two Steering Committee meetings were held under this project. Team leaders and experts of both UPTFT and HBCP have been guided and supported on implementing project results.

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TRACECA projects which were guided and supervised during the contract period are the following:

Name of project Contractor Contact Project Status starting date Customs Facilities Computer Solutions Luc Verheye July, 2001 Inception and at Central Asian BV (NE) T: +3176 5202405 Progress Road Border F: +3176 5202407 Reports Crossings [email protected] issued

Rehabilitation of Louis Berger S. A. Fabrice Signor November, Inception and Caucasian Highways (FR) T:+33145 783939 2002 Progress (I,II) F:+33145 777469 Reports [email protected] issued Common Legal Lamnidis & Thomas Lamnidis November, Inception and Basis for Transit Associates (GR) T:+30210 3643567 2002 Progress Transportation F:+30210 7264510 Reports vicky_papaeliou@kall- issued law.gr Harmonisation of Scott Wilson Adrian Tite November, Inception, Border Crossing Kirkpatrick (UK) T:+441256 461161 2001 Progress (I,II) Procedures F:+441256 816835 and Final [email protected] Reports om issued. The project completed in October, 2003 Unified Policy on Scott Wilson Adrian Tite November, Inception and Transit Fees and Kirkpatrick (UK) T:+441256 461161 2001 Progress (I,II) Tariffs F:+441256 816835 Reports [email protected] issued om Pre-feasibility Study Lahmeyer Thomas Wielpuetz November, Final Report of New Rail Link International GmbH T:+49610 7551835 2001 issued. between the (DE) F:+49610 7551520 The project Ferghana Valley, Sener Engenerias [email protected] Completed in Bishkek and (SP) March 2003 Kasghar Central Asia Railway Italferr. S.p.A Alessandro Veralli January, Inception, Telecommunications (ITA) T:+39064 9752721 2002 Progress and F:+39064 9752209 Final Reports [email protected] issued. The project completed in July, 2003 Feasibility for the Eurecna CNA Andrea Baldan December, Inception and Improvement of VenetoInternational T:+39041 2919421 2002 Progress (I,II) Road and Rail Services F:+39041 5322465 Reports Border Crossings [email protected] issued between Moldova

TRACECA Co-ordination Team - Completion Report January 2004 - 33 -

and Ukraine, and for the Upgrading of the Multimodal Terminals in Moldova and Ukraine Railway Transit Oil Uniconsult (DE) Marcel Sames December, Inception and Logistical Center T:+4940 336216 2002 Progress F:+4940 322764 Reports m.sames@uniconsult- issued hh.de Capacity NEA Transport Harrie de Leijer July, 2003 Inception Development for Research and T:+3170 3988310 report was Senior Transport Training F:+3170 3988312 issued in Officials [email protected] November 2003

Supply of an Optical Siemens AG(DE) / Heiko Friedrich February, The project Cable System for Siemens ATEA T:49897 2262292 2000 was Communication and F:49897 2242506 successfully Signalling to the [email protected] completed in Railways of ns.de May, 2003. Armenia, Azerbaijan and Georgia Supervision of Finnroad Oy (FIN) Raimo Sallanmaa August, Inception, Supply of an Optical T:+3589 8689880 2002 Progress and Cable for F:+3589 86898830 Final Reports Communication and raimo.sallanmaa@finnroa issued. Signalling to the d.fi The project Railways of completed in Armenia, Azerbaijan May, 2003 and Georgia Supply of Aids to Pintsch Bamag Khaled Jaber February, The nautical Navigation Antriebs- und T:+492064 602252 2003 equipment is Equipment to the Verkehrstechnik F:+492064 602283 supplied and Ports of Aktau GmbH (DE) [email protected] installed (Kazakhstan), Baku Transas Europe Oliver Schwarz (Azerbaijan) and GmbH (DE) T:+4940 8906660 Turkmenbashi F:+4940 8811379 (Turkmenistan) [email protected]

Supervision and HPTI (DE) Helga Wagner January, Inception Training for the T:4940 78878112 2003 Report issued Supply of F:4940 78878178 Navigational Aid [email protected] Equipment

Supply of tank CONEC TRADE Fisher November, The project wagons to GmbH (DE) 2002 was Azerbaijan Railways successfully completed in

TRACECA Co-ordination Team - Completion Report January 2004 - 34 -

March, 2003.

4.3 Co-ordination of Other Donors/Financiers/Investors/Associations

Co-operation with IFIs / Donors/Investors has been established to create synergies and avoid duplication of efforts. Regular meetings were organised with the representatives of IFI’s (EBRD, WB, ADB, UN ESCAP). In addition the internet publications of the Donors/IFIs are being used to receive project information.

4.4 Global Feasibility Study

The Global Feasibility Study has been finalised and is attached to this report. (Annex III)

4.5 Dissemination

Dissemination activities have been implemented: • The TRACECA Logo has been updated two times. • The dissemination materials have been published. • Restructuring and redesign of the TRACECA Website has been performed. • Activation of the new dynamic website has been performed. • Regular (6 times) update and maintaining of the Website has been done. • BS PETrA website has been reregistered and completely redesigned. The owner is the Steering Committee. The website has been managed and regularly updated by the Odessa Office. The formulation of the input is made together with MoT of Ukraine as the acting Chair of the SC. Links are available to TRACECA website and all other concerned parties. The Draft of the BS PETrA map was placed on the website for consideration and comments by member states.

TRACECA Co-ordination Team - Completion Report January 2004 - 35 -

• Redesign and finishing of the TRACECA Image Brochure has been done. This brochure has been distributed. The second brochure is ready for distribution. • The TRACECA life magazines have been published and distributed 7 times, the last magazine has been issued in November 2003

4.6 Project Management

In order to clarify the project’s intervention logic during the course of this project, it was found necessary to reorganise the structure of the Coordination Team:

The Supervisor of the Permanent Secretariat is the Team Leader, and there are two regional coordinators in Odessa (Black Sea Region) and Tashkent (Central Asia).

The Team in the beginning of the projects was:

Team Leader: Marc Graille 8/2 Aliyarbekov Street az 1005 Baku Azerbaijan Tel: +994 12 98 56 73 Fax: +994 12 98 64 26 e-mail: [email protected]

Co-ordinator Central Asia: Bodo Rössig 68 Pushkhin St. Tashkent 70000 Uzbekistan Tel: +998 71 136 74 39 +998 71 136 74 49 Fax: +998 71 136 74 76 e-mail: [email protected]

Bodo Roessig 8/2 Aliyarbekov Street az 1005 Baku Azerbaijan Tel: +994 12 98 56 73 Fax: +994 12 98 64 26 e-mail: [email protected]

In addition and at the request of the European Commission the financing support to National Secretaries, General Secretary and Executive Secretary has been extended till January 18, 2004.

TRACECA Co-ordination Team - Completion Report January 2004 - 36 -

In order to prepare the TRACECA new strategy (2004-2006) AIDCO has decided to launch an evaluation for the TRACECA PROGRAMME (to cover the period 1998-2002). The evaluation took place and the Co-ordination Team has accompanied the evaluators in the following states: Armenia, Azerbaijan, Georgia, partly Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan as well as in a later stage Moldova and Ukraine.

TRACECA Co-ordination Team - Completion Report January 2004 - 37 -

PROJECT PROGRESS REPORT

Project title: TRACECA Coordination Team Project number: 01-0186.00 Beneficiary countries: TRACECA Countries Page: 1 of 1 Planning period: May 2003 - November 2003 Prepared on: November 2003 EC Consultant: Dornier Consulting Gmbh / Transtec SA Project objectives: Coordination of the TRACECA programme and its cohesion with other regional community-funded initiatives, other donors and improve information and communication channels Via dissemination to the beneficiaries. No ACTIVITIES IMPLEMENTED TIME FRAME INPUTS PERSONNEL EQUIPMENT Months 1 to 24 OTHER INTERNATIONAL LOCAL & FURNITURE Planned Utilised Planned Utilised Planned Utilised Planned Utilised Coordination of TRACECA A 34 40 140 148 Programme Activities Coordination of TRACECA B 22 15 133 134 Projects Contacts with Donors IFI C 12 13 81 80 Investors

D Global Feasibility Study

E Dissemination/Information 12 12 56 48

TOTAL 80 80 410 410

TRACECA Co-ordination Team - Completion Report January 2004 38

RESOURCE UTILISATION REPORT

Project title: TRACECA Coordination Team Project number: 01-0186.00 Beneficiary countries: TRACECA Countries Page: 1 of 1 Planning period: May 2003 – November 2003 Prepared on: November 2003 EC Consultant: Dornier Consulting Gmbh / Transtec SA Project objectives: Coordination of the TRACECA programme and its cohesion with other regional community-funded initiatives, other donors and improve information and communication channels Via dissemination to the beneficiaries. RESOURCES/INPUTS TOTAL PLANNED PERIOD PLANNED PERIOD REALISED TOTAL REALISED AVAILABLE FOR REMAINDER PERSONNEL

Long-term international experts

Team Leader 454 34 34 506 Senior expert 886 46 46 910

Short-term international expert

Senior experts 86 - - 98 Junior experts 122 - - 122

Sub-total 1548 80 80 1624

LOCAL EXPERTS

Senior experts 5790 410 410 5873

EQUIPMENT AND MATERIAL PC 4 4 0 Lap Top Computer 3 3 0 Printers 2 2 0 Copiers 2 2 0

Sub-total

TOTAL

TRACECA Co-ordination Team - Completion Report January 2004 - 39 -

OUTPUT PERFORMANCE REPORT (Part 1)

Project title: TRACECA Coordination Team Project number: 01-0186.00 Beneficiary countries: TRACECA Countries Page: 1 of 5 Prepared on: May 2003 EC Consultant: Dornier Consulting Gmbh / Transtec SA Output results Deviation original plan Reason for deviation Comment on constrains & assumptions + or - %

A1 Permanent Secretariat is supervised Done

A2 Offices in Odessa and Tashkent are set up including Done staffing and equipping

A3 Hand-over of TRACECA co-ordination and supervision Done of the Permanent Secretariat to the Co-ordination Team

A4 Setting up-of contact points in the beneficiary countries Done approved by Task Manager by appointing local experts

A5 Assist Beneficiaries in implementing the MLA, i. e. Done collect, assess and distribute relevant information

A6 – A7 Working Group and Annual Meetings are As per schedule organised.

A8 Black Sea PETrA support is implemented and working. In time Staff (local experts) is hired.

A9 Black Sea PETrA Steering Group meetings are In time prepared.

TRACECA Co-ordination Team - Completion Report January 2004 - 40 -

OUTPUT PERFORMANCE REPORT (Part 2)

Project title: TRACECA Coordination Team Project number: 01-0186.00 Beneficiary countries: TRACECA Countries Page: 2 of 5 Prepared on: May 2003 EC Consultant: Dornier Consulting Gmbh / Transtec SA Output results Deviation original plan Reason for deviation Comment on constrains & assumptions + or - %

B1 – B3 Relating with contractors, project beneficiaries and stakeholders. Information is provided. Critical interfaces No identified.

B4 Political and technical embedding with stakeholders and No target groups of projects.

B5 Follow-up of projects through analysis of project outputs No and reports.

B6 Programming of future activities. No

B7 Advising Beneficiaries on definition and financing options No on new projects

B8 Elaboration of ToR for new projects No

B9 Elaboration of Tender Documents for supply contracts. No

TRACECA Co-ordination Team - Completion Report January 2004 - 41 -

OUTPUT PERFORMANCE REPORT (Part 3)

Project title: TRACECA Coordination Team Project number: 01-0186.00 Beneficiary countries: TRACECA Countries Page: 3 of 5 Prepared on: May 2003 EC Consultant: Dornier Consulting Gmbh / Transtec SA Output results Deviation original plan Reason for deviation Comment on constrains & assumptions + or - %

C1 Assisting beneficiaries in the co-ordination of other donors No and investors

C2 Maintaining contacts to all donor offices in the region on a No regular basis

C3 Informing IFIs representatives on actual status of activities within the overall TRACECA-programme and BS PETrA on a No regular basis

C4 Exchanging information among (potential) donors and investors concerning on-going and scheduled activities along No TRACECA-corridor and BS PETrA on a regular basis

C5 Inviting representatives of IFI's to attend workshops, meetings etc. carried out within the TRACECA-programme No and BS PETrA

C6 Getting involved in formal and informal donor-co- No ordination meetings

C7 Informing commercial operators and all interested parties No about TRACECA and BS PETrA activities

C8 Assistance to the National Secretaries in organising regular meetings with commercial operators and interested parties in each country

TRACECA Co-ordination Team - Completion Report January 2004 - 42 -

OUTPUT PERFORMANCE REPORT (Part 4)

Project title: TRACECA Coordination Team Project number: 01-0186.00 Beneficiary countries: TRACECA Countries Page: 4 of 5 Prepared on: May 2003 EC Consultant: Dornier Consulting Gmbh / Transtec SA Output results Deviation original plan Reason for deviation Comment on constrains & assumptions + or - %

Specific contracts have been signed between PS D1 Regular up-date of traffic data base in the Permanent and TRACECA countries in order to collect a Secretariat. traffic data

D2 Evaluating past, current and future socio-economic developments along TRACECA-corridor Cost estimate for the acquisition was issued during the second mission of the Short term Expert in charge of the Global feasibility Study.

D3 Analysing the evolution of traffic flows along TRACECA No Part of the Global Feasibility Study corridor and along alternative routes

D4 Analyse transport-related costs and benefits on the No Part of the Global Feasibility Study TRACECA-corridor

D5 Benchmark TRACECA-corridor with other corridors No Part of the Global Feasibility Study

D6 Analyse impacts of the Basic Multi-Lateral Agreement as No Part of the Global Feasibility Study well as of the TRACECA-projects

D7 Develop scenarios and provide recommendations and No Part of the Global Feasibility Study propose further developments

D8 Presentation of findings of study during workshops and No conferences.

D9 Assisting in the integration of study results in the No programming of the next TRACECA – activities

TRACECA Co-ordination Team - Completion Report January 2004 - 43 -

OUTPUT PERFORMANCE REPORT (Part 5)

Project title: TRACECA Coordination Team Project number: 01-0186.00 Beneficiary countries: TRACECA Countries Page: 5 of 5 Prepared on: May 2003 EC Consultant: Dornier Consulting Gmbh / Transtec SA Output results Deviation original plan Reason for deviation Comment on constrains & assumptions + or - %

E1 Hand-over of TRACECA website. Done Hand-over report has been approved. .

E2 Update and improvement of TRACECA brochures. Done

E3 Updated TRACECA map. Done

E4 Quarterly TRACECA magazine is published. Done

E5 Promotional Material is produced: Posters, logo. New Logo is available since February, 2002. : Done Posters are foreseen for September, 2003.

E6 Hosting and managing of TRACECA and Black Sea Done PETrA websites.

E7 – 8 Maintaining the site technically and updating of web site. Done

E9 Up-date of "Marco Polo" section of articles regarding the No activity No contact with “Marco Polo” Agency New Task Manager has to decide on this issue. TRACECA region.

E10 Maintain technical library Done

TRACECA Co-ordination Team - Completion Report January 2004 - 44 -

5 Lessons learnt and recommendations

General remark A clear picture about the intention of the European Commission towards the TRACECA Corridor is necessary for the Intergovernmental Commission, the Secretariat in Baku and the Co-ordination Team. It is clearly understood, that the enlargement of the European Union needs new strategies and priorities. In the 3rd International Eurasian Transport Conference in St. Petersburg (September 2003) Mrs L. de Palacio, the Commissioner for Transport and Vice President of the European Commission, has pointed out that all the analysts currently agree that the new member States of the EU will depend more and more on the relationships with the Eastern–Asian Region as the fast developing economic giants. Therefore transport links and transport corridors have to be improved. The EU will prefer to reduce the number of corridors down to the ability to finance them and will give preference to the corridors starting in the centre of the European Union and widening them in the Asian and Mediterranean direction. She also stated that the European Commission is supporting the initiatives in the Black Sea Region and the TRACECA Corridor. Based on this statement the TRACECA Member States represented by the Intergovernmental Commission and the General Secretariat should be more secured in regard of the financial support for the organisation itself and for the development process of the corridor.

The Permanent Secretariat of the IGC has reached a high level of expertise and knowledge; it is internationally recognised and is a partner organisation of all donors’ organisations and investment banks. The role of the co-ordination team to be the neutral adviser, the intermediate between the countries and the objective controlling capacity of the monetary issues of the IGC is accepted by all member states. Also the contact points in the region separate from the National Secretaries are essential to have neutral view on the development in the transport sectors and the implementation of projects.

Programme The TRACECA programme as part of the technical assistance to the CIS countries is accepted and an integral part of the transport policy of all signatory countries of the TRACECA Multilateral Agreement. The contacts to the Ministries of Transport and Custom and border related Institutions are excellent and full support is given. Problems in implementing projects are coming only from institutions dealing with State Security and State Defence. This has to be considered in the implementation of projects. Geographical and communication-related material is some time subject to security codes and not available. The competitiveness of the TRACECA Corridor has been proven especially for humanitarian aid transportation to Afghanistan. It is still useful to analyse bottlenecks on the whole corridor and to work on solutions. Afghanistan and Iran have applied for membership and in the Yerevan Conference they have been welcomed. This is an indication that the TRACECA corridor is attractive with its Multilateral Agreement and Amendments as well as its Secretariat and Organisation is working effectively.

TRACECA Co-ordination Team - Completion Report January 2004 45

The increase of cargo transported especially in the field of oil and oil product transportation has convinced the IFIs and private investors to invest in infrastructure projects. The financing of restructuring measures, trade facilitation or harmonisation projects remains to be field for donor organisations. .

Financial subjects The financing of the Permanent Secretariat of the IGC and the National Secretaries has been done via this Co-ordination Project and prior to this for a certain time span via the project Common Legal Basis for Transit Transportation, Verbally the EC officials have ensured the Ministers of Transport or Deputy Prime Ministers of the signatory States of the MLA that financial support will be given at least for the Years 2004, 2005 and 2006 if the TRACECA member states are also taking a share of cost. For 2004 the TRACECA Member States will contribute with a share of 15 % and a proposal for an increase of this share is under consideration. It is necessary to find solutions for cases when a contract period is over and a new contract has not been signed. Without a practicable approach for this situation the Permanent Secretariat in Baku is not in the position to respect the laws of labour in Azerbaijan and in worse case even the Permanent Secretariat has to be closed down..

TRACECA Co-ordination Team - Completion Report January 2004 - 46 -

PLAN OF OPERATIONS FOR THE NEXT PERIOD

Project title: TRACECA Coordination Team Project number: 2002/027-526 Beneficiary countries: TRACECA Countries Page: 1 of 1

Planning period: November 19 2003 – Junary 18th 2004 Prepared on: November 2003 EC Consultant: Dornier Consulting Gmbh / Transtec SA

Project objectives: Coordination of the TRACECA programme and its cohesion with other regional community-funded initiatives, other donors and improve information and communication channels Via dissemination to the beneficiaries. TIME FRAME INPUTS 2003 - 2004 (months) PERSONNEL No ACTIVITIES November / December / International Local FLIGHTS Per Diem December January Coordination of TRACECA x x x x A 32 140 4 20 Programme Activities X X B Coordination of TRACECA Projects 24 90

X X C Contacts with Donors IFI Investors 12 60

D Global Feasibility Study

X E Dissemination/Information 10 10

74 300 4 20 TOTAL

TRACECA Co-ordination Team - Completion Report January 2004 47

Published in January 2004

This publication has been produced with the assistance of the European Union. The contents of this publication is the sole responsibility of Dornier Consulting Gmbh / Transtec SA and can in no way be taken to reflect the views of the European Union.

Annex I

TRACECA Co-ordination Team – Final Report – Annex I TRACECA PROJECTS AP 2003

Duration Justification Comments Project name & description Budget in № in EURO months Trade Facilitation and Institution This project will include three phases: Support. a) Facilitation of Border Crossing Procedures and ensure The efforts made in the previous projects e.g. TRACECA Hot Line and enhanced that other vital information is readily available to Harmonisation of Border Crossing communications initiatives further Shippers, Cargo Owners, Freight Forwarders and Border Procedures and the common policy on transit development and follow-up of the entities. It will be the first step of establishment of freight tariffs and fees as well as the common legal implementation of the TRACECA Visa, moving monitoring system. The whole system will operate basis for transit transportation are to be the harmonisation of border crossing under the competence of National Monitoring Groups for followed up and to be streamlined. procedures and the TRACECA freight transit transportation. documentation The support to the IGC TRACECA and the b) The general objective of this project is the follow-up of Permanent Secretary is vital for the decision The support to the TRACECA IGC and the implementation of simplified rules applicable to processes in the TRACECA Member State. 1 to TRACECA Permanent Secretariat 24 2 000 000 transport and transit, developed within previous (PS). TRACECA projects and rendering assistance in joining the main international agreements and conventions in the framework of the Basic Multilateral Agreement. c) Support of the PS TRACECA and Black Sea PETrA Highly compatible with TRACECA Steering Committee: objectives; the project aims at transport Organisation of the TRACECA Annual Meeting 2005 facilitation through harmonisation; immediate Organisation of the TRACECA Working group meetings impact on corridor operability. 2005/2006 Financing support to IGC , PS TRACECA and Black Sea Support of the TRACECA Black Sea PETrA PETrA Steering Committee up to June 2006 organization ensuring continuity of the TRACECA development. Regulation on the Transport of The objectives of this project is the harmonisation of Project serves the production of bankable Dangerous Goods along TRACECA legislation and procedures along the lines of United project proposals and could be a catalyst to Corridor. The project will include Nations and European Directives, justification and carry attract IFI’s financing; improves definitely feasibility study of construction of out Technical and Economic Feasibility Studies for the transport safety and environmental protection. special terminals in Kazakhstan, improvement of dangerous goods (gases, flammable 2 18 1 000 000 Azerbaijan, Georgia and Ukraine and liquids and solids, oxidizers etc.) transportation through The project should focus on implementation proper infrastructure for Liquid TRACECA transport corridor. issues. Petroleum Gas (LPG) Transportation.

Draft15 1 TRACECA PROJECTS AP 2003

Navigational Channel for Turkmenbashi Economical and technical justification, detailed plan of High priority Port. survey of the existing port dredger actions and cost estimation were determined by the Tacis and drafting of the tender dossier for its TRACECA Project TNREG 9803 TRACECA Corridor – First Phase: (by framework contract) A rehabilitation.( framework contract) Traffic and Feasibility Studies, Module D “Navigational Survey of the port dredger and the cost Channel for Turkmenbashi Port – “Determination of the estimation of its rehabilitation. The selection existing situation (2000) and “Maintenance and of the necessary hydrographical equipment.

improvement recommendations” (2001). The preparation of tender documents for the dredger and its hydrographical equipment.

3 The selection of disposal points and methods

for dredged materials in combination with an environmental study.

Purchase of hydrographic equipment and spare parts and repair equipment 12 1 000 000 Purchase of hydrographical equipment and for the dredger spare parts and equipment for rehabilitation of the dredger.

Infrastructure improvement and Border crossing points will be identified within High priority installation of equipment on the border TRACECA Project “Feasibility Study for the improvement of the road and rail border crossings Conditionality / The feasibility study crossings between Ukraine and Moldova. between Moldova and Ukraine” (TRACECA Project (contract no 2002/27530) has to identify the 4 12 2 000 000 2001) border points and to reach a written agreement with the involved beneficiaries. If this is not the case the alternative project will be financed. FIATA – Freight Forwarders Training This project will contain the highlighting of anomalies, High priority, highly compatible: immediate Courses – Following the TRACECA contradictions, monopolies, restrictive practices, impact on transport harmonization, Trade Facilitation project several regulatory vacuums, documents to be used, etc. standardization of paperwork and cargo countries have formed national Recommendation are to be given if local laws and decrees safety. Consequent follow-up to earlier forwarder associations and affiliated are to be adapted and about the influence of this to the activities in the field, should lead to local with FIATA, the international body transport industry. capacity building in training field. 5 representing Freight Forwarders. FIATA 18 2 000 000 This will be done on a state-by-state basis, but in principle acts to harmonise documentation all states will be encouraged to adopt a common model connected with international transport regulatory framework proposed by the project. operations and to ensure appropriate use of such documents. Beneficiary states request assistance with familiarisation and training. Draft15 2 TRACECA PROJECTS AP 2003

Maritime Training - Improvement of the This project will elaborate training programs in Contributes to shipping safety and training equipment system and training accordance with requirements of conventions, resolutions environmental awareness and to capacity system of seafarers staff in the State and recommendation of International Maritime building of state institutions. Maritime Academies and Maritime Organization (IMO) for maritime institutions and provide Administrations according to the Maritime Intuitions with full set of training facilities The project should make an assessment of the technical guidelines and training equipment of Conventions and other IMO documents, current standards of implementation of IMO programs of conventions, resolutions including it’s electronic versions, as well as new maritime regulations, to be able to benchmark possible and recommendations of International text-books. progress after the project has ended. Criteria Maritime Organization (IMO) and Permanent Secretariat of the IGC TRACECA received the should be drawn up to allow such 6 18 2 000 000 European Conventions. official letter from Secretary-General of IMO about the benchmarking. This would allow an necessity of such kind of project. assessment of the efficiency of the project either as part of a monitoring exercise to take place approximately a year after the training has finished. Alternatively the progress of the adherence to IMO regulations could be benchmarked before considering further grants to above-named beneficiaries.

Total 10.000.000

Alternative to Project 4.

Feasibility study for establishment of For the possible establishment of each FTZ, an Economic General improvements of economic free trade zones (FTZ) in TRACECA and financial feasibility study will be carried out by the framework conditions for investments. ports and implementation of pilot project. Identification and implementation of Pilot projects. Projects. General improvements for trading and 7 transport. 18 2 000 000 Presidents of Azerbaijan, Georgia, Moldova and Ukraine signed the “Free Trade Zone Agreement” on the GUUAM Summit that took place in Yalta (20th of July 2001).

Draft15 3 TRACECA PROJECTS AP 2003

Programme: TACIS – TRACECA Action Programme 2003

Area of Co-operation: Trade and Transport Area

Project Title: Trade Facilitation and Institution Support

Project Cost: €2.0 millions

Project Duration: 24 months

Beneficiary countries: Azerbaijan, Armenia, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine and Uzbekistan

Background, Institutional and Financial Appraisal

Since the breakdown of the Soviet Union, historical transit routes cross the borders of newly independent states. On these new border crossings time is wasted and money is spent on formalities; transport costs are rising accordingly. Also, TRACECA states are independent states, which face specific situations and must keep their freedom to design and apply their own laws, rules and regulations. They developed their own legislation and procedures regarding the transit of persons and goods through their territories, which, though similar, are not identical. This situation generates difficulties and paper work for the end users, which must face extra costs and delays.

In spite of this situation, TRACECA states, considering economic development as a priority, decided to develop trade by harmonising and simplifying transport and transit legal framework.

The TRACECA programme for trade and transport technical assistance was launched in May 1993. Certain preliminary projects were launched by TACIS during the following two years. February 1995 was a stage of concerted effort to move ahead with a substantial number of projects. These have recently included Harmonisation of Border Crossing Procedures and Unified Policy on Transit Fees and Tariffs.

On September 7-8, 1998, delegations of 32 countries and 13 international organisations gathered in Baku for the International TRACECA Conference. Nine Presidents and one Prime Minister, Ministers, Ambassadors and heads of delegation discussed the importance of the TRACECA programme as the shortest way of integration into the international economic structures, as a guarantee of political and economic stability and also as a means to improve regional co-operation.

During this Conference, 12 countries: Azerbaijan, Armenia, Bulgaria, Georgia, Romania, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Uzbekistan, Ukraine signed a Multi-Lateral Agreement (MLA) on International Transport in the transportation corridor Europe - Caucasus - Asia and four supplementary technical appendix on customs, road, maritime and rail transport.

Under the Multilateral agreement the IGC-TRACECA was created and Permanent Secretariat as executive body was set up in Baku.

Draft15 4 TRACECA PROJECTS AP 2003

Also, in each member state a National TRACECA Commission was set up and a National Secretary of Permanent Secretariat appointed.

Justification and Objectives

This project will contain three main objectives: development and follow-up of the implementation of the TRACECA Visa and the TRACECA freight documentation, TRACECA Hot Line and enhanced communications initiatives and support to the IGC TRACECA and Permanent Secretariat.

The general objective of this project is the follow-up of the implementation of simplified rules applicable to transport and transit developed within previous TRACECA projects and to provide additional service and systems that will assist the current freight transport users and enhance the marketing capability of the TRACECA Corridor.

Visa and TRACECA Specific objectives will have to deal with customs and customs related rules for goods. Previous work carried out during several TRACECA projects paved the way for such a simplification: “Trade Facilitation” and “Border Crossing” these projects concentrated on and refined the freight aspects of transit harmonisation. This means that many of the procedures have already been simplified and thereby permits the easier introduction of the TRACECA Freight Documentation.

However, many problems are still pending regarding the transit of passengers, particularly the persons whose activity is directly related to the transit of goods such as truck drivers in road transport or car attendants in railways. Delivery of visas for persons is both times consuming and costly; besides, for one single voyage, persons need as many visas as there are borders to cross. A second specific objective of the project will be to design a set of procedures that will ease and make less expensive the crossing of borders by the citizens of TRACECA states.

TRACECA states already participate in international customs and visas agreements, but none of them cover the whole area. A specific sub-objective of the project will be to make sure that TRACECA visa stay compatible with present customs and visa unions.

In addition, to facilitate Border Crossing Procedures and ensure that other vital information is readily available to Shippers, Cargo Owners, Freight Forwarders and Border entities the TRACECA Hot Line and Enhanced Website and the Use of Web cams are to be evaluated and developed.

TRECECA Hot Line - Creation of a reliable dedicated telephone network at the designated TRACECA border crossing points utilizing either ‘land-line’, GSM or fibre-optics communication media and linking this to a Help-Desk in the various National Secretariats that will be available 24 hours per day and 365 days per year. This can additionally be supported by the currently established TRACECA Website in the form of an ‘Interactive Enquiry Section’. There should be an initial ‘pilot’ project to establish methodology and practical parameters of the overall technical and administrative system.

Draft15 5 TRACECA PROJECTS AP 2003

There will be a need for an Initial Evaluation of the whole concept and a requirement to provide a report on the total concept, the practical problems and limitations of the system and a detailed cost analysis including a progressive development strategy. There should be a review of the current administrative capabilities of the TRACECA structure in relation to the operation and support of the Hot Line and Help-Desk initiative. This review should evaluate and report on the realistic capabilities of the current administration and make recommendation for improvement if required.

Enhanced TRACECA Website – To evaluate the current the TRACECA Website to further refine its capabilities that will eventually include a centre for Frequently Asked Questions (FAQ’s). This FAQ service within the Website will then correlate queries and information on the regular difficulties experienced by the TRACECA Corridor users. This facility should incorporate a capability to permit all users to access the information on FAQ’s and to pose their own questions. The known queries will be available and the new queries will then be added to the list of FAQ’s with the respective answers.

Use of Web cams – There are already current initiatives in the use of Web cams in some countries and the experience from this should be evaluated and proposals made for the use of Web cams in specific border crossings in the TRACECA Transport Corridor to give ‘real-time’ overview on traffic movements for the benefit of the corridor users and security for the border authorities. It is understood that the use and cost of CCTV (Closed Circuit Television) would not be financially feasible to permit international access but the media of Web cams could fulfil this need in a cost effective manner.

Main Components

In order to reach the above stated objectives, the project purpose and deliverables are defined as follows:

o Development and follow-up of the implementation of the TRACECA Visa and the TRACECA freight documentation

• In depth review of documentation and legislation impact concerning international freight in each TRACECA country • In depth review of customs agreements in each TRACECA country • In depth review of visa agreements in each TRACECA country • In depth freight and passenger movement study throughout the TRACECA area • In depth study of legal and legislation processes in each TRACECA country • Alignment with previous and current related projects • Design of an initial “Freight Pilot Scheme” on freight only in order to apply a new set of simplified rules • Assistance in the legal implementation of the scheme • Monitoring of a first phase of the implementation of the “Freight Pilot Scheme” • Organisation of seminars with all interested parties of TRACECA states in order to plan the expansion of the initial “Freight Pilot Scheme” • Expansion of scheme

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• Feasibility and design of a “Passenger Pilot Scheme” • Assistance in the legal implementation of the scheme • Initial introduction of a “Passenger Pilot Scheme” • Monitoring of the “Passenger Pilot Scheme” • Organisation of seminars with all interested parties of TRACECA states in order to plan the expansion of the initial “Passenger Pilot Scheme” • Convergence of the implementation of the TRACECA Visa and the TRACECA Freight Documentation. • Ultimate harmonisation of both procedures and legislation.

o TRACECA Hot Line and enhanced communications initiatives

• Establishment of methodology and practical parameters of the overall technical and administrative system • Elaboration of the total concept, including the practical problems and limitations of the system and a detailed cost analysis, a progressive development strategy. This review should evaluate and report on the realistic capabilities of the current administration and make recommendation for improvement if required. • Technical and finical support of a centre for Frequently Asked Questions (FAQ’s) on TRACECA website • In depth study of using the web cams on the border crossing in European countries • Economic and financial feasibility study for the use of Web cams in specific border crossings in the TRACECA Transport Corridor.

o Support to the IGC TRACECA and Permanent Secretariat

• Organisation of the TRACECA Annual Meetings 2005 and 2006 • Organisation of the TRACECA Working group meetings 2005/2006 • Financing support to IGC and PS TRACECA up to 2006

Implementation timetable

Carrying out and finalisation of the regional study and End of 2005 EU practice

Establishment of the “Passenger Pilot Scheme” End of 2005

Harmonisation of the implementation of the Middle of 2006 TRACECA Visa, Freight Documentation and legislation

Technical and finical support of the TRACECA Permanently website

Elaboration of the report of recommendations for Middle of 2005 increasing capabilities of the current administration

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Carrying out economic and financial feasibility study Beginning of 2006 for the use of Web cams

Support to the ICG and PS TRACECA Permanently

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Programme: TACIS – TRACECA Action Programme 2003

Area of Co-operation: Trade and Transport Area

Project Title: Regulation on the Transport of Dangerous Goods along TRACECA Corridor

Project Cost: €1.0 million

Project Duration: 18 months

Beneficiary countries: Azerbaijan, Georgia, Kazakhstan, Turkmenistan and Ukraine

Background, Institutional and Financial Appraisal

The growth in oil production in the region is well known. However the increase in production has lead to greater availabilities of associated gas. The government of Kazakhstan wants to limit the flaring of natural gas and encourages re-injection. While the gas is on the surface, there is an economy in extracting propane and butane fractions (LPG), which are marketable as heating fuel and a clean automobile fuel in the Mediterranean, Black Sea, and in the Caucus region. LPG can also be used as industrial feedstock for chemical production.

The market for LPG fractions in the Black Sea and Mediterranean is huge. Turkey has no domestic production and consumes 4,000,000 MT per annum, with consumption steadily growing. In Turkey there is abundant infrastructure for the receipt of sea- borne LPG. Greece has domestic production of LPG but is a net importer of LPG, taking between 500,000 – 800,000 MT per annum. In Greece there is abundant infrastructure for the receipt of sea-borne LPG.

One such production facility already exists at Tengiz, where current production capacity is approximately 300,000 MT/year. Expansion of this facility is planned to increase to 500,000 MT/year by 2005. In addition, there is another project under consideration in Kazakhstan by a major Western oil company, and Kazakh authorities are considering LPG production at two sites, Aktyubinsk and Jambul. Turkmenistan is also looking at expansion of mixed propane and butane production.

Very little attention has been given to this smaller energy sector product, and even less to the logistics and transport of LPG, an explosive gas. Yet LPG production can optimise oil production and justify the cost of re-injection of natural gas, as well as be sold commercially.

Currently, LPG has found little or no market in industrial production. This is partially due to the low output of Russian LPG and the high cost of its transport, and to non- liquidity of CIS chemical producers, and large centralized heating of even small Russian population centres.

LPG from Turkmenistan is sold by truck to Armenia, Iran, and Turkey. LPG from Kazakhstan is currently being delivered in railroad gas cars to various destinations,

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including Eastern Europe, the Caucuses, and Finland. The only deep-sea loading facility was constructed in Odessa with assistance from Tengizchevroil. However, the Odessa terminal is not fully developed and there are several competing plans for development of gas loading capacity in the various ports in the area (Ilyichevsk, Odessa, Yuzhny). LPG is shipped to the facility overland in railroad gas cars. The route is long; turnover of gas cars is slow and expensive. There is a constant problem with availability of gas cars. Shipping in such a way is administratively time consuming.

The Port of Batumi has examined gas storage projects with a range of foreign investors and major Western oil companies. There is a project to use existing storage, and the port has undertaken a study of building a gas terminal. Yet without adequate construction and a technologically unified means of transport of gas through the trans- caucus corridor and from Kazakhstan, investment in a stand-alone terminal is difficult to justify.

Justification and Objectives

Actual start-up and production of LPG in Central Asia is hampered by the lack of economical means of transport for realization of LPG. Most producers of LPG are oil companies. They look as LPG production as a side stream, or sometimes, an outright nuisance. Oil companies are even less inclined to invest in means of transport. The land-locked nations of Central Asia currently can be offered rail transport, which is expensive and cumbersome. If another viable transport scheme could be developed, it is likely that LPG production would be stimulated. The Contractor should address this issue, contacting potential producers and forecasting LPG production.

Added availability of LPG could make it a viable feedstock for chemical production in the area. Several large chemical plants are idle or not working at full capacity. Could chemical production be enhanced by the availability of LPG and what effect would this have on the local economies? This objective should be addressed in the project.

Other gaseous products are available as by-products from added chemical production. These products may become available for export through the present project’s storage in Poti, Georgia. The project should estimate the availability of these by-products, their volume, and consider these gaseous products in the technical component of the project study. Also, the issue of import of gaseous products may be imported into the region.

Identical conditions exist in Turkmenistan and production of LPG should undergo the same development. Estimates of the market and feasibility of movement of LPG from Turkmenistan to international markets should also be addressed.

The first objective of the Project is an economic analysis of all possible schemes and modes of transportation of LPG in the region, with calculations and recommendations on operational cost and capital investment.

The second objective of the Project is presentation of a completely integrated technical scheme for LPG transportation. This will include:

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- means of storage and loading in Aktau and/or Kuryk (Yeralievo), Kazakhstan - means of storage and loading in Turkmenbashi or Okarem, Turkmenistan - optimal means of transportation across the Caspian, - means of storage and trans-shipment of LPG in Azerbaijan, - gas rail car transport of the LPG to end-users and/or to the port of Poti and/or Batumi, - means of storage and loading of LPG in Poti and/or Batumi, - optimal construction program in Ukraine (Yuzhny, Ilyichevsk, Odessa).

The third objective of the Project shall be an overview of the regulatory authorities (fire department, ecological, maritime, construction norms, etc.), in accordance with international and UN standards for storage and transport of LPG.

Main Components

The Contractor must submit a report, following the requirements listed hereunder:

- Means of Storage and Loading in Aktau and/or Kuryk (Yeralievo), Kazakhstan

The Contractor will find a suitable location(s) for storage and loading of LPG. The means of transport will account for receipt of LPG gas in rail tank cars on an FCA basis and manipulation of the LPG to a FOB basis.

- Means of Transport Across the Caspian

The Contractor will choose the optimal means of transport with respect to all possible forms of manipulation of LPG: rail car, isotainer, bulk. The scheme of transport will account for receipt of LPG gas on an FOB basis and manipulation of LPG to a CIF Azerbaijan basis.

- Storage and Trans-shipment Options in Azerbaijan

The Contractor will find a suitable location (s) for storage and loading of LPG. The means of transport will account for receipt of LPG gas via the Caspian on a CIF basis and manipulation of the LPG to a FCA basis rail tank car. An investigation will be carried out concerning the partner (s) that can manage the administration and shipment of LPG.

- Shipping Logistics in the Caucus Area

The Contractor will survey and assess the shipping capabilities of LPG through the Caucus region, and to the Port of Poti. Volume capabilities and cost estimates will be prepared.

- Means of Storage and Loading in the Port of Poti and or Port of Batumi

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- Existing Means of Transport in the Odessa Region and Evaluation of Development Plans

- Evaluation of Target Markets for the LPG Considering Best Netbacks for Producers

- Environmental Impact Assessment.

The Contractor will find a suitable location (s) for storage and loading of LPG. The means of transport will account for receipt of LPG gas via rail tank car free delivered, and manipulation of the gas to a FOB basis. The facility must account for the highest possible flexibility of product shipping mix, volumes, and the support equipment to ensure safe and modern gas loading.

Implementation timetable

Carrying out a reports on points listed in the main Quarterly components

Carrying out a feasibility study End of 2006

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Programme: TACIS – TRACECA Action Programme 2003

Area of Co-operation: Trade and Transport Area

Project Title: Navigational Channel for Turkmenbashi Port

Project Cost: €1.0 million

Project Duration: 12 months

Beneficiary country: Turkmenistan

Background, Institutional and Financial Appraisal

The TRACECA rout, being today a multi-modal transport corridor, connects an extended Europe in the West via the countries of Central Asia with Afghanistan and fast-growing China in East.

For Central Asia as highly land-locked region, endowed with rich mineral deposits, oil and gas reserves and other natural resources, the railways in particular play an essential role in transporting the area’s high volume commodities to far away ocean ports for export and of course as well for imports. The main links after using the land bridge via Georgia and Azerbaijan are the railway ferries between the ports of Aktau (Kazakhstan) and Turkmenbashi (Turkmenistan). The link to Turkmenistan is the shorter one to cross the Caspian Sea and is the most important crossing of the Caspian Sea.

The access to the port of Turkmenbashi is via an excavated channel, which is reportedly of insufficient depth, and poorly marked for the safe operation of vessels. The deepest draught vessels which are regularly use the channel are the rail ferries (owned by the Caspian Shipping Company, Baku/Azerbaijan) which are the back bone of the rail connections between the Caucasus and Central Asia.

These types of vessels are only able to use the middle of the entrance channel along a narrow strip whereas depths of almost 7 meters available whereas depths generally limited to 4 – 5 meter close to navigation buoys. The drafts of the ferries are 4 – 4.5 meters depends on cargo loaded.

In addition, the wideness of the channel is not sufficient. To meet international standards the navigational channel should be 110 Meters wide meaning with a water depths of 7 meter.

The combination of insufficient wideness of the channel and the limited depths of the channel has created a nautical problem not only for the railway ferries but also for the tankers carrying oil and oil products. The loading capacity of the tankers can not be used in full passing the channel and the ferries can not pass the channel at all if there

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is wind above 16 meters/second. In those cases ferries cannot access the port. It is not an extraordinary case that ferries are waiting one or two days before berthing.

The result is, that a liner service of the ferries, substantial for the TRACECA Corridor and the guarantee for “in time” transportation cannot be established. The utilization of the involved vessels and the ports of Turkmenbashi and Baku are lower which also effects the utilization of the equipment to be used e.g. railcars, containers and trucks.

The port of Turkmenbashi is in a reconstruction process. Modern cargo and container facilities have been built basically with loans from the EBRD and recently a new link span for the rail ferries has been finalised also financed by the EBRD. The Port has a vital interest to secure the access to the port and is ready to assist in the frame of their possibilities this project.

The TACIS Project TNREG 9803 TRACECA Corridor – Traffic and Feasibility Studies, Module D “Navigational Channel for the Turkmenbashi Port – “Determination of the existing situation (November 2000) and “Maintenance and improvement recommendations (February 2001) includes a detailed plan of actions and cost estimations.

Justification and Objectives

In a wider frame the shipping industry of the Caspian Sea is also benefiting from this project. The port will be accessible at any time if the water depths and the wideness of the channel will be on an international safety standard. Based on that, the port can charge a channel fee to finance the rehabilitation and the running dredging costs.

To create all necessary documents enabling the port to finance the rehabilitation of the dredger and to train the port stuff respectively the dredging operators to secure the entrance to the port of Turkmenbashi. This should include an analysis of the benefits of the ship owners calling the port of Turkmenbashi to estimate savings by reduced idle times and higher cargo loads with a deeper and widener entrance channel. Based on that, a reasonable port entrance /channel fees can be charged.

The main risk to be seen is that the port is not able to generate the money needed for the rehabilitation and the dredging operation or that the International Financing Institutions are going to finance this project by whatsoever reasons.

Main Components

- survey of the existing port dredger - drafting the tender dossier for its rehabilitation - environmental assessment - stuff training - analysis of the savings/additional income of ship owners based on the adequate entrance channel and a reasonable entrance/channel fees is developed - assistance is given to negotiate the financing with IFI’s

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Implementation timetable

Finalisation of general survey and adequate recommendations End of 2004 Preparation of tender dossier for dredger rehabilitation Beginning of 2005 Negotiation’s assistance with IFI’s Beginning-middle of 2005

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Programme: TACIS – TRACECA Action Programme 2003

Area of Co-operation: Trade and Transport Area

Project Title: Infrastructure improvement and installation of equipment on the border crossings between Ukraine and Moldova

Project Cost: €2.0 millions

Project Duration: 12 months

Beneficiary countries: Moldova and Ukraine

Background, Institutional and Financial Appraisal

Following the collapse of the former Soviet-Union in 1991, an internal conflict arose when Trans-Nystria, a region east of the river Dniestr, claimed independence from Moldova. As this region covers the entire eastern border of the country, the conflict has seriously perturbed Moldova’s road and rail links with Ukraine, and trade exchanges between Moldova and Ukraine have decreased dramatically. Moldova’s economy has suffered greatly from this, as the country depends heavily on imports of raw materials and energy, and exports of agricultural products and, to a lesser extent, of manufactured goods. As the new situation in Moldova is now stabilising, the country’s corridors for import, export and transit (from Romania and Bulgaria to the southeast of Ukraine) are being reorganised.

Moldova and Ukraine were two of the twelve States which signed the TRACECA Multi-Lateral Agreement (MLA) on International Transport, along with Romania and Bulgaria. Next, the GOUUAM Agreement between Georgia, Ukraine, Azerbaijan and Moldova, and recently joined by Uzbekistan, is expected to enhance trade exchanges between the involved countries.

The Border crossing points to deal with under this project will be identified within the course of the TRACECA Project “Feasibility Study for the improvement of the road and rail border crossings between Moldova and Ukraine” (TRACECA Project 2001). As the contractor is already identified, the first project should commence still in 2002.

Both projects together will contribute to facilitate border crossings and bring them up to western standards. Furthermore, in the particular case of this project, the results might contribute to increase co-operation, trade and good neighbourhood in the region.

Justification and Objectives

To be identified within the TRACECA Project “Feasibility Study for the improvement of the road and rail border crossings between Moldova and Ukraine” (TRACECA Project 2001)

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Main Components

To be identified within the TRACECA Project “Feasibility Study for the improvement of the road and rail border crossings between Moldova and Ukraine” (TRACECA Project 2001)

Implementation timetable

To be identified within the TRACECA Project “Feasibility Study for the improvement of the road and rail border crossings between Moldova and Ukraine” (TRACECA Project 2001)

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Programme: TACIS – TRACECA Action Programme 2003

Area of Co-operation: Trade and Transport Area

Project Title: FIATA – Freight Forwarders Training Courses

Project Cost: €2.0 millions

Project Duration: 18 months

Beneficiary countries: Azerbaijan, Armenia, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine and Uzbekistan

Background, Institutional and Financial Appraisal

Especially the TRACECA states of the former Soviet Union are now expanding trade links with new international partners, including the European Union. This growth in diversity of trading links is healthy and will contribute to the overall economic growth of the region. However, in past days of central planning within the CIS countries, TRACECA states of the former Soviet Union were not themselves deeply involved in international transport documentation of common use in international trade in the western world. This unfamiliarity leads to poor design of documents, slow processing, and sometimes to fundamental misconception of the role of the documentation and their use.

Previous TRACECA projects have addressed this issue. In particular the Trade Facilitation and Freight Forwarding projects proposed streamlined processes for international trade and transport documentation, based on the so-called Single Administrative Document or SAD. It also brought the international freight forwarding association, FIATA into contact with the beneficiary states. As a direct result, several of them have formed national freight forwarders associations, which have attained ordinary membership of FIATA.

The freight forwarding industry is very young in the region of the CIS countries. Professional help is needed to learn fast how to run the transport industry and there is a continuing need for further training for the full harmonisation with western practice.

The regulatory framework of the freight forwarding and transport industry within the region is not uniform and it is not always clear which laws and decrees are applicable.

Justification and Objectives

FIATA has a training programme adapted to the transition economies, and the objective of this project is to make such specialist training available to the regions freight forwarders. Parallel to this, the transport industry itself will be encouraged to promote any necessary changes in the broader issue of regulation and access to the profession, as well as the adoption and usage of transport documentation.

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This project will contain the highlighting of anomalies, contradictions, monopolies, restrictive practices, regulatory vacuums, documents to be used, etc. Recommendation are to be given if local laws and decrees are to be adapted and about the influence of this to the transport industry.

This will be done on a state-by-state basis, but in principle all states will be encouraged to adopt a common model regulatory framework proposed by the project. The project will have an immediate impact on transport harmonisation, standardisation of paperwork and cargo safety.

Main Components

In order to achieve the above-mentioned objectives, the main activities are as follows:

• Comprehensive investigation and analysis of the regulatory framework of the freight forwarding and transport industry in each of the TRACECA countries, • Critical analysis of the documents used, • Highlighting anomalies, contradictions, monopolies, restrictive practices, • Finding out regulatory vacuums, • In depth analysis of the organisational structure of freight forwarders, done by a state-by-state basis, • Careful identification of the national bodies in each state with which the project is to collaborate, • Make FIATA specialist training available to the regions freight forwarders, • Encouraging and assistance to the foundation of FIATA associations to those states without a recognised one, • Preparing and providing a series of intensive seminars on the FIATA recommended process for management and day-to-day practice in the freight forwarding industry, • Providing a full set of documents and manual for practitioners, including terms of trade, waybills, contract forms for carriage, insurance and customs procedures.

Implementation timetable

Comprehensive investigation and analysis End of 2004

Foundation of the FIATA associations mid of 2005

Organisation of the FIATA specialist training and Regularly seminars

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Programme: TACIS – TRACECA Action Programme 2003

Area of Co-operation: Trade and Transport Area

Project Title: Maritime training

Project Cost: €2.0 millions

Project Duration: 18 months

Beneficiary countries: Azerbaijan, Georgia, Kazakhstan, Turkmenistan and Ukraine

Background, Institutional and Financial Appraisal

One of the objectives of the TRACECA Basic Agreement is to ensure traffic safety, security of goods and environmental protection. This objective, with regard to maritime transport, could be achieved only if the ships are manned and operated by highly qualified and trained crews. The shipping industry has undertaken an unprecedented technological revolution during the last quarter of the last century. Today's modern ships are highly automated with complex and sophisticated equipment on board. Many of these ships carry hazardous and noxious cargoes.

During its existence, IMO has developed a well-coordinated regime of technical standards, rules, regulations and codes of practices to ensure the safe and efficient operation of different types of ships and the prevention of vessel-source marine pollution.

Permanent Secretariat of the IGC TRACECA received an official letter from Secretary-General of IMO about the necessity of such kind of project.

As the only specialized agency of the UN system dedicated to maritime affairs, IMO has the responsibility to assist the countries in their endeavours to develop their own human resources in the Maritime sector. Accordingly IMO has developed and implemented a series of training programmes to enable the countries to train their own nationals in various maritime disciplines according to global standards. Through well- trained nationals, the developing countries are gradually acquiring the capability to comply with IMO conventions and protocols, and they are becoming increasingly self- reliant.

Justification and Objectives

Due to a lot of development obstacles, shipping companies of TRACECA countries could not follow completely this development. Besides of few institutes, which are in line with new technologies, most of companies are facing lacks in information, training and investments. Negative samples of the really prevailing situation are the accidents occurred last time in maritime transport on the Caspian Sea.

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So, one of the major problems facing all developing countries and those in transition is the lack of provision of modern training facilities for the cadets and officers of the maritime training centres. The provision of training equipment is crucial for the development of the maritime training centres. Without this equipment these countries cannot attain the standards of training required by the relevant IMO conventions.

The adoption of globally applicable standards, rules and regulations is only the first step. The next step is to promote their effective implementation by those who control, manage or operate different types of ships. For this purpose, highly trained and skilled personnel are required, both afloat and ashore. In addition to basic maritime training, specialized training is required for the management and operation of different types of ships.

This project will contributes to shipping safety and environmental awareness and to capacity building of state institutions as well. It will elaborate training programs in accordance with requirements of conventions, resolutions and recommendation of International Maritime Organization (IMO) for maritime institutions and provide Maritime Intuitions with full set of training facilities equipment of Conventions and other IMO documents, including it’s electronic versions, as well as new maritime text-books.

The purpose of the project is to provide Maritime Intuitions with full set of training facilities equipment of Conventions and other IMO documents, including their electronic versions, as well as new maritime textbooks.

Main Components

• Intensive analysis of the structure of maritime training institutions in the partner countries, • Identifying and evaluating the Maritime Academies and Universities regarding IMO training programs, • Elaborating of training programs in accordance with requirements of conventions, resolutions and recommendation of International Maritime Organization (IMO) for maritime institutions, • Providing Maritime Institutions with full set of training facilities equipment of Conventions and other IMO documents, including their electronic versions, as well as new maritime textbooks, • Conducting Training Need Analysis (TNA), • Analysing the results of TNA and making tailor made training courses and programs, • Organising training courses to be held on site and in Europe, • Providing the Maritime Institutions with full set of training materials concerning Conventions and other IMO documents, including their electronic versions and new maritime textbooks as well as necessary equipment to conduct the training.

Implementation timetable

Beneficiaries (institutions) identification in all partner countries End of 2004

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Elaboration of training programs and training courses Regularly organisation Providence institutions with full set of training facilities Regularly equipment and appropriate documentations

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Alternative of Project № 4

Programme: TACIS – TRACECA Action Programme 2003

Area of Co-operation: Trade and Transport Area

Project Title: Feasibility study for establishment of the free trade zones in TRACECA ports and implementation of pilot projects

Project Cost: €2.0 million

Project Duration: 18 months

Beneficiary countries: Azerbaijan, Bulgaria, Georgia, Kazakhstan, Romania, Turkey, Turkmenistan and Ukraine

Background, Institutional and Financial Appraisal

Nowadays, since the international trade is becoming rapidly globalise and more complicated, the foreign trade policies which are undertaken by States as well as the political instruments used in these economic policies are of growing significance. From historical point of view, the establishment of free zones has had a quite long history. As time went by and the customs walls and state boundaries were created, in trade colonies which had been established near main commercial routes which had led to the big manufacturing centres, the establishment of the free zones had been announced in order not to lose existing in those days trade volume and not to lose the profits connected with it. They had been left beyond customs boundaries.

The free trade zones (FTZ) are called "the zones for manufacturing of export products" in developing countries, but in developed countries they are called "the free trade zones" where trade predominates. The zones were established in order that the employment opportunities and trade volume could be increased in the least developed regions of a country.

The free trade zones that nowadays have achieved great success have been changed from their classical application into specialization. The manufacturing of advanced technological products began to play leading role in them, and thus they started to become technology centres.

Justification and Objectives

The purpose of creation of special trade zones in ports of Aktau, Baku, Turkmenbashi, Poti, Batumi, Ilyichevsk, Samsun, Trabzon, Burgas, Constantsa, Varna is a maximum effective utilization of ports for the accelerated wide involving of republics of CIS in global trade for maintenance of steady growth and increase of competitiveness of economy.

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The creation of FTZ is predetermined by a unique geographical position of regions, situated on a joint of transport routes in various directions between West and East, North and South.

The purposes of creation of free trade zones are, as follows:

- To increase both the foreign investments as well as the foreign trade volume, - To enable the local manufacturers to obtain raw materials at international prices in order to increase their competitiveness in international markets, - To encourage exports and trans-shipment (to support the industries producing export goods), - To increase an influx of foreign currency, - To reduce unemployment through creating new jobs, - To raise as quickly as possible the economic standards and to enable the technologically advanced production and management techniques to be imported from abroad.

Main Components

The project should be considered as a regional economic development program. The project will have to evaluate:

- Legal framework of each TRACECA country involved. - Possible location of the FTZs including technical evaluation. - Relevant Partner groups

For the possible establishment of each FTZ, an Economic and financial feasibility study should be carry out by the project.

The expected results of the project are:

• Training and study tour for the relevant Partner groups. • Legislative bases and legal models of laws for creation of free trade zones in ports. • Draft of amendment of legal standards as an annex to the TRACECA Multi-lateral Agreement. • Preparation of the final design plan for creation of free trade zones in ports. • Establishment of three or four pilot projects.

Implementation timetable

Preparation of an evaluation study End of 2004

Training and study tour organisation Beginning-middle of 2005

Drafting legislative base amendment of legal standards Middle of 2005

Carry out an economic and financial feasibility study End of 2005

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Establishment of three or four pilot projects End of 2005

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THIRD ANNUAL MEETING ТРЕТЬЕ ЕЖЕГОДНОЕ ЗАСЕДАНИЕ OF THE INTERGOVERNMENTAL COMMISSION МЕЖПРАВИТЕЛЬСТВЕННОЙ КОМИССИИ ТРАСЕКА TRACECA г. Ереван / Республика Армения, 9-10 октября 2003 г. Yerevan / Republic of Armenia, October 9-10, 2003 Project proposals to the Action Plan 2004 (out of 2004-2006)

Project name Duration Budget in Description Comments № in months EURO 1 Technical assistance for the Supply of new Feasibility Study, technical Technical Assistance / electric locomotives for Azeri State Railway/ specifications, tender documents, EBRD Investment Assistance to EBRD and AZ RWS in order to assistance to tendering purchase new electric locomotives used along 24 1 000 000 TRACECA corridor in South Caucasus.

2 TRACECA roads reconstruction in Central Asia / Feasibility Study of the road section Technical Assistance / Feasibility study for the rehabilitation of the road Aktau-Beynau-Kundgrad UZBEK Investment connection between Kazakhstan and Uzbekistan. 12 2 000 000 Access to Aktau Port. 3 Training of operational air transport control staff of The implementation of ADS-B The project will be split in South Ring states. technology is requiring homogenous two phases : performance and coordination procedures from the operational air Phase A / Evaluation and traffic controllers. Theoretical education, assessment of the 24 2 500 000 simulator training and most of all an previous projects ( upgrade in aviation English is essential evaluation of the needs ) before the controllers can be considered prepared to use this new technology. Phase B / Implementation

4 Improvement of the maritime links between • Marketing Study of shipping Proposals from Black Sea TRACECA Corridor and TENs Corridors. lines Countries TRACECA Black Sea Countries. • Feasibility study for establishment of the rail-sea combined transport link between ports of Samsun, Poti and Batumi, Varna, Burgas, Constantsa, • Development of a common security management system in 24 2 500 000 ports and on board ships involved in TRACECA project in the Black Sea area. • Establishment of the monitoring system and Establishment of the Port Community Information System for the Ports in Varna region, which are serving TRACECA traffic

5 Rehabilitation of Azerbaijan Highway/ Assistance to tender, technical Technical Assistance / Road section Kazimagomed-Kyurdarmir supervision and support to the PIU EBRD Investment 24 1 800 000 Supervision and support to the PIU / 6 Poti Port - breakwater / Final design, tender documents, Technical Assistance / Final design, tender documents (review), 12 1 500 000 assistance to tender and technical EBRD Investment assistance to tender and technical supervision. supervision Safety of TRACECA roads in Central Asia. Establishment of Center for Data Supply contract / Harmonisation of marking, signalization and Processing and Diagnostic of roads and 7 24 2 500 000 security equipment of TRACECA Roads in Central mobile laboratories. Feasibility study, Asia equipment procurement and training.

TOTAL 13 800 000

Project name Duration Budget in Description Comments № in months EURO Operational provision for the Hydro Meteorological Identification assistance, No priority / It can be financed within Safety of the Transport Corridor Europe- Procurement, Technical budget “environment” 1 27 2 500 000 Caucasus-Asia (HYMES-TRACECA) Assistance and Training. Proposal of WMO. Supply of spare parts and machinery for ferry Proposal of Azerbaijan. (AP Conditionality / restructuring of Caspian 2 boats 6 1 500 000 Tashkent 2002 N 8) - Shipping Cie renovated Construction of the second railway bridge over Proposal of Azerbaijan. Kura river near Poylu station (on 73rd km of 3 24 3 000 000 Saloglu – Poylu railway line)

Proposal of Armenia. Inspection and pre feasibility studies for Feasibility studies for the reconstruction of the rehabilitation emergency artificial constructions and bridges of 4 the railways of South Caucasian countries 18 1 000 000 (Armenia, Azerbaijan, Georgia)

Purchase of environmental equipment for Aktau Supply The project will include Aktau, Maritime Trade Port in the framework of the Turkmenbashi and Baku Ports 5 24 2 500 000 TRACECA programme

Establishment of road transport vehicles on Establishment of the centre, All TRACECA Countries perishable foodstuffs transportation certification preparation of training centre in TRACECA region in the framework of materials, training, support 6 18 1 800 000 ATP agreement. in getting appropriate certificate. Proposal of Kazakhstan. Feasibility Study of Fergana Valley (Uzbekistan) – Feasibility Study on the Conditionality: approval of DG RELEX on Karasu (Kyrgyzstan) – Torugart (Kyrgyzstan) with base of the pre-feasibility the link with China 7 12 1 500 000 exit to China railway line construction study fulfilled in 2002. Proposal of Kyrgyzstan. Safety of railway transportation in Central Asia Equipment procurement. All Central Asia Countries 8 12 2 000 000 Proposal of Uzbekistan.

Project name: Highway „Dushanbe – Khorog 24 1 500 000 Project objective: to ensure Proposal of Tajikistan of regular transport connection between the 9 central area and Karategin and Gorno-Badakhshan regions with access to the neighbor countries, such as China and Pakistan Construction of special-purpose complex 24 1 500 000 Project objective: to “Bratstvo” on the border-crossing between establish the main border- Tajikistan and Uzbekistan crossing, linking all southern regions of Tajikistan with 10 Uzbekistan with further establishment of links with Afghanistan, China and Kyrgyzstan.

Modernization of the regional railway link Bekabad 24 2 000 000 Project objective: to – Kanibadam. establish regular east-west connection through Uzbekistan – Tajikistan – Uzbekistan, which is of high 11 importance for energy saving, increase of traffic capacity and integration with existing electrified Central Asian Rail Network.

Total 20 800 000

Annex II

TRACECA Co-ordination Team – Final Report – Annex II

TESTDRIVE !

05.09. – 30.09.2003 Douane Zoll

Police

Douane

Zoll

Police

Photos by DaimlerChrysler and Dornier Consulting

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The TRACECA Testdrive The convoy of ten Mercedes- Benz Actros trucks plus support The initiative to send an aid con- vehicles carried more than 200 voy via the TRACECA corridor tons of goods for reconstruction was launched by the Daimler- projects in Afghanistan. The Chrysler press department, who material from the state-run Ger- had been in contact with Dornier man organisations, AGEF and Consulting at the beginning of the THW, is urgently required for year in order to discuss the mat- critical initiatives to provide ter. drinking-water supplies, to repair power networks and to rehabili- Being the coordinator of the tate schools and hospitals. TRACECA programme, Dornier Consulting has offered to support Loyola de Palacio, Vice President the organisation of the convoy of the EU Commission and Com- through its in depth knowledge of missioner for Transport and the region. Furthermore, the Energy, officially launched the TRACECA offices in Baku and convoy in Brussels on September Tashkent have played a vital role 4, 2003. to establish contacts with relevant authorities, to give advise and to The convoy reached its final assist the convoy on site. destination, the border town of Hayraton in Afghanistan, three In April 2003 the preparations and a half weeks, and a journey started. The local Mercedes Benz of 6,000 km through the Balkans, dealers in the transit countries as the Caucasus and Central Asia on well as the DaimlerChrysler rep- schedule. Along the route several resentative offices had been press conferences and receptions closely involved in the prepara- took place, spreading the objec- tion phase. They had been re- tives of TRACECA and the con- sponsible for organising the test- voy. drive in their countries. The TRACECA coordination team The initiative has shown that the has provided support, wherever TRACECA corridor is a safe and necessary. feasible alternative to other transport routes!

Douane

Zoll

Police

Tour Diary It It’s an early morning start. The an easy ride today to Budapest, TRACECA wyvern starts its 05-09-2003 Brussels (BE) just over two hundred kilometres engines and leaves the Hungarian Official Start of the TRACECA need to be accomplished. We capital heading for the border of Convoy in Brussels reach the Hungarian border after Serbia – Montenegro, where it Mrs de Palacio, Vice President of 40 km. Usually the border cross- arrives at half past twelve. the Commission, Commissioner ing at Hegyeshalom is known to Customs procedures on the Bul- for Energy and Transport, be somewhat slow. It takes just garian side take 1½ hours. The launches the first TRACEA Con- 1½ hours to handle border proce- convoy crosses no-mans land and voy bound for Afghanistan at a dures for the 24 vehicles. The arrives at the border checkpoint reception hosted by Daimler- convoy had been announced to of Horgos. The group is heartily Chrysler in Brussels. This event the customs officials, who were welcomed by the DC staff is attended by all ambassadors of well prepared. This was the first dressed in TRACECA - polo the TRACECA countries as well impressive test. Just after the shirts and -caps. We are im- as representatives from the EC. border the Hungarian police es- pressed since this country does The TRACECA countries wel- corts the convoy and leads it to not belong to the official come the initiative and perceive Budapest. 52 km/h is the average TRACECA member states. Eve- this convoy as a challenge to speed of the convoy. In the everything has been prepared well show that TRACECA is alive and ning a reception takes place in the which cuts the waiting time at the the corridor allows the safe haul- DaimlerChrysler subsidiary. border procedures to one hour. age of goods by road. Guests are the Chargé des Af- faires of the German embassy, The Serbian police guides the local journalists, embassy offi- convoy safely to the capital Bel- 07.09.2003 Stuttgart (DE) – cials, etc. The TRACECA logo grade after nine hours of travel- Vienna (AT) Start of the TRACECA Convoy in Stuttgart, Germany Its an unusual scene on an early Sunday morning at the Daimler- Chrysler Headquarter in Stuttgart: 12 trucks and just as many other vehicles are neatly arranged on the main plaza. A bustling crowd is busy with the final preparations for a long journey. The first TRACECA Convoy delivering technical relief goods to Afghani- stan is just about to take off. Be- fore getting into the trucks, State Secretary Ute Vogt and the Head ! of Mercedes Benz Trucks Dr. Klaus Maier say farewell to the crew and wish good luck for this Douane unique trip. Shortly after the twenty-four vehicles leave the Zoll plaza and set off to the first desti- adorns the stage and the evening ling from Budapest. Road condi- nation Vienna. After more than dies away with music. tions are worse compared to 700 km on the German and Aus- 09.09.2003 Budapest (HU) – Hungary and rickety cars slow trian Motorway the convoy Belgrade (YU) down the pace. Another press reaches Vienna one hour before The convoy heads east conference has been organised, midnight. which is attended by Police the Belgrade City 08.09.2003 Vienna (AT) – Bu- Major, the Minister for dapest (HU) Transport and Com- The first border crossing proce- munications Marija dure doesn’t take long Raseta-Vukosavljevic, the German embassy

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formed about TRACECA and the objectives of the convoy. At a kiosk we buy the national news- paper, which shows yesterday’s and representatives from Daim- photo in front of the cathedral on lerChrysler. its first page. In the afternoon the boarding of the Somat ferry be- 10.09.2003 Belgrade (YU) – gins. Late at night the convoy Sofia (BG) leaves Europe with destination Another capital in four days – Georgia. Sofia Its going to be a long day again. 13.09/ 14.09.2003 Black Sea We leave Belgrade at 07.00. The Crossing police has blocked the main arte- Rough sea puts strain on the team rial road out of the city, causing a The passage over the Black Sea major traffic jam, just to let us begins with unfavourable weather through. Again, you can feel that Afterwards a photo shooting conditions. Half of the team is this convoy enjoys special treat- takes place in front of Sofia’s seasick. There is nothing do about ment and is supported by coun- famous landmark the cathedral on it but sleep. The ferry is packed tries’ governments. After driving the Alexander Nevski square. with trucks. Every Friday it 250 km on the Autoput with de- Today’s stage leads the convoy to leaves for Poti. The next day cent road conditions, we experi- Bulgaria’s major port Burgas. welcomes us with sunshine and a ence what the roads to come Road conditions have been di- flat sea. Dolphins accompany our might be like. After the city of verse, after 250 km on good mo- ship and show impressive jumps. Nis, the roads become winding, torways, we drive on rather bad There is plenty of time to sleep we head through deep gorges and roads towards Burgas. Horse and regenerate from the quite narrow tunnels and hit one or drawn carts, straying dogs bring exhausting first stage. more potholes. It starts to rain down the pace of the convoy heavily and we are happy to reach despite of the police escort. The 15.09. 2003 Arrival in Poti Sofia in the evening. Just as on average speed of today’s stage is Warm welcome to the Caucasus the other days, the DaimlerChrys- 62 km/h. In the evening we arrive The ferry arrives in Poti at 9:00 in ler representatives have organised at the Black Sea port of Burgas. the morning. Many of us are a reception, which is also at- happy to get off the ship and on tended by the Bulgarian foreign 12.09.2003 Boarding the ferry minister as well as Anelia Krushkova, Deputy Minister of Transport & Communications and TRACECA National Secretary for Bulgaria as well as Mohammad Fazel Saiffy, Ambas- sador of Afghanistan. !

11.09.2003 Sofia (BG) – Burgas Douane

(BG) Zoll On the rim of Europe The day begins with a press conference with speeches by TRACECA National Secretary in Burgas (BG) the trucks again. The welcome Mrs Krushkova and the Ambas- Leaving Europe ceremony in the harbour is im- sador of Afghanistan Mr Saiffy. Wherever pass through, the con- pressive. Even the minister of Police voy causes a sensation. Two transport and Communication Mr trucks are driven to Burgas’ inner Adeischwili has made his way to city for a photo shooting. People Poti in order to welcome us. The approach us and like to be in- EU is represented by the head of

the EU delegation in Georgia Mr outside the Jacques Vantome. Secured by a city centre rather large number of security and joins us one hour to pass the turnpike due personnel, we continue to the city for dinner at the hotel. The actual to the support of the border police of Tskaltubo, where we are ac- highlight of the days is the who had been informed in ad- commodated in a former sanato- TRACECA pop concert which vance. The convoy continues to rium of the Soviet Army. The takes place on Tbilisi’s main Ganja, a provincial town 350 km road conditions are rather bad. square. According to official west of Baku. Large potholes as well as vehicles information 40.000 young people of all sort, herds of sheep and have gathered to enjoy the music. 18.09.2003 Ganja (AZ) – Baku other domestic animals demand Georgian artists perform in front (AZ) permanent concentration from the of a huge TRACECA banner. On the way to the domicile of PS drivers. While watching the show one IGC TRACECA - Baku We leave Ganja at 8:00 in the morning, its raining. We pass along flat arable land. The crop of the farmers is sold alongside of the street piled up forming impressive sculptures. The roads are better than expected and shortly before we reach Baku the highway becomes a four lane motorway: That’s the very New Silk Road! After nine hours we reach Azerbaijan’s capital Baku. The trucks are parked outside the city at the DaimlerChrysler branch for 16.09.2003 Tskaltubo (GE) – thing comes to my mind: The inspection, coaches bring us to Tbilisi (GE) TRACECA thought conveyed our hotel. Eduard Schevardnadse welcomes through a pop concert, that’s

the TRACECA convoy quite a great idea since the young 19.09.2003 Baku (AZ) We are heading towards the capi- generation will fully benefit from Today’s highlight: Press confer- tal of Georgia Tbilisi, where a the achievements of TRACECA ence in the PS IGC TRACECA reception by the Georgian presi- and shall use this common basis A two-hour press conference dent Eduard Schevardnadse is in the region to shape their own takes place in the PS of IGC planned. A distance of 240 km is future. Its midnight when the TRACECA. Participants are Mr our today’s task. The fascinating concert and we call it a day. Sharifov Deputy Prime Minister landscape with its lush green 17.09.2003 Tbilisi (GE) – Ganja of Azerbaijan, Mr Tagirov, Secre- compensates for the weak road (AZ) tary General of IGC TRACECA, conditions. The security guys -all The convoy reaches Azerbaijan Mr de Vries, Representative of dressed in black- do a good job It’s a rather short trip today, the EU, Mr Grünwald, Directing ! and lead the convoy safely to the kilometre wise, just about 220km. Manager of Dornier Consulting, Georgian Capital. A delegation of We leave Tbilisi early in order to Dr. Both project director of the convoy including Dr. Martin reach the border of Azerbaijan in TRACECA coordination, Mr Douane Both, project director of the due time. The road conditions are Graille Team leader TRACECA Zoll TRACECA coordination team, is rather bad and the speed of the Coordination Team as well as invited to the state chancellery wyvern drops to 20km/h. The representatives from Daimler- where we meet Schevardnadse. scenery is wild and we pass horse Chrysler. The DaimlerChrysler The president appreciates this drawn carts and plenty of other Initiative is appreciated by the historic mission and underlines vehicles on the way. The convoy participants and is a good test to the importance of the TRACECA reaches the TRACECA bridge at show that the corridor is working corridor. A press conference takes the Georgian – Azerbaijan border. Police and that road transport is feasible place. The Minister of Transport This is an good example of one of between Europe and Central Asia. as well as the head of the EU the investment projects eliminat- The achievements of the Delegation in Georgia are among ing bottlenecks. The border cross- TRACECA programme are high- the participants. In the evening he ing procedures don’t take long. lighted and the need to continue visits the trucks, which are parked We just need a little more than the programme is stressed. In the 6

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evening a reception takes place attended by the Deputy Prime Minister, TRACECA representatives as well from embassies and industries. border crossing formalities last industries have been invited. The longer than in the other countries, responsible persons from Daim- we have to wait four hours before lerChrysler meet the Turkmen we start the engines and experi- president in the afternoon. They ence a stunning ride through the address the issue that Turkmeni- Karakum desert escorted by the stan has not ratified the Multilat- Turkmen police. In the evening eral Agreement and stress that we reach the city of Balkanabad. this would be highly appreciated Due to shortage of hotel rooms, by all TRACECA member states. some of the group spend the night in the trucks.

22.09.2003 Balkanabad (TM) – Ashgabat (TM) The convoy reaches the Turkmen capital 20.09.2003 Baku (AZ), board- 8:00 o’clock – the fleet takes off ing of the Caspian Sea Ferry towards Ashgabat. As usual the Caspian Sea crossing police takes care of clearing the In the afternoon the convoy de- road for us. Every now and then 24.09.2003 Ashgabat (TM) – parts to the port of Baku and lines the convoy is pulled of the road to Mary (TM) up in front of the ferry Mercury let the traffic pass which has been Another day in the desert II. The ferry has been booked stuck behind us. The drive The convoy hits the road for the exclusively for the convoy in through the desert is certainly one second stage in Turkmenistan. order to avoid delays. Marc highlight of the tour. We take Our today’s destination is Mary, Graille is supporting the border lunch at the 1000km point of the an industrial town 360 km east of crossing and embarking proce- Karakum canal. We pass the Ashgabat. The crew enjoys the dures and everything goes numerous police checkpoints good road conditions and the smoothly. At 18:00 the 24 vehi- without having to stop and arrive interesting landscape while driv- cles have boarded the ferry. The in the capital at seven in the eve- ing along the mountain range standard of the vessel is good. ning. Road conditions have been which forms the border to Iran. It You can smell that it has been really good getting better and is a safe trip, except some camels renovated especially for this trip. better approaching Ashgabat. The crossing the road and the police Two hours later the Mercury II last section even was a four lane escorts the convoy as usual. We casts off and we are leaving the motorway. take lunch at a TIR parking space Caucasus. and reach Mary at sunset. There is a shortage of hotels, so a large 21.09.2003 Turkmenbashi (TM) share of the group sleeps in the ! – Balkanabad (TM) “Hotel Actros” parked inside the Ride through the desert 23.09.2003 Ashgabat (TM) TIR parking ground. The sea is as smooth as a glass Press conference at the Daimler- Douane when we are approaching the Chrysler premises 25.09.2003 Mary (TM) – Bu- Zoll Turkmen coast in the morning. Today is a day of rest for the chara (UZ) We lie at anchor for a while be- convoy. A press conference with On the road to Uzbekistan cross- fore going ashore in Turkmen- approximately 100 people takes ing the pontoon bridge. bashi at half past ten. Visa had place at the DaimlerChrysler Its a long stage today: more than been issued just two days before dealer. Ambassadors as well as 400 km and one big challenge the departure of the convoy. The representatives from international ahead: the pontoon bridge crossing the Amu Darija river. We are Police not making a good pace today. Every hour we pull off the road to let the traffic pass by. Due to time constraints, we were told 7

that the Turkmen - Uzbek border Samarkand the Silk Road City Samarkand, escorted by police, at closes at five in the afternoon, 290 km to Samarkand that should two in the night. lunch is skipped. We reach Bal- not be a problem having come so kanabad at half past three. Pass- far yet. The convoy leaves just 27.09. / 28.09.2003 Samarkand ports are collected and we drive after lunchtime. After half an (UZ) to through the city to the pontoon hours drive something happens Press Conference bridge. After a short waiting that should have been avoided by The press conference takes place period at the police checkpoint, all means. Despite the fact that in the afternoon. Herbert Grün- the sprinters and G models pass the police secures the convoy and wald, managing director of Dorn- the bridge without problems. The blocks every street crossing, a ier Consulting, the coordinator of water level of the river is low and young man wants to cross the TRACECA, gives a speech on the the bridge does not float freely. street, runs between the trucks TRACECA programme and The first truck drives onto the and gets hit by the camera car thanks DaimlerChrysler to sup- bridge and slowly makes its way overtaking the convoy. We are port this programme by organis- to the opposite bank of the river. shocked. Fortunately the ing this aid convoy. Dr. Maier, Done. The second truck takes its TRACECA Coordination Team head of MB Trucks and the turn. After 50 meters you hear a attends to the matter and stays DaimlerChrysler Representative strange noise, two iron chains behind with the people involved for Central Asia acknowledge the holding the bridge together burst. in the accident. The aid convoy achievements of the TRACECA. The pontoon in front of the truck continues its journey hoping that The press conference and the falls by half a meter. Is the jour- this day has a happy end. We are succeeding reception is attended ney over? Will be able to con- informed that the accident victim by embassy officials and the tinue our way? is only slightly injured. Relief. international business community Fortunately the bridge can be Due to the accident and the repaired. Three hours later all fact that we are stopping vehicles have crossed the bridge every hour to let the traffic and we continue to the border. Its pass by we are on a slow getting dark already when we pace. Road conditions are arrive at the Turkmen border rather weak and the police control. They had been informed driving in front of the trucks that we are running late and ha- is taking it easy. The sun ven’t locked doors yet. The red sets and it’s another trip tape needs a while. We cross no- through the dark. We slow mans land and roll to the Uzbek down in order not to over- border. Bodo Rössig, TRACECA look unlighted vehicles, Coordina- tion Team, and Her- as well as national press me- bert Grün- dia and television. wald, ! Dornier 29.09.2003 Samarkand (UZ) Consulting, – Termez (UZ) is already The last stage The convoy starts its engines Douane waiting and has pre- for the second last time in the Zoll pared for a early morning. The distance swift pro- of today’s stage is 440 km. It cedure is going to be the most im- without pressive one with regard to any prob- the landscape. Road condi- lems. Its tions are good and we are Police eleven at making good pace. After pedestrians or animals. It’s almost night when we reach Buchara and driving through flat terrain for the eleven when we reach Samar- we call it a day. first two hours or so the land- kand. Mr Rössig and the other scape changes. We drive through crew members have left Buchara rugged mountains, a breathtaking 26.09.2003 Buchara (UZ) – at six in the evening and arrive at Samarkand (UZ) scene. After passing them the 8

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convoy rolls over flat land to- voy ends here. Let’s hope there wards Termez on a decent mo- are many more to come! torway on the last stretch. We reach Termez at sunset. The trucks are parked as usual on the outskirts of the town. Tomorrow is our last day – just a short jump across the border.

30.09.2003 Termez (UZ) – Hay- raton (AF) The final destination Hayraton, Afghanistan At nine in the morning the TRACECA convoy reaches the Uzbek border. Bodo Rössig, TRACECA Coordination Team, is assisting to get over the paperwork and accompanies the crew to the final destination. At the border a small reception takes place attended by European ambassadors and national media. The twenty-four vehicles pass the legendary “Bridge of Friendship” and enter Afghanistan without any customs procedures. School- children carrying flowers welcome us with a song. The trucks are parked at a warehouse at the bank of the river. About fifty workers are waiting to give us hand when unloading. The official welcome ceremony takes place in a pavilion. The aid supplies are handed over symboli- cally to the governor of the Balkh province. He thanks the TRACECA convoy on behalf of the Afghan people for travelling such a long way and taking all the ! trouble. The reception is attended by local politicians, representatives of the army, the TRACECA Douane coordination team as well as Zoll representatives from Daimler- Chrysler. The unloading of the trucks takes the whole day. At five in the afternoon we leave Afghanistan and enter Uzbeki- stan, where we have to get the paperwork done again. It’s al- Police ready getting dark, when we leave the border and drive back to Termez in order to park our trucks. The first TRACECA con- 9

Summing-up This convoy has shown that land It is important that the momentum Summing-Up transport via the TRACECA gained through the TRACECA corridor is feasible, safe and convoy in the respective countries There is no doubt about it, the meaningful. The road conditions is used to further increase the TRACECA Testdrive was a great did not hamper the convoy se- importance and reputation of the success. The convoy has been verely. The expectations of the TRACECA programme. It has given high priority by the coun- participants had been opposite to been a highly relevant pro- tries involved, the planned time that, which proofs that the corri- gramme for the TRACECA coun- schedule has been kept without dor’s functionality is better than tries during the last ten years any delays and the most critical its reputation. achieving tangible results and point - the border crossing proce- building a common future for dures – went quick and unbu- The border crossing procedures these countries. The slogan reaucratic. were settled in short time. In most printed on the semi-trailers “New cases it took only one to two Silk Road for Development and As a matter of fact, this testdrive hours to let the 24 vehicles pass. Cooperation” took these can not be compared with the Compared to usual waiting times achievements into account. usual road transport operated by for truckers at the borders - up to international forwarders. Due to several days – this was more than its designation as an aid convoy “express service”. The customs Recommendations and the patronage of the Euro- had been informed prior to the pean Union - as a tribute to the arrival of the convoy and a Daim- The TRACECA testdrive was a TRACECA programme - the lerChrysler representative or positive sign showing that the convoy was perceived as a dip- members of the TRACECA coor- corridor offers high potentials for lomatic mission. In all the coun- dination team received the con- land transport and is a true alter- tries receptions and press confer- voy at the border and assisted to native to other transport routes. ences took place. Government handle the procedures. The coop- officials, ambassadors, represen- eration between the custom offi- The following recommendations tatives of the business commu- cials on site and the staff in for the further development of the nity, etc. gathered in the name of charge of the convoy was effec- TRACECA programme can be TRACECA. The officials have tive and well. made: supported the undertaking by involving the national police, Through the convoy the Public relations custom authorities and other TRACECA programme has Unfortunately, only a limited related agencies in order to ensure gained attention by a broad audi- number of people in Europe as a plain sailing of the convoy. ence and its recognition has been well as in the TRACECA coun- increased significantly. tries are acquainted with the programme. The convoy has shown that people and especially the business community are eager to get to know more about ! TRACECA and also like to support the initiative. A broader approach to spread the news of Douane TRACECA is necessary to in- form the people on goals and Zoll activities and to generate awareness and involvement. The potentials are not fully exploited yet. The “TRACECA Silk Road- Train” The convoy has proofed that Police travelling in a larger group of vehicles has strong advantages compared to being on one’s own. Organising convoys along the TRACECA route can be a realis-

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tic undertaking in the future. A several hours or even days at the feasibility study should be border. The TRACECA pro- launched in order to investigate gramme has given high priority to how such convoys, composed of improvement of border crossing trucks from different forwarders, procedures at a very early stage. can be organised. Important fea- Achievements have been made. tures of such convoys are to set These efforts need to be further up time schedules and define strengthened. At a later stage, it locations where the trucks gather would be desirable to have and depart, to assist in border TRACECA contact and service procedures, ensure safety through points at the border crossings in the local police, etc. The creation order to supervise the procedures of an official TRACECA booking on site and to assist truckers and office as well as a Carnet forwarders with the paper work. TRACECA analogue to interna- The contact points should also tional carnets is also an option. A offer relevant services supporting convincing approach needs to be the continuation of the journey. elaborated in order to foster land transport along the TRACECA corridor.

TRACECA Road book In the course of the preparations for the convoy a detailed road book has been elaborated which covers the entire route from Stuttgart to Hayraton. The road book has been proofed to be a useful tool for the crew. In order to foster land transport along the TRACECA corridor a kind of road book should be elaborated that contains useful information for forwarders such as route descriptions as well as contact information of e.g. TRACECA offices, ferry companies, border crossings, TIR parking facilities, accommodation, technical service, medical service, etc. This road book should be designed as an easy to use manual which ! offers a wide range of useful information for forwarders who are thinking of sending their Douane trucks along the TRACECA cor- Zoll ridor.

Border crossing The border crossing procedures Police are the most critical issue when travelling the TRACECA route. Plenty of time can be wasted when trucks have to wait for 11

Annex III

TRACECA Co-ordination Team – Final Report – Annex III

The European Union’s Tacis TRACECA programme for Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan

TRACECA Co-ordination Team For Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey,

Turkmenistan,FINAL Ukraine, DRAFT Uzbekistan

DRAFT FINAL REPORT, ANNEX - III TRACECA - Global Feasibility Study

September 2003TRACECA Global Feasibility Study

Martin Lentsch TRANSTEC

This project is funded by Hamburg, 03 September 2003 A project implemented by the European Union Dornier Consulting Gmbh / Transtec SA

TRACECA Co-ordination Team - Global Feasibility Study September 2003 1 TRACECA - Global Feasibility Study 22 July 2003 Contents

List of Tables and Figures...... 6

List of Abreviations...... 8

Executive Summary ...... 10

Introduction...... 10

Trade and Transport Developments of the TRACECA Region...... 11

Macroeconomic Trends...... 11

Regional Transport Development...... 13

Transport Sector Development...... 16

Analysis of Existing Transport Routes ...... 24

TRACECA Programme Review ...... 26

Conclusions and Recommendations ...... 30

Competing alternative transport routes for TRACECA ...... 30

Competition in Transport Services ...... 31

Regional Cooperation ...... 31

Capabilities of Existing Transport Routes and Infrastructure ...... 32

I. Introduction ...... 35

Background ...... 35

Approach for the Global Feasibility Study...... 37

TRACECA Co-ordination Team - Global Feasibility Study September 2003 2 TRACECA - Global Feasibility Study 22 July 2003

Costs and Benefits ...... 38

Methodology...... 39

II. Trade and Transport Development of the TRACECA Region...... 41

Macroeconomic Trends in the TRACECA Region ...... 41

Main Economic Problems of the States of the Former Soviet Union...... 41

Regional Analysis...... 42

Conclusive Remarks ...... 50

Regional Transport Developments ...... 51

Analysis of TRACECA Database ...... 53

Trade Volume of the Regions...... 57

Future Trade and Transport Pattern in the TRACECA Region ...... 61

III. Transport Sector Development ...... 65

Financing Transport Sector Development ...... 69

Transport Sector Reform Process ...... 74

Institutional Developments ...... 74

Regulatory Frameworks for the Transport Sector ...... 75

Regulatory Issues for TRACECA ...... 85

IV. Analysis of Existing Transport Routes...... 86

Road Transport...... 87

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Central Asia - Europe...... 88

Caucasus – Europe...... 91

Road Border Crossing...... 94

TRACECA for Road Transport...... 95

Railway Transport...... 97

Central Asia - Europe...... 97

Caucasus – Europe...... 100

Railway Border Crossing...... 101

TRACECA for Rail Transport ...... 102

Intermodal / Container Transport...... 102

Container Transport for TRACECA ...... 107

V. TRACECA Programme Review ...... 108

TRACECA Projects...... 108

Technical Assistance Projects...... 108

Investment Projects...... 109

Basic Multilateral Agreement ...... 112

What has been achieved...... 112

Need to strengthen the institutions...... 113

Recommended actions ...... 116

VI. Conclusions and Recommendations...... 119

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Feasibility of TRACECA Routes ...... 119

Competing Alternative Transport Routes ...... 119

Competition in Transport Services ...... 121

Regional Cooperation ...... 121

Capabilities of Existing Transport Routes and Infrastructure ...... 121

Focus Areas for TRACECA ...... 122

ANNEXES 125

Tables 1.11 – 1.18, 1.20 - 1.27 Transport Flows of the TRACECA Subregions - Year 2000 (source TRACECA Database)...... 126

Table: Trade Elasticities...... 142

Table: Trade Volume Central Asia ...... 144

Table: Trade Volume Caucasus...... 146

Table: Committed World Bank loans for the Transport Sector ...... 148

Table: TRACECA Technical Assistance Projects...... 150

Table: TRACECA Technical Assistance Projects...... 151

Table: TRACECA Investment Projects...... 153

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LIST OF TABLES AND FIGURES

List of Tables

Table1: Summary of GDP growth of TRACECA countries

Table 2: Trade Regions and related Transport Corridors

Table 3: Transport Modes of Commodity Groups

Table 4: Trade of the Caucasus and Central Asian Region – Year 2000

Table 5: Modal Split

Table 6: Oil Production Caucasus and Central Asia 1994 – 2015

Table 7: Organizations and Programmes involved in Transport Sector Development

Table 8: Financial Contributions of IFIs and Donor Organizations

Table 9: Authorized Persons to utilize TIR Carnets in Central Asian and Caucasus Countries

Table 10: TIR Carnets issued by the IRU National Association

Table11: Transit Routes for Road Transport between Central Asia and Europe

Table 12: Transit Time and Waiting Time for Road Transport in Central Asia

Table 13: Transit Fees and Charges for Road Transport Table 13: Transit Fees and Charges for Road Transport

Table 14: Transit Routes for Road Transport between Caucasus and Europe

Table 15: Transit Time and Waiting Time for Road Transport of Caucasus Region

Table 16: Transit Fees and Charges for Road Transport of the Caucasus Region

Table 17: Road Border Crossing Performance Indicator

Table 18: Commercial Parameters for Road Transport on TRACECA Routes

Table 19: Distances of selected Railway Routes between Cities in the TRACECA Region Asia and Europe

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Table 20: Rail Routes between Europe and the Caucasus

Table 21: Border Crossing Performance Indicators - Railway Table 21: Border Crossing Performance Indicators – Railway

Table 22: Distances of Railway Routes between Places of the TRACECA Region and major Seaports

Table 23: Transit Time for Railway Shipments

Table 24: Transport Cost for Container Transport by Railway

Table 25: Comparison of selected Transport Routes for Central Asia

Table 26: Comparison of Routes for Container Transport to Baku

Table 27: Distribution of TRACECA Technical Assistance Projects

Table 28: Distribution of TRACECA Investment Projects

Table 29: Transport Sector Issue Matrix for TRACECA

Table 30: Identified Areas to Increase Effectiveness of the IGC

Table 31: Recommended Actions for Institutional Strengthening of IGC

List of Figures

Figure I: Structure of Forecasting Methodology

Figure II: Trade Volume in 2000 of the Caucasus and the Central Asian Region

Figure III: Trade Volume of the Caucasus and the Central Asia with the European Region in 2015

Figure IV: Distribution of all TRACECA Projects

Figure V: Outline Structure for the IGC TRACECA

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LIST OF ABREVIATIONS

ADR European Agreement concerning the International Carriage of Dangerous Goods by Roads

AGC European Agreement on Main International Railway Lines

AGR European Agreement on Main International Traffic Arteries

AGTC European Agreement on Important International Combined Transport Lines and Related Installations

ATP Agreement on the International Carriage of Perishable Foodstuffs and on the Special Equipment to be used for such Carriage cbm Cubic meter

CIF Cost, Insurance and Freight

CIM Rules for international carriage of freight

CIS Commonwealth of Independent States

CMR Convention on the Contract for the International Carriage of Goods by Road

COTIF Convention Concerning International Carriage by Rail

CPC Caspian Pipeline Consortium

EC European Commission

ECMT European Conference of the Ministers of Transport

ECO Economic Cooperation Organization

EIU Economist Intelligence Unit

EU European Union

FOB Free on Board

GDP Gross Domestic Product

IMF International Monetary Fund

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IRU International Road Transport Union

KAZATO Union of International Road Carriers of the Republic of Kazakhstan

MLA Basic Multilateral Agreement of TRACECA

MTT/ETT International Transit Tariff of OSJD

NIS Newly independent states

PEC III Pan European Corridor III

OSJD Organization for Railways Cooperation

OTIF Intergovernmental Organization for International Carriage by Rail

SMGS Agreement on International Goods Transport by Rail

SPECA United Nations Special Programme for the Economies of Central Asia

TAR Trans-Asian Railway

TEU Twenty-foot Equivalent Unit

TIR “Transport Internationaux Routier”

Tonne Metric tonne (1,000 kilogram)

TRACECA Transport Corridor Europe-Caucasus-Asia

UNECE United Nations Economic Commission for Europe

UNESCAP United Nations Economic and Social Commission for Asia and the Pacific

UNCTAD United Nations Conference on Trade and Development

UZIFA Uzbek International Forwarder Association

WTO World Trade Organization

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EXECUTIVE SUMMARY

Introduction

The Tacis TRACECA Programme was launched in 1993 with pursuance of four overall objectives: (i) assistance to political and economic sustainability of these republics providing access to European and World markets via alternative transport routes; (ii) promoting future regional co-operation between the TRACECA member-states; (iii) promoting all possible use of TRACECA projects as a mean to attract loans from International Financial Institutions (IFI) and private investors; and (iv) promoting optimal integration of the international Transport Corridor Europe- Caucasus- Asia "TRACECA" with Trans-European Networks (TENs).

The programme received continuous support from the European Commission with funding amounting to EURO 110 million for technical assistance and investment projects. As part of the programme coordination the “Global Feasibility Study” reviews feasibility of TRACECA corridor.

Orientation of the Global Feasibility Study is given by a framework approach as recommended by UNECE guidelines for “Cost Benefit Analysis of Transport Infrastructure Projects” focussing on the overall economic, social and environmental effects of the project, pattern of gains and losses, financial viability of the project, and practicability of the project and identification of any barriers to implementation. As the TRACECA programme has reached a compound structure making it difficult to measure direct costs and benefits. Thus appraisal of costs and benefits are only be possible at an aggregated level, and emphasize is given to the reporting of wider economic and other impacts on broader policy issues.

Costs of the TRACECA programme are not limited to direct inputs by the EC, as other international organizations and donors, IFIs, and countries itself are involved in efforts to develop the TRACECA transport corridor. To identify benefits the study refers to parameters measuring levels of political and economic sustainability while countries improve their participation in a global economy. High costs of international trade represent a serious constraint on the economic development of landlocked developing countries. Inadequate infrastructure adds heavy costs to the production and export of goods, hampering their competitiveness in regional and international markets. Analysis of UNCTAD shows that in

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1997 transport and insurance payments as a percentage of total export of goods and services for major developed market ranges at 3.7%, average transport costs for countries in Central Asia and the Caucasus were 3 to 8 times higher. Also freight costs for the countries Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan and Turkmenistan the freight costs ranged at 9.6%, whereby those range at approximately 3.4% of the c.i.f. import values in developed market economies.

A significant reduction in the transport costs of their imports would therefore not only increase their purchasing power but also boost their domestic production, supporting their diversification efforts and increasing the competitiveness of their exports. Methodology of the study encompasses the appraisal major the four major issues: (i) alternative transport routes, (ii) competition in transport services, (iii) regional cooperation, and (vi) capabilities of existing transport routes and infrastructure

Chapter II is evaluating socio economic developments and macro economic trends, and analyzes traffic flows of the TRACECA region in order to identify expected transport volumes and patterns. Chapter III assesses the transport sector development, sector financing, and sector reforms of the countries. Chapter IV analyzes the transport routes presently used for international transport of the TRACECA countries. As transport services follows the principles of economic distances, transport cost, transport time and reliability are analyzed and a comparison of present and potential transport parameters for competing transport services provide a number of benchmarks for TRACECA transport services. Chapter V reviews the TRACECA Programme structure and responsiveness to discussed issues of the transport sector development and relevant transport routes of chapter II and IV. Chapter VI to summarize major conclusions and recommendations of the study.

Trade and Transport Developments of the TRACECA Region

Macroeconomic Trends

Since the collapse of the Soviet bloc, countries of the Black Sea, the Caucasus, and Central Asian regions are in transition of their economic structure and are engaged in reform processes and policy reviews. Although progress is more evident in some countries than

TRACECA Co-ordination Team - Global Feasibility Study September 2003 11 TRACECA - Global Feasibility Study 22 July 2003 others the general trends outline a positive development. Recent figures of GDP growth suggest a strong upward tending path of the economies. In order for the countries to reach their commercial, economic, and scientific potential policy reforms are being considered and further developed for implementation since the early 1990s. They involve structural reforms on trade/market liberalization effective through privatization, improved fiscal management, better monetary policies, as well as sustainable social policies. Some countries, like Azerbaijan, Kazakhstan, and Kyrgyzstan actively engage in the implementation process. In other countries, such as Uzbekistan or Tajikistan this process takes comparatively longer.

The ability to sustain this progressive trend over the longer term depends on the countries ability to find and create new markets to expand and consolidate their economic activities. A further development of TRACECA would assist the countries in discovering their market potential, as it will provide an improved intra-regional connection network and a competitive link towards mature markets on either end of the corridor.

Although each NIS country is facing a unique situation, there are main problems that all countries face equally. These include: the dislocation of economic links with the other parts of the former Soviet Union, a huge terms of trade shock, the end of Soviet Union subsidies, the task of forming new institutions supporting a liberal market economy, and the reversal of distortions emanating from Soviet central planning. It is important to recognize these commonalities, as common problems can create incentives for the countries to cooperate with each other. Cooperation and intra regional trade will be vital for the successful economic development of each country and for the region as a whole.

The regional analysis of this study briefly summarizes analysis of institutions and international organizations including the World Bank, Asian Development Bank, and International Monetary Fund and shows that it becomes evident that most countries are addressing the problems of transition. With respect to the common problems that NIS countries face positive development trends are evident in most of the countries. Cooperation amongst the countries, and with the rest of the world is growing. GDP figures are supporting the positive trends estimated for the medium term future prospective. Providing that the regions will be spared from major external political and economic shocks, estimates should prove to be accurate, and the NIS countries will develop to become important players in world political and economic affairs in the future.

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Regional Transport Development

To make a long-term forecast of regional transport developments in the TRACECA region is presumptuous, but one of the few certainties in quantitative empirical research on long-term economic growth is that political instability has a negative effect on growth and investment. Empirical research nonetheless, also indicates that growth of transport activities correlates with growth of the economy.

Available macro economic data as well as trade and transport data of the TRACECA database provide a sufficient basis to estimate developments of future trade and transport patterns in the TRACECA region. As the database provides comprehensive information for the years 1998 to 2000, the year 2000 has been selected as base line for the purpose of this study. The forecasting methodology of this study to estimate the future transport pattern related to the TRACECA region encompasses a number of different effects including: projected economic growth of the countries, development of trade volumes, analysis of transport mode response related to traded commodities, and geographical distribution of trade flows.

The Database with its detailed information on trade and transport volumes and its data structure formed the basis for a geographical analysis of trade/transport directions, as well as for a transport mode related analysis of different commodity groups in the TRACECA region. Analysis of the geographical distribution of current regional trade volumes provides a basis for estimating future transport developments and infrastructure needs. Based on year 2000 data trade volumes have been identified between the countries in Central Asia and the Caucasus, and to four principal directions to regions of the world: (i) European countries and America, (ii) Russian Federation and Belarus, (iii) East and South East Asia, and (iv) Middle East, Indian Sub-Continent and Africa. Estimates of future transport volumes took into account the movement of commodities, and the response of transport modes to factors of demand. A more detailed look at the transport patterns of commodities of the oil sector in comparison to the non-oil sector, allowed further conclusions regarding transport mode options. Further analysis of commodities within these sectors facilitates estimating future transport volumes and provides for a mechanism to allocate their likely distribution to transport modes. 25 commodity groups have been split into two groups in the oil sector (Crude Oil, Oil Products) and five groups in the non-oil Sector (Bulk Commodities, Cotton,

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Machinery and Equipment, Manufactured Goods, Food stuff, and Other Products), which are related to different transport patterns and modes.

The trade volume of Central Asia and the Caucasus Region is gradually increasing. Although the Russian Federation has always been the largest trading partner of this region, its share is now declining. Exports of oil and imports of higher valued commodities and consumer goods have become fast growing trade segments with Europe. Gradual establishment of new industries and restoration of existing facilities in the production and manufacturing sector leads increasingly to resource processing within the countries. This results in increased trade of consumer products and manufactured goods on a national and regional level. The development of increased down stream production activities can also be observed in the oil sector, where traded volumes of oil products are increasing.

The total recorded transport volume (import and export) of the year 2000 for Central Asia and the Caucasus Region amounted to about 118.5 million tons. Oil and non-oil sectors accounted for 41% and 59%, respectively.

Transport modes for crude oil export differ from those of oil products. Evidence from the TRACECA database illustrates that 95% of Azerbaijan’s crude oil was exported through pipelines and only 5% by railway in the year 2000. By comparison, Kazakhstan exported 52% of its crude oil by pipeline and 48% by rail. Oil products of both countries, on the other hand, were transported by railway, only. A significant share of Kazakh oil is transported via the TRACECA corridor. In 2000, 3.8 million tonnes of Kazakhstan’s crude oil and oil products were carried by Railway towards Black Sea ports since pipeline capacity is limited in the Caucasus region. This accounts for half of all oil transports by railway in the Caucasus region. These relations are relevant while considering transport opportunities for future production volumes.

For appraisal of future transport patterns of the non-oil sector in the TRACECA region, two principle groups of commodities were allocated according to their growths perspectives. (i) Bulk cargo, which include coal, coke, bauxite, ores, salt, grain and cereals, fertilizer, products of chemical industry, cotton, etc. were produced in the period of the FSU in large quantities, but production has slumped significantly and it is not foreseen that future growth will reach or exceed previous levels. (ii) The remaining commodity groups of the non-oil sector, which are described as general cargo include items such as machinery, equipments, manufactured

TRACECA Co-ordination Team - Global Feasibility Study September 2003 14 TRACECA - Global Feasibility Study 22 July 2003 goods, and foodstuff, are strongly associated to emerging private sector industries and consumer behavior. Therefore future trade developments are suggested being closely related to economical development of the countries.

The Oil Sector is clearly determined by the investment and production planning of the oil producing countries. A dominating role among the oil producing states are playing Kazakhstan in Central Asia and Azerbaijan in the Caucasus. Different transport and growth characteristics are inherent with the commodity groups of the non-oil sector. Countries traditionally trade large quantities of mineral resources and agricultural products. At the time, the recovery of industrial and production sectors is underway and the demand for consumer goods and services is increasing.

Trade volumes of the bulk commodity group are depending on resources and the economies of its exploitation. Current production levels of these commodities are sometimes half, than in the late 80s with limited growth perspectives and may never reach production figures above those of the years 1988/1989. Hence, a suggested average growth rate of 1.5% is calculated on the basis of the weighted production index for agricultural and mining of the countries in the region reflecting possible recovery of the sector to a moderate level.

Trade volumes of the commodity group encompassing manufactured goods, consumer goods and other produces are showing strong growth rates, closely related to economical growth of the emerging economies. In most countries of the world growth of international trade exceeds the growth of GDP considerably. Import and export elasticities normally range between 1.3 and 1.9. In eastern European countries trade elasticities even tend to be higher. The average trade- elasticity of this commodity group in TRACECA regions varied in countries between 1.6 and 5. As investments in the oil sector may distort the overall picture and elasticities are not likely to be sustained at that level the average trade-elasticity is estimated to be 2,5 in the context of this study.

Under these assumptions the development in Central Asia of the non-oil sector transport volume is expected to grow at an annual rate of 4.11%. This would result in a total transport volume with the European Region of 19 million tonnes in 2015. As part of this, bulk commodities are expected in the range of 7 million tonnes. Manufactured goods, consumer goods and other products lie in the range of 12 million tonnes

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For countries in the Caucasus the non-oil sector transport volume is expected to grow by 6 % per annum, producing an overall transport volume with the European Region of 11.1 million tonnes in 2015. As a significant part of which, bulk commodities are expected in the range of 2.3 million tonnes. The commodity group of general cargo that includes manufactured goods; consumer goods and other products will lie in the range of 8.8 million tonnes.

Transport Sector Development

Physical conditions of the roads and railways in Central Asia are not in good shape. About 1,500 km of roads in the region deteriorate each year, rolling stock is poorly maintained, and both road and rail networks reflect outdated priorities. Economic integration within the Soviet Union oriented transportation infrastructure towards European Russia without priorities for links with neighboring countries.

Rail is accounting for more than 75% of all freight and the network coverage is generally sufficient for current economic activity, but road transport volume is increasing. Although the road network of the TRACECA region is generally sufficient, international road transport corridors linking Central Asia with Europe are limited. Additional corridor routes are needed to meet future transport demands, whereby upgrading of existing roads is more urgent than new construction. Conditions of roads cause slower travel with considerable wear and tear on vehicles and damage to goods. According to an IRU review technical conditions of highways account for 30% higher fuel consumption and 1.5 time higher transport costs compared to developed foreign countries.

Countries receive assistance for the transport sector development from international financial institutions (IFI), bilateral donors, international organizations, and professional organizations. They also address development issues trough subregional organizations and intergovernmental initiatives. Prevalent focus is on infrastructure projects and on building capacities and formulating policies for trade and transport facilitation. The latter supports transitional processes, ongoing policy reforms and enhancement of regional cooperation.

While implementing trade and transport facilitation projects different organizations interact with concerned governments often in a similar manner and proposed actions are often alike, but lack of coordinated activities leads sometimes to duplication. A closer coordination

TRACECA Co-ordination Team - Global Feasibility Study September 2003 16 TRACECA - Global Feasibility Study 22 July 2003 among involved organizations, programmes and projects would increase efficiency. A high level of cooperation between IFIs and the TRACECA programme can be witnessed at a number of physical infrastructure projects.

Projects related to policy reforms often face difficulties to reach anticipated objectives and tangible results within the given time frames. As policy reforms are linked to decision processes of governments with longer inherent time frames, where thorough scrutiny prevails over quick fixed solutions.

IFIs and donor agencies tend to implement projects and programmes with international consultants in shorter periods of time. As a consequence they are facing difficulties to maintain sustained long-term programmes. Subregional and international organizations on the other side try to involve own staffs in substantive programme implementation and in doing so assure a long-term coordination and continuation of programmes. Despite a constrain of resources that limits the scope of activities of subregional and international organizations, work is carried out jointly and effectively with concerned government agencies on the basis of mandates endorsed by the governments.

The EU launched the TRACECA programme as technical assistance programme. The regional dimensions of TRACECA activities formed an intergovernmental programme where countries and governments gradually stepped up their commitments. By signing the Basic Multilateral Agreement (MLA) and establishing the Intergovernmental Commission (IGC), a new subregional intergovernmental organization has emerged. With the establishment of the Permanent Secretariat (PS) questions arise how the initial donor programme can be transformed into the activities of an intergovernmental organization.

Since the gaining of independence in the early 1990s substantial financial contributions were channeled to the transport sector, including investments in infrastructure in TRACECA countries. Contributions are coming from IFIs, the European Commission, bilateral donor organizations, national budgets of the countries, and in smaller scale from the private/commercial sector.

Since 1993 financing contributions and commitments from major development banks and donors for infrastructure investments and technical assistance amounts to US$ 3.5 billion.

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About US$ 3.33 billion accounts for the finance volume of IFIs since independence of the TRACECA countries. If one includes the contribution from borrowers and/or beneficiaries, the total investment level of these projects amounts more than US$ 5.85 billion. Most of the projects are still in consideration or being currently implemented, and only a few have been finalized. Hence tangible results are not yet visible and transport operators still experience the same old conditions.

Analysis of loan commitments in TRACECA countries shows that those who made considerable progress with economic and policy reforms have also adopted the instruments of IFIs as a vital finance mechanism. Thus these countries are implementing most of the infrastructure improvement projects; they will be the first benefiting positive economic effects from improved transport conditions.

Most of the donor organizations maintain their programmes on bilateral basis. Organizations like JICA and USAID are among the dominant participants. UNDP launched the Silk Road Area Development Programme as a regional initiative for Central Asia and the western province Xingjian of China.

Among the activities of Donor organizations, the EU funded Tacis-TRACECA programme and projects has achieved significant results. The programme up to now supported technical assistance and provided grants for initial infrastructure investments. Its regional dimension of TRACECA is instrumental in strengthening regional cooperation among the countries and achieved with signage of the MLA the establishment of the IGC TRACECA. The most visible result in this regard is the establishment of the Permanent Secretariat in Baku, which represents now an intergovernmental organization for the TRACECA sub-region and became the centre of all ongoing programme activities. TRACECA is providing a strong lead in formulation of regional policies and strategies for transport sector development of the whole region. Considering that TRACECA funding accounts only for less then 1.9% of the total investment volume for transport sector in connection with international finance mechanism, it has achieved considerable impact. Meanwhile, it provides substantial guidance and directions to the transport development at national and regional level, evidenced by increasing levels of cooperation with the TRACECA programme, and the entities the IGC by interested parties.

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The level of national investments has been relatively low due to lack of funds. Activities were limited to projects such as completion of some that started during the FSU and being of national importance, or building railway lines to reconnect separated national networks by new national boundaries. Available capacities and resources were overstretched with the maintenance of the eroding infrastructure, and the budget allocations for development projects had little priority.

Financing of infrastructure investments accounts for a significant portion of the national budgets. An analysis by the EU for 15 European countries (EU15) shows that annual transport infrastructure investments ranged between 0.5% and 1.5% of the countries GDP. If applied to the TRACECA countries, annual levels for transport infrastructure investments would range at 2001 GDP levels for: Central Asia between US$ 190 million and US$ 575 million, Caucasus between US $ 55 million and US$ 166 million, and for the Black Sea region between US $ 700 million and US$ 1,360 million, these levels are not yet reach and transport infrastructure is not maintained and developed at desired levels. Although investment levels are still low, respective budgets are gradually increasing as indicated by increasing loan disbursements of IFIs. Considering qualitative aspects of infrastructure investments, the TRACECA programme provides vital instruments to national governments for coordinated planning and prioritizing of infrastructure investments, ensuring higher effectiveness.

Private sector investments in areas of transport infrastructure are gradually emerging. Terminals, warehouses and service facilities to road and rail transport are being established, and rolling stock and vehicle are acquired by private enterprises in order to provide vital services to the to transport operation on the TRACECA corridor. The commitments of governments and the development cooperation under the TRACECA programme for the transport sector development are certainly building higher confidence levels for investors.

The transport sector reform process in the TRACECA countries is vital for economic stability, enables access to world markets via the TRACECA corridor as an alternative route and provides the basis for sustainable transport sector investments. The reform process has been assessed by looking at institutional developments within the public sector of the countries and on the other side by examining the development of regulatory frameworks for transit transport.

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The establishment of responsible ministries within the governments provides evidence for institutional development of the transport sector in TRACECA countries. As former institutional structures were monopolistic and inhered regulatory as well as commercial responsibilities, the reform process has to deal in the first place with separation of these functions.

Countries took different approaches for their reform processes. Some countries already established responsible ministries for the transport sector such as Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Romania, Tajikistan and Ukraine, of which Kazakhstan was one of the first to established a Ministry of Transport and Communication in Kazakhstan in 1993 and has come a long way in developing its institutions for policy formulation and regulatory tasks. The other countries are following a similar process. Far- reaching separation of policy formulation and regulatory functions from commercial and operational activities is understood to be favorable for the reform process. The latter should involve private sector operators in order to achieve competition in transport services.

Turkmenistan and Uzbekistan have yet taken little steps to establish responsible ministries. Different agencies are still responsible for their particular sectors and act independently. Hence they are lacking a consistent national transport policy. This deficiency becomes obvious in both countries when looking at the implementation level of international commitments such as those related to the Basic Multilateral Agreement.

The existing frameworks for transit transport of the TRACECA Region are formed through national regulations, bilateral and multilateral agreements, as well as international conventions. Regulations and agreements have a transport mode orientation; hence applicable frameworks for transit transport of road and railway have been separately assessed.

The opening of the CIS countries to international trade has resulted in an increase in road transport with extensions to long distance activities. Regular transport between European countries and the countries of the Caucasus and Central Asia has been established and is carried out by operators form European and TRACECA countries with increasing private sector participation. Difference in regulations presents problems for transporters of TRACECA countries when traveling to Europe. As the European Union (EU) extends

TRACECA Co-ordination Team - Global Feasibility Study September 2003 20 TRACECA - Global Feasibility Study 22 July 2003 eastwards, countries increasingly comply with EU Directives that became “international transport standard”.

The underlying framework for road transport consists of (i) international conventions, (ii) subregional cooperation agreements, (iii) bilateral agreements and multilateral transit permit schemes, and (iv) national regulations.

55 United Nations Conventions and Agreements in the field of transport have been prepared under the auspices of the UNECE. In addition the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention), is understood as a key legal instrument for harmonization of cross-border procedures. Implementation of the Kyoto Convention is considered as an important step towards accession to WTO. Among TRACECA countries, Kazakhstan has initiated to adopt the provisions of the Kyoto Convention as amended in 1999 and makes every effort such as revising the customs code and customs guidelines accordingly.

Countries have started to adhere to international transport agreements, but the number of ratified conventions is still modest and the implementation process is lacking behind. Important conventions need to be ratified and governments need to consider rapid improvement in adhering to international frameworks for movement of goods. Beside the MLA, TRACECA countries have been involved in several other multilateral agreements on international transport, therefore countries need review the implementation of the agreements to avoid legal conflicts.

To facilitate and promote transportation of goods and passengers between TRACECA countries and Europe bilateral transport agreements have emerged to regulate the preferential usage of each other’s road network in accordance with applicable national law reciprocally. Quotas of annual number of permits are usually ascertained through annual bilateral consultations on the basis of bilateral and transit transport requirements. The system of quotas through bilateral agreements appears to be complicated and bilateral quotas are often too low resulting in high prices for road permits.

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TRACECA countries have yet become member. This permits are providing transport operators of the member countries with a greater level of liberal movement within the ECMT region. Although the ECMT permit scheme would be a step towards harmonization of road transport, the practice shows that ECMT permits may lead to distortion of competition. Further extension of the scheme to the TRACECA region needs careful scrutiny.

Main national regulations with regard to road transport are (i) regulating terms and conditions under which foreign transport operators are permitted to use the national roads, (ii) regulations with regard to permissible vehicle dimensions, gross vehicle weight and axle loads, (iii) customs code and regulations for cross border movements and transit transport, and (iv) visa regulations for foreign truck drivers.

An important step in implementing transport facilitation measures at national level would be the establishment of non-discriminatory national legislation for road transit transport. It needs to take into account requirements and commitments resulting from bilateral and multilateral agreements, as well as from acceded international conventions. The recently introduced legislation in the Republic of Kazakhstan could be seen as an example in this regard, and if comparable national regulations could be established in all TRACECA countries, transit and cross border procedures would experience a greater level of harmonization.

The railway network of the CIS countries, China, Islamic Republic of Iran and Turkey are providing the rail transport linkages to the TRACECA countries. These networks are identified through a number of agreements and intergovernmental programmes, which include: multilateral agreements under the auspices of UNECE (AGC and AGTC), identified routes of the Trans-Asian Railway by UNESCAP, and TRACECA routes. Besides relevant international conventions the legal framework regulating railway transport is constituted through national regulations and through the two important railway specific conventions SMGS and CIM.

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National regulations in respect to railway are usually defining the status of the national railway organization and their functions concerning the infrastructure (track), rolling stock and train operation. Historically, railway organizations inherited the monopoly on infrastructure and operation, but recent policy changes in some countries are considering private sector participation in railway operation. As private rail freight operators are gradually emerging, difficulties are reported as they arise from the current regulations under SMGS since it is not covering sufficiently the function of freight forwarding business.

Despite efforts to harmonize the transport law, both systems are continued to apply in parallel for the future. The joint OSJD and UNECE work on using the SMGS consignment note as a customs transit document will simplify railway transport operations. Recommended actions in this regard are (i) adoption of a Resolution recommending Contracting Parties of the SMGS Agreement to adopt the SMGS consignment note as a Customs transit declaration, (ii) continued work towards finalizing a Convention including all facilitation measures similar to the procedures applicable to the CIM consignment note under the Common Transit system. The TRACECA countries have made considerable progress in the first issue by adopting in 2002 to use the SMGS consignment note as the common transit document for rail transport; however, its implementation is still in progress. A transport law as defined under CIM would then clearly regulate transport liabilities, providing a better legal basis and increased higher security for shippers and insurance companies.

Railway transit tariffs are set according to the so-called commodity oriented MTT (International Transit Tariff) scale, which is based on long-discredited costing methodologies dating from the central planning era and lacks of rational costing. In general high transit tariffs appear to cross-subsidize domestic traffic. TRACECA countries introduced the TRACECA coefficient for the railway tariff in order to apply a harmonized pricing mechanism on the corridor and increase competitiveness to alternative routes. The MTT is perceived as an obstacle for multi-modal transport. Unit rates and through tariffs per container units would better serve the needs of the customers. The lack of the lack of common through-tariffs for container constitutes to be the major institutional barrier. The ongoing TRACECA project “Unified Policies on Transit Fees and Tariffs” has developed a “TRACECA Transit Tariff (TTT)”, and if would be a milestone in the reform process and create a favorable environment for container transport to the TRACECA region.

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Bilateral and multilateral agreements constitute a commitment of a government towards other countries; its execution at national level, however, depends on how effective individual countries have translated these commitments into their national legislation. This is a major issue in most of the countries and the TRACECA programme and the IGC may further address these issues through related projects and substantive work of the Permanent Secretariat.

Analysis of Existing Transport Routes

The transit transport routes servicing the TRACECA countries in Central Asia and the Caucasus are manifold utilizing both road and railway transport, whereby road transport is increasingly employed for the transport of manufactured and consumer goods imported from European countries and Turkey. Railway routes are to a large extend used for the transport of oil, raw materials, bulk cargo, and containers.

The selection of transport routes and/or corridors therefore depends on a number of different factors such as transport mode, geographical location, cost, transport time, reliability and available services. Road transport routes are chosen according to economical factors and depend on impediments in transit countries. Rail transport is less impeded than road transport and is commonly carried out on the network of the CIS countries. Container transport is only gradually emerging and depends on the level of available intermodal services of ports, railway, road and inland terminals.

For the analysis of road, railway and container transport major transport routes and corridors are selected to reflect a realistic picture of the current transport situation. Factors related to distance, transport time and cost for the three transport modes have been elaborated in further detail as they are directly related to the feasibility of the TRACECA corridor.

Analysis of road transport shows that TRACECA routes crossing the Caspian Sea and the Black Sea by ferry and with transit through Azerbaijan, Georgia and Black Sea countries are distance wise a viable alternative. They provide a shorter, or at least comparable, alternative for road transport between Europe and Central Asia. Although ferry services are in place TRACECA is currently perceived as not viable to access Aktau port in Kazakhstan due to poor road conditions, difficult transit regulations in Turkmenistan, insufficient cross Caspian

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Sea ferry services for trucks, and high “transit fees and charges” and non-physical barriers imposed along the route transiting through Turkmenistan, Azerbaijan and Georgia. Difficulties arising from present road conditions in Azerbaijan and Georgia are further constraining the development of TRACECA road transport for Central Asia.

The assessment of road transport further shows that conditions of road infrastructure and ferry services, “rent seeking” behavior, transit fees, and cross border procedures have been identified as the major barriers for TRACECA road transport. Efforts of the TRACECA programme in this area have not yet yielded in visible improvements of TRACECA’s road transport capacities. The Development of road transport needs to be addressed with highest priority, and tasks for its development rests with the countries along these routes. As it is time for TRACECA routes, there is a need to step up the countries efforts to develop necessary subregional transport infrastructure and related transport services, as well as resolve institutional barriers and impeding issues through subregional cooperation.

The rail network of TRACECA is primarily a strategic infrastructure for export of commodities such as crude oil and oil products. It further services the demand for transport of bulk cargo either import or export, and at secondary level provides transport services for new emerging commodities and container. The transport of primary commodities is growing, leading to further saturation of rail tracks, particular in Azerbaijan and Georgia being the bottleneck of the TRACECA rail network. Unlike in road transport where Caucasus roads can be detoured, rail has no alternative.

Emerging transport demand for container shipments and new commodities needs to be addressed by the railway organizations, as this is vital for increasing efficiency of such transports and strengthening the non-oil sector of the countries. The current situation with highly discounted rates for oil shipments on one side and expensive rate for general cargo shipments may need further examination with regard to costs involved.

Container transport for TRACECA is primarily for shipments that are connected to maritime transport. With access to ports in the Black Sea maritime transports includes also transport with European countries, as competitive shipping services exist with European ports. This presents a favorable environment for further development of containerization in the TRACECA countries.

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However, port services and hinterland logistics for container transport remains still problematic along the TRACECA corridor. Traditional railway tariffs, cumbersome documentation, impeded road transport, insufficient services for container to cross the Caspian Sea, quality of infrastructure, and imbalanced freight volumes are a few issues that are constraining containerization in TRACECA. But the analysis shows that identified problem areas of TRACECA are possible to be resolved and to provide faster and less costly container transport services to the Caucasus and Central Asia.

TRACECA Programme Review

The TRACECA programme review is briefly analyzing the projects with regard to its contribution to the development of the transport modes and how the issues emanating from the analysis of existing transport routes are addressed by the TRACECA programme, and further how the programme addressed regional cooperation of the TRACECA countries.

TRACECA evaluation reports point out that the level of cooperation with the beneficiary organizations has always been critical for success of projects. However, projects with institutional and/or legislative components have been difficult as time frames for legal and institutional changes were beyond the sphere of the implementing contractor. As shown in the evaluation report, projects are highly interlinked and have built on each other’s experience and achievements. This is an indication of the value of individual projects for the TRACECA programme.

Investment projects provide equipment or infrastructure that is available for use immediately after delivery, whereby accomplishments of technical assistance projects may yield at later stages as and when the environment will be conducive. Countries are undergoing an institutional development process by establishing responsible ministries for the transport sector and adjusting their regulatory frame works, thus delivered technical assistance and capacity building of the TRACECA projects have positively contributed to this process at various levels.

Projects with a direct mode orientation for road and rail are dealing only with one or a few issue areas. Projects of the category Legal & Trade and Horizontal, which were initiated mainly in the context of the MLA, cover a wider spectrum of the issue areas. Assuming that

TRACECA Co-ordination Team - Global Feasibility Study September 2003 26 TRACECA - Global Feasibility Study 22 July 2003 improvement of transport services may only be successful if issues of the transport sector development are collectively pursued, such projects that cover a wider range of issues may yield better results for the transport corridor development.

Regional intergovernmental cooperation for developing the TRACECA corridor was established with the Basic Multilateral Agreement (MLA). Countries have taken ownership for the development of the TRACECA corridor with a firm commitment at presidential level, elevating the Tacis project “TRACECA Programme” to an intergovernmental programme. The Permanent Secretariat, the annual TRACECA Conferences, and numerous working group meetings indicate active intergovernmental cooperation. Member countries are taking decisions by consensus, which in turn attach high priority to the implementation by ratifying IGC decisions. Elapsed time of less than five years since signing the MLA can be considered as very short compared with what has been achieved. This progress is owing to a few visionary high-ranking politicians of TRACECA countries and a dedicated programme management of the European Commission.

Although important structures of the IGC have been established, its institutions are experiencing shortcomings while taking up the work. Mandates, legislative and programmatic structures, functions, responsibilities and administrative frameworks still need to be further refined. It is widely understood that the MLA and the IGC are forming the foundation for regional cooperation among the countries, hence questions arise how to improve the intergovernmental cooperation and to how to strengthen its institutions. As the coordination team is directly involved in the day-to day work of the IGC and the PS, a number of areas have been identified that need to be strengthened in order to enhance effectiveness of the IGC and the PS, which include the following:

Servicing of IGC meetings by the PS

Long-term coordination of the substantive work programme at regional level

Transforming the Tacis project “TRACECA” into a substantive work programme of the IGC and the PS

Broaden the basis of the IGC for support and cooperation within the member countries

Increase activities and visibility of the IGC and the PS at international level

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Strengthening of the IGC and the PS is critical for successful regional cooperation. The PS has been established in Baku, hosted by the MLA’s depository country Azerbaijan, and the MLA and the host country agreement frame its status. Currently the PS is working with a skeleton staff comprising of the Secretary General, the Executive Secretary, experts for rail, road and maritime affairs, and some secretarial and office support staff. In addition the PS is supported through the TRACECA Coordination Team and the projects “Harmonization of Border Crossing Procedures”, “Unified Policy on Transit Fees and Tariffs”, and “Common Legal Basis for Transit transportation”. Present conditions under which the PS has to perform its work are not satisfactory. Thus this process may only be sustained temporarily as the projects are on contractual basis and will end eventually, leaving the PS and the IGC behind without having established own professional and administrative capacities.

In the light of the TRACECA programme and the tasks of the IGC it is obvious that the PS needs to be professionally strengthened. It needs to take over functions, which are currently performed by consultants on project basis. In this regard it is proposed that a “Transport and Trade Division” with a core team of qualified professionals should establish within the PS. The new division would manage projects with funding provided by donors The professional staff of the PS should further provide substantive lead and support for the legislative work of the IGC, which means preparing of high quality meeting documents, organizing and servicing legislative meetings and preparing comprehensive meeting reports. Preparation of meeting documents and reports is a critical issue for the success of the commission, as both are the most important instruments to prepare the discussion and to disseminate recommendations and decisions.

Thorough functioning of the IGC and the PS depends entirely on the funding of the institutions and the programme. In the light that present funding by the Tacis programme may not continue at the same level beyond 2006, it is high time to develop concepts, which would ensure long-term sustainability. In this regard two avenues of funding need to be examined: (i) funding contribution by the member countries to secure the regular budget of the PS and basic legislative work of the IGC, (ii) extra budgetary funding by donors for to assist in the substantive work programme of the IGC. While recognizing that financial capacities of member countries are limited and differ according their economical conditions, the latter is crucial for the continuation of the TRACECA programme.

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As EC funding is about to be reduced the IGC need to consider opening its platform to other interested and committed parties that would provide support to the TRACECA corridor development. Such support can come from various sources such as: IFIs, International organizations, and donor countries. An option may be that IFIs, donor countries and organizations could become associated members of the IGC.

From the viewpoint of the coordination team of experts following principle actions are necessary to ensure sustainable development of TRACECA and the work of the IGC:

Refinement of the meeting structure of the IGC and its legislative meetings

Elaboration of a detailed structure for the PS including administrative and substantive divisions, descriptions of tasks and responsibilities, and budget proposal for the regular budget

Elaboration of a medium term plan for the PS and a short-term (e.g. biannual) programme of work for legislative and substantive tasks

Elaboration of funding concepts for the regular budget and extra budgetary funding of the PS and its programme activities

As emanating from the MLA the structure and functions of the IGC, the PS and the interaction with the member countries have been outlined in the study, emphasizing on a clear delineation of regional and national spheres. The Permanent Secretariat is coordinating the work of the TRACECA programme at regional level and is further charged with task to facilitate the work of the IGC. The Working Groups are intergovernmental committees mandated by the MLA and being established through IGC decisions. As defined by the MLA, they are coordinating the transport sector development of TRACECA at regional level and prepare recommendations to the IGC. The National Secretaries are the Focal Points of the PS in the TRACECA member countries. They are playing a key role in reporting and coordinating between the PS and their National Commission in implementing the provisions of the MLA and IGC decisions at national level. The National Governments are proposed to be primarily associated with the IGC with two key ministries, namely the ministry of foreign affairs and the responsible ministry for the transport sector. Involvement of both ministries is seen as vital as the work of the IGC concerns both, international affairs of a country and

TRACECA Co-ordination Team - Global Feasibility Study September 2003 29 TRACECA - Global Feasibility Study 22 July 2003 transport sector development at national level. As transport harmonization along TRACECA routes concerns a wider range of ministries and agencies in a country, all concerned entities (ministries and agencies) as well as professional bodies and private sector stakeholders are proposed to participate in the National Commissions.

Conclusions and Recommendations

Discussed feasibility considerations of this study are summed up according to the four earlier mentioned aspects:

Competing alternative transport routes for TRACECA

Competition in transport services

Regional cooperation

Capabilities of existing transport routes and infrastructure

Competing alternative transport routes for TRACECA

TRACECA routes provide shorter, or at least comparable alternative routes for road transport between Europe and Central Asia

TRACECA routes provide the only independent alternatives for road transport between Europe and Central Asia

Transport costs and transit time are impeded on all competing routes between Central Asia and Europe. Potential for reduction of transport time is up to 40% - 50 % and for reduction of transport costs is more than 30%. TRACECA routes have the potential to improve conditions, being faster and less costly than those presently existing on competing routes. Once established it would lead to improvements on competing routes as well, hence reduces transport costs and transit times on all routes.

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Rail transport of the TRACECA corridor is constraint by the bottleneck of the Caucasus railway, which is saturated among others by increasing transport of oil crude oil and oil products.

TRACECA routes provide the shortest connection between seaports and TRACECA countries in the Caucasus and Central Asia, thereby offering most direct access to maritime transport services. Moreover there are competitive shipping services available between European ports and the Black Sea region, thus TRACECA routes are favorable for further development of containerization in the TRACECA countries.

Competition in Transport Services

Sufficient competition in transport cannot only be achieved through alternative routes; competition in transport services at all levels is a further prerequisite. Therefore deregulation of monopolies, separation of regulatory functions and commercial services, and commercialization of transport services with private sector participation is also a must, if cost reduction potential shall be achieved.

The review of the transport sector development shows that institutional development and sector reforms are progressing at all levels in the TRACECA region, which will gradually improve the environment for effective levels of competition in transport services.

Regional Cooperation

Most of the TRACECA countries are clustered landlocked countries, depending highly on providing each other transit opportunities, thus regional cooperation is also vital for the viability of the corridor and is inextricably interlinked with establishment of international transport routes. Such a regional cooperation needs also to encompass transit countries towards European markets.

Building and strengthening of a sound regional cooperation is underway with the MLA, the IGC and the PS and the National Secretaries and National Commission. The MLA and the TRACECA programme comprehensively address all-important issues in developing the TRACECA corridor.

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Capabilities of Existing Transport Routes and Infrastructure

In view of future trade volumes between TRACECA countries and the European region, capabilities of existing transport routes and infrastructure to respond to transport demands is crucial. It determines the development perspectives of the landlocked countries.

Road transport and container transport is expected to respond to a growing demand of additional 12.3 million tonnes of general cargo by 2015, if the modal split will remain at current levels. But transported volumes would even further increase if railway may not be able to compete for above-mentioned reasons.

The TRACECA corridor is crucial to provide in future sufficient transport infrastructure to enable competitive transport services for TRACECA countries to access European and World markets.

Railway and road transport infrastructure needs to be improved and extended in order to cope with the demands emanating from the economical development of the TRACECA countries in Central Asian and the Caucasus

Discussed issues of this study suggest addressing important focus areas at a substantive and an institutional level. The programme needs on one side to continue its pursuance of tangible improvements of the transport corridor, and on the other side to continue with building regional cooperation of TRACECA through strengthening the institutions of the IGC.

Areas that need to be strengthened in order to enhance effectiveness of the IGC and the PS are identified as follows:

Identified Areas to Increase Effectiveness of the IGC

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! Servicing of IGC meetings by the PS ! Long-term coordination of the substantive work programme at regional level ! Transforming the Tacis project “TRACECA” into a substantive work programme of the IGC and the PS ! Broaden the basis of the IGC for support and cooperation within the member countries ! Increase activities and visibility of the IGC and the PS at international level

Following principle actions are considered necessary to ensure sustainable development of TRACECA and the work of the IGC:

Recommended Actions for Institutional Strengthening of IGC 1. Refinement of the meeting structure of the IGC and its legislative meetings 2. Elaboration of a detailed structure for the PS including administrative and substantive divisions, descriptions of tasks and responsibilities, and budget proposal for the regular budget 3. Elaboration of a medium term plan for the PS and a short-term (e.g. biannual) programme of work for legislative and substantive tasks 4. Elaboration of funding concepts for the regular budget and extra budgetary funding of the PS and its programme activities

Important issue areas which emanate from the discussion of the transport sector development and from the analysis of the of transport routes are summarized in the table below, which should be pursued by the programme of work of the PS.

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Transport Sector Issue Matrix for TRACECA Transport Sector Development Transport Routes / Services ! Accession to international ! Improve quality of roads Conventions and Agreements ! Build missing road links ! Non discriminatory national ! Reduce “rent seeking” behavior for legislation for international road transit, border crossing and permit

Road transport issuance ! Improve financing of road ! Simplify custom transit procedures construction and maintenance ! Improve cross border procedures ! Transport law according to CIM, OTIF, COTIF ! Establish block train services

Rail ! Harmonize tariff for TRACECA ! Improve cross border movements region ! Cooperation of transport operators for intermodal container transport ! Establish unit based tariff and ! Increase security for container through tariff for container transport transport by rail

Container Container ! Allocate priority to container transport Intermodal / by rail 1. Promote policy reforms, deregulation of transport monopolies 2. Harmonize bilateral and multilateral agreements 3. Cooperation among national agencies / ministries 4. Capacity building 5. Private sector participation in transport services 6. Coordination with IFIs and international organizations Cross Cutting Cutting Cross

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I. INTRODUCTION

Background

The Transport Corridor Europe Caucasus Asia was conceived in 1993 to provide an independent transport corridor for the new independent states of Central Asia and the Caucasus. The TRACECA Programme was launched in the framework of Tacis with pursuance of four overall objectives:

1. Assistance to political and economic sustainability of these republics providing access to European and World markets via alternative transport routes

Promoting future regional co-operation between the TRACECA member-states

Promoting all possible use of TRACECA projects as a mean to attract loans from International Financial Institutions (IFI) and private investors

Promoting optimal integration of the international Transport Corridor Europe- Caucasus- Asia "TRACECA" with Trans-European Networks (TENs)

Embracing formulation of these objectives foreshadows a programme that needs to encompass measures for wider range of policy issues related to the economic transition of the region and at the same time tackle in-depth transport infrastructure development. Since 1993 the programme received continuous support from the European Commission with funding amounting to EURO 110 million for technical assistance and investment projects. It evolved while implementing 39 technical assistance projects and 14 invest projects, and countries concluded the Basic Multilateral Agreement (MLA) and formed the Intergovernmental Commission (IGC) TRACECA. Programme coordination and assisting the IGC became integral part of the technical assistance programme. In this context, tasks of the present ongoing project “TRACECA Coordination Team” include a review of the feasibility of TRACECA by elaborating a “Global Feasibility Study” with following terms of reference:

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Terms of Reference for the Global Feasibility Study

! Evaluating past, current and future socio-economic developments along the TRACECA corridor ! Analyzing the evolution of traffic flows along the TRACECA corridor and along alternative routes ! Analyzing transport related costs and benefits on the TRACECA corridor ! Benchmarking the TRACECA-corridor with other corridors with specific regard to potentially competitive corridors ! Analyzing impacts of the Basic Multilateral Agreement as well as of the TRACECA projects ! Developing scenarios, providing recommendations and proposing further developments

The study has been prepared by the team of experts of the “Coordination Team” encompassing a wide range of expertise that includes transport specialists, transport economists as well as sound expertise in intergovernmental commission and secretarial work.

While preparing the study numerous TRACECA reports as well as documents and publications of international organizations and IFIs have been considered. Moreover, during many missions to TRACECA countries, transport operators and officials of government agencies and ministries were interviewed in order to collect comprehensive information.

A valuable source of information has also been the TRACECA database. It represents a comprehensive source of trade and transport data that are recorded in tonnage in units, thus enabling transport economic analysis of the region. The data itself are the most valuable part, and not the forecasting model, which was not suitable for the purpose of the study.

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Approach for the Global Feasibility Study

UNECE underlines in its guidelines for “Cost Benefit Analysis of Transport Infrastructure Projects”1 the social perspective in the rational of such appraisal.

Transport infrastructure investment affects many parties – local and national Governments, infrastructure providers, transport operators and users, people whose economic, social or environmental quality of life is changed. Often there are winners and losers and the assessment of projects may be different depending upon whose perspective is taken.

A principle perspective for TRACECA should be a social one that takes into account all significant effects whoever is affected. UNECE in its guidelines refers in this regard to:

The overall economic, social and environmental effects of the project

The pattern of gains and losses

The financial viability of the project

The practicability of the project and identification of any barriers to implementation

For the social appraisal of projects, UNECE recommends the use of a framework approach containing a cost–benefit analysis of those elements which can justifiably be valued in monetary terms, but with additional reporting of wider economic impacts and other impacts on broader policy issues. The cost-benefit analysis and the broader environmental and policy indicators need to be brought together in a coherent way in order to produce the overall assessment.

In this context an appraisal framework for assessing feasibilities of TRACECA should be defined. Justifiable valuation of costs and benefits in monetary terms will be difficult to assess, as the TRACECA programme has reached a compound structure making it difficult to measure direct costs and benefits. Thus appraisal of costs and benefits may only be

1 Economic Commission for Europe, A Set of Guidelines for Socio-Economic Cost Benefit Analysis of Transport Infrastructure Project Appraisal, United Nations, New York and Geneva 2003

TRACECA Co-ordination Team - Global Feasibility Study September 2003 37 TRACECA - Global Feasibility Study 22 July 2003 possible at an aggregated level, and emphasize needs to be given to the reporting of wider economic and other impacts on broader policy issues.

Costs and Benefits

Costs of the TRACECA programme may not only be limited to direct inputs by the EC, as beside the Tacis programme, other international organizations and donors, IFIs, and of course the countries itself involved in efforts at various levels that contribute to the transport corridor development of TRACECA. While it may be possible to quantify those investment levels, one needs to understand the benefits that would be achieved through such a programme. Although it is certain that the TRACECA member countries, and in particular the landlocked countries in Central Asia and the Caucasus belong to the core beneficiaries, quantifications still remains a difficult task.

To identify benefits, guidance is provided by the first objective of the TRACECA “Assistance to political and economic sustainability of these republics providing access to European and World markets via alternative transport routes”. They could be indicated by parameters measuring levels of political and economic sustainability while countries improve their participation in a global economy.

High costs of international trade represent a serious constraint on the economic development of landlocked developing countries. Inadequate infrastructure adds heavy costs to the production and export of goods, hampering their competitiveness in regional and international markets.

In general, the level of international transport costs facing landlocked developing countries is explained by the fact that their exports incur additional costs in the country or countries of transit. Analysis of UNCTAD2 shows that in 1997 transport and insurance payments as a percentage of total export of goods and services for major developed market ranges at 3.7%, average transport costs for countries in Central Asia and the Caucasus were 3 to 8 times higher.

2 UNCTAD, Transit Systems of Landlocked and Transit Developing Countries: Recent Developments and Proposals for Future Action, TD/B/LDC/AC, 1/17, 13 June 2001, Geneva

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Landlocked countries are also negatively affected by the high cost of their imports. A rough measure of the transit cost disadvantages faced by landlocked countries is provided by balance-of payments statistics which show freight costs as a proportion of cost, insurance and freight (c.i.f.) import value. In 1997, freight costs were approximately 3.4% of the c.i.f. import values in developed market economies. But for the countries Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan and Turkmenistan the freight costs ranged at 9.6%.

The high transport costs of imports inflate the prices not only of consumer goods but also of capital goods and intermediate inputs, thereby increasing the cost of domestic agricultural and industrial production. A significant reduction in the transport costs of their imports would therefore not only increase their purchasing power but also boost their domestic production, supporting their diversification efforts and increasing the competitiveness of their exports.

Methodology

As outlined above, feasibility of TRACECA routes as a network of transport infrastructure of the TRACECA corridor cannot simply be described with a single figure or calculated with a simple model, as it is practice for contained infrastructure investment project such as a road, a rail track, or a freight terminal. The TRACECA corridor encompasses primarily the infrastructure of five land locked countries in Central Asia, of two landlocked countries in the South Caucasus, and of the countries surrounding the Black Sea. Moreover, the functions of the TRACECA corridor are manifold as it provides transport opportunities equally from end to end, for intermediate routes between and within countries, and for crossing the corridor at any direction.

It is evident that economical development of the landlocked countries depends not only heavily on the access to international markets, but also on the access of intra regional markets of the TRACECA region. Hence transit transport opportunities for landlocked countries in Central Asia and in the Caucasus are crucial while considering viability of the TRACECA corridor. High transport costs are burdening the economies and a vital condition for reduction of transport costs is the availability of competing alternative transport routes.

But reduction of transport costs cannot only be achieved through alternative routes; competition in transport services at all levels is a further prerequisite. Therefore deregulation of monopolies, separation of regulatory functions and of commercial services,

TRACECA Co-ordination Team - Global Feasibility Study September 2003 39 TRACECA - Global Feasibility Study 22 July 2003 and commercialization of transport services with private sector participation is also a must, if cost reduction potential shall be achieved.

Most of the TRACECA countries are clustered landlocked countries, depending highly on offering each other transit opportunities, thus regional cooperation is also vital for the viability of the corridor and is inextricably interlinked with the establishment of international transport routes.

Capabilities of existing transport routes and infrastructure to respond to future transport demands is a further important aspect in measuring practicability of the TRACECA corridor. Capacities of alternative routes and corridors as well of railway and road infrastructure are critical in this regard. If transport opportunities are limited, economical development will be strangled leading to increased disparities.

Above-identified four aspects have been selected as major issues to guide the appraisal of the viability of the TRACECA corridor as presented in this study. Chapter II is firstly evaluating socio economic developments and macro economic trends, and secondly analyzing the evolution of traffic flows of the TRACECA region in order to identify expected transport volumes and patterns relevant for the TRACECA corridor. Chapter III provides an in-depth assessment of the transport sector development, with focus on sector financing and on sector reforms of the countries. Chapter IV provides a detailed analysis of the transport routes presently used for international transport of the TRACECA countries. As orientation of transport services occurs in accordance with pertaining economic distances, decisive factors such as transport cost, transport time and reliability have been analyzed of the TRACECA routes and competing corridors. Comparison of present and potential transport parameters for competing transport services provide a number of benchmarks for TRACECA transport services. The TRACECA Programme review in Chapter V analysis the programme structure and its responsiveness to emanating transport sector issues of the discussion of the transport sector development and from the analysis of the transport routes of chapter II and IV. Finally arising issues are brought together in Chapter VI to summarize major conclusions and recommendations of the study.

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II. TRADE AND TRANSPORT DEVELOPMENT OF THE TRACECA REGION

Macroeconomic Trends in the TRACECA Region

Since the collapse of the Soviet bloc, the New Independent States around the Black Sea, in the Caucasus, and Central Asia have faced the task of transforming their national economic structure from the old Soviet model of central planning to a liberal market economy. To achieve the goals of sustenance, self-esteem, and freedom they engage in reform processes and policy reviews. Although progress is more evident in some countries than others the general trends outline a positive development.

In the process of evaluating TRACECA developments, close attention should be paid to the main macroeconomic indicators in these regions. Recent figures of GDP growth suggest a strong upward tending path of the economies. In order for the countries to reach their commercial, economic, and scientific potential policy reforms are being considered and further developed for implementation since the early 1990s. They involve structural reforms on trade/market liberalization effective through privatization, improved fiscal management, better monetary policies, as well as sustainable social policies. Some countries, like Azerbaijan, Kazakhstan, and Kyrgyzstan actively engage in the implementation process. In other countries, such as Uzbekistan or Tajikistan this process takes comparatively longer.

Main Economic Problems of the States of the Former Soviet Union

TRACECA Co-ordination Team - Global Feasibility Study September 2003 41 TRACECA - Global Feasibility Study 22 July 2003 commonalities, as common problems can create incentives for the countries to cooperate with each other. Cooperation and intra regional trade will be vital for the successful economic development of each country and for the region as a whole.

Regional Analysis

The regional analysis hereinafter briefly summarizes analysis of institutions and international organizations including the World Bank, Asian Development Bank, and International Monetary Fund.

Black Sea Region

Bulgaria, Moldova, Romania, Turkey and Ukraine represent the Black Sea region of TRACECA member countries. Socio-economic trends in the Black Sea region, through ups and downs have demonstrated an overall positive development. The countries bordering the Black Sea have a strategic location in terms of trade and transit. They have ready access to international maritime trade and have close access to European markets. Bulgaria, Romania, Moldova and Ukraine are all looking forward to be joining the European Union. Although the countries do not face the difficulties that arise with the level of remoteness it will be vital for them to be engaged in cross regional economic development process. Their privileged situation will enable them to supply the landlocked countries of TRACECA with valuable advice and experience and help create better trade accessibility.

Caucasus Region

Armenia, Azerbaijan, and Georgia represent the Caucasus region of the TRACECA member countries. The Caucasus region has a long history of trade transit starting with the ancient silk route. The region is rich in resources and economic culture. Their proximity to established world markets is definitely an advantage when it comes to developing trade relationships and integrating into the free world market. Their main focus in the economic development process will be on policy development and increased cooperation within the region, Europe and Central Asia

Armenia; even with several economic shocks in the past few years Armenia shows continuous commitment to structural reforms and liberal reform policies. Advancements in

TRACECA Co-ordination Team - Global Feasibility Study September 2003 42 TRACECA - Global Feasibility Study 22 July 2003 structural reforms have contributed to growth rates averaging 5.9% since 1994. Since the introduction of the liberal trade regime, Armenia has experienced low inflation and a stable exchange rate. Despite a relatively strong macroeconomic performance job opportunities have not grown. Almost half of the population still lives below the poverty line. Trends are hinting at improvement, however, at a very slow pace. Throughout the 90s employment opportunities were very poor. Since then growth of new enterprises has been going slow, and there has been little restructuring of exiting ones. Investments are hampered by both official and unofficial interference of the government. There is a serious shortage in necessary skills as human capital eroded in the 1990s mainly due to migrations. Investors often times face high political risks.

Recent trends are indicative for the improvement of business and economic conditions. This leads to estimates of accelerated growth in the coming years, and probable reduction of poverty. Armenia’s primary focus in the coming years should be (i) On further improving the business climate in order to attract more foreign investments, (ii) Supporting the development of human capital, (iii) Addressing poverty.

Azerbaijan; Azerbaijan’s central economic problems after their independence in 1991 are common to the republics of the former Soviet Union. In the first five years of transition aggregate output declined much more drastically than in most of the CIS countries, and was accompanied by hyperinflation. After 1995 the economy recovered. Since then GDP growth has been impressive at an average of 8% per year. These outcomes are mainly a result of the recovery of the oil and gas sectors. However, output levels remain far below the 1990 level.

The government committed to the State Oil Fund (SOF) in December 1999. The fund is designed to help the country allocate the revenues from natural resources such as oil and natural gas wisely. It carries both stabilization and savings functions. It is advised to invest in the non-oil sectors of the economy in order to achieve a balance in oil and non-oil sectors in the future. Typical investments would include the improvement of infrastructure and social services. Azerbaijan has taken these recommendations seriously and has not spent oil money rapidly and wastefully. Azerbaijan’s main focus for the coming years should be on: (i) raise living standards and reduce pervasive poverty, (ii) create transparency in governmental process and policy reforms and spending.

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Georgia is strategically situated as trade and transit corridor bordering the Black Sea, the Russian Federation, Azerbaijan and Armenia. Over the past ten years poverty has increased drastically as incomes and social protection have deteriorated. The poor have suffered disproportionately from the decline in social spending, especially heath and education. There are, however, slow improvements in the social sector.

Accessibility is improving, and health indicators are improving. Also there is an emergence of a private land market, and there are advancements in private businesses that help creating new job opportunities and exports. Transit agreements are being improved increasing the attractiveness of Georgia as a transit country. For the future Georgia’s overarching and primary focus should be on poverty reduction and reverse the increase in inequality. In this regard strategies need to include better fiscal management in order to achieve macroeconomic stability, decrease state involvement I commercial activities and improve the environment for the private sector. Overall, it is necessary to improve governance and reducing corruption.

Central Asian Region

Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan represent the Central Asian region of the TRACECA member countries. Although economic growth rates have remained comparatively slow, the trends are positive. According the Asian Development Bank, growth rates in 2002 tended around 7.7%. Central Asian NIS countries all have the fate of being landlocked. Landlocked developing countries have a considerable larger difficulty in connecting to world markets for example due to the lack of adequate infrastructure leading towards world markets, such as roads, railways or channels, and are doomed to be dependent on countries lying on the transit routes. High transit tariffs and bilateral relations will play an important role in the ability for a landlocked country to fully reach its economic potential. Central Asian countries are now dealing with the task of establishing a national acceptable economic system and at the same time adjusting to the regional surroundings. This requires a continuous internal-external focus, which is important in establishing and consolidating their new role in regional and world economic affairs. Many Central Asian countries are coming to understand this important strategy and trends seem towards increased interaction.

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Kazakhstan; Kazakhstan’s overall economic performance was strong in 2002. GDP growth amounted to remarkable 9.5% exceeding the 7.0% government target. On average, growth has remained above 10% over past three years. Medium term prospects are positive, despite the economy’s heavy dependence on the oil sector and hence its vulnerability in respect to external shocks. Notably, the crude oil and gas condensate expanded significantly (17.3% - to 47 metric tones) due to the improvements in transport infrastructure and increased investments. A 7.4% raise in the real income from the 2001 income level is indicative to the growing improvement in living standards. The average monthly wage in 2002 amounted approximately Tenge 20,300, which is an increase by 16% in nominal terms from the 2001 figures.

In regard to policy reform the government has remained to be very active. The policy effort to consolidate fiscal consolidation was continued. A modernized treasury system already provides for increased transparency in the national fiscal system. Improved fiscal management is included in the countries medium/term development strategy (2002/2004), which regards education and health care sectors as priority budget areas. Kazakhstan is eager to join the WTO. Despite the fact that general policies have been geared towards meeting WTO criteria, there are yet a number of protective measures remaining that need to be relaxed.

Rural development has been marked a key priority of the government for 2003-2005. The growth in oil production and export is likely to sustain as demand form regional trading partners strengthens. Imports are estimated to grow at around 6% per annum due to the inflow of capital goods related to the oil sector investment. Stable economic growth is likely to push the improvement in living standards to an 8/9% annual increase.

Kyrgyz Republic’s economy was slowed considerably as a result of the accident of the country’s largest goldmine, the Kumtor goldmine. The current economic base is extremely vulnerable to internal and external shocks and it is difficult to protect a small economy like that of Kyrgyz Republic completely from these influences. Medium term prospects depend largely on the rapid diversification of the domestic production base and exports. Debt relief from the Paris Club members has provided some additional resources and time to carry out the necessary structural reforms.

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The drastic drop in gold production is believed as the main cause for the drop in GDP by 0.5% in 2002 compared to the 5.3% growth measured in 2001. The gold mine contributed 9% of the overall GDP and 40% of industrial output. In 2002 industrial output experienced a sharp decline at 11.4% less than the previous year. The development of following sectors, however, showed a strong turnout: textiles, glass, leather products, and food processing. The agricultural output is heavily depending on weather conditions. Inconsistencies over the past year have affected crop yields. Despite the adverse condition in 2002 the sector output grew by 3.3%, only slightly less than the target of 4.0%. The service sector growth is estimated to be around 4.2%. Although the increase in retail trade and hotel/restaurant output under this category was directly related to the increase in tourist influx. Despite the overall growth contraction the effects on poverty will be limited. Average increase in the average monthly wage was measured to be 10.5% in late 2002. Inflation rates have remained low, and the agricultural sector continues to grow which employs about half of the workforce.

Government’s efforts to debt restructuring have been successful so far, and policy reforms have been underway. In 2002 several structural reforms have been undertaken, which raised the quality of public resource management and improved governance. Changes have positively effected the business and private sector environment. A National Poverty Reduction Strategy Paper has been created in October 2002, which serves as a blueprint for development of 2003-2005. However, diversification of domestic production and foreign trade, a more rapid implementation of structural reforms, and continued pursuit of solid macroeconomic reforms are required to sustain the trends and provide a base for economic recovery and growth. Recovery of the gold production, and increased foreign funds will be necessary to maintain the prospects of GDP growth at around 5% in the coming years.

Tajikistan; the overall economic performance of Tajikistan was comparatively strong in 2002. Macroeconomic management improved with Tajikistan’s rebuilding efforts after the civil war. A poverty Reduction Strategy Paper was finalized and presented to the Parliament. However, the implementation process of stabilization and structural reform policies has been slow. These reforms are absolutely vital to sustain economic growth and move towards a reduction of poverty.

GDP growth amounted to 9.1% in 2002 in the 5th consecutive year of strong economic growth. Mainly growth has been driven by the post-conflict recovery of output in aluminum, electricity, and agriculture. Total agricultural growth amounted 15%. Cotton production rose

TRACECA Co-ordination Team - Global Feasibility Study September 2003 46 TRACECA - Global Feasibility Study 22 July 2003 by 13.9% and the end of a drought in 2002 pushed wheat production, which is rain, fed and not irrigated like cotton. Light industry, mostly textiles, and cotton processing grew significantly by 27%. Construction grew at 30%, however accounting for only 4% of overall GDP did not significantly contribute to GDP growth. In 2001 the political environment due to the conflict in neighbouring Afghanistan adversely affected FDI inflows. Since 2002, however, foreign investment has picked up, doubling to $ 21 million. There is no reliable statistics on poverty trends since 1999 available, but anecdotal evidence and regional surveys suggest that incomes, cash and non-cash, have increased since the peace agreement in 2000. The growing informal sector may be the main contributor to this trend. Only a very small share of people is employed in formal sector. GDP growth is estimated to be around 7% in the coming years.

Tajikistan has a very high external debt accounting for close to 90% of GDP totaling $962 million, owing pone third to the Russian Federation. Although there was significant debt rescheduling in 2002, the debt service payments amount over 5% of GDP. Exports grew by 11% (to $723 million). Imports on the other hand grew only at 6% (to $819 million). With an exception in 2001, exports and imports have been growing quite strongly. However, it should be noted that growth is not only highly dependent on world market prices, especially for cotton and aluminum, but also on political relations with neighboring countries. 2001 exports suffered heavily due to the closure of a railway line through Kazakhstan to Tajikistan’s main export markets. The connection resumed in 2002, but trade levels have remained lower.

Tajikistan’s Poverty Reduction Strategy Paper was presented to the National Parliament in June 2002. Identified reforms cover all major sectors and aim to support the transition towards a market economy. A greater challenge will be the prioritization and implementation of the outlined reforms, finding confessional international funding and attracting more foreign investment. Restructuring the agricultural sector is high on the reform agenda and offers hope for growth and poverty reduction, as agricultural products belong to Tajikistan’s traditional export commodities. A farm privatization plan is being currently underway. The largest share of agricultural production, apart form the cotton and silk industries, already is taken by private hands

Due to the civil war it is crucial to rehabilitate the physical infrastructure and utilities, particularly power, in Tajikistan to stimulate economic activities. With donor assistance Tajikistan has committed itself to unbundled and corporatize utilities and to privatize

TRACECA Co-ordination Team - Global Feasibility Study September 2003 47 TRACECA - Global Feasibility Study 22 July 2003 transport. The outlook over the coming years remains uncertain, due to the heavy dependence on international factors such as aid and the goodwill of the international community, political climate, and agricultural production. The policy framework will engage substantively in enhancing macroeconomic stability and structural reforms with the goal to reduce poverty.

Turkmenistan’s economic performance in 2002 was rather mixed. Official estimates state that GDP growth amounted to an impressive 14.9%. This was largely based on the increased export of natural gas, oil and oil products. An increase in output in the industry sector, namely light industry and food processing, also accounted greatly to the GDP increase. However, these estimates do not reconcile with other economic indicators such as the stagnant consumption of electricity, the 11% decline in imports, as well as the rising levels of unemployment. Industrial growth, as officially claimed, seems highly exaggerated. The Asian Development Bank has estimated a more realistic growth measurement to around 7-8% based on the data of the natural gas sector. Given this fact the actual GDP growth should be around 8.6%, which is a substantial drop from the record of 20.5% increase measured in 2001.

Growth rates mask the country’s limited progress in reforms. The share of the private sector, as estimated by the EBRD, only accounts for 25% of GDP. Basic commodities are heavily subsidized or free and all transactions, including both national and international trade must be registered with the State Commodity Exchange, such that all cotton sales, for example, are under the umbrella of a state order system. This system enables the government to fully control any transactions made.

The poverty situation is mixed. Health and education services are deteriorating at an alarming rate. A new educational policy has cut the number of schooling years to nine. It is believed that higher education and advanced skills are currently unnecessary to advance the economy. Further policies have negatively affected the facilities and standards of education and health. Commodity subsidization disguises the increasing gap of living standards between the rural and urban areas. As a result of the subsidization policies and wasteful consumption remains a predominating issue.

In general the macroeconomic policy regime has remained unchanged. There is more than a 300% spread between official and market exchange rates, which is a severe impediment on

TRACECA Co-ordination Team - Global Feasibility Study September 2003 48 TRACECA - Global Feasibility Study 22 July 2003 the growth of the private sector, and creates a bad environment for FDI. For the near future, Turkmenistan can expect an increasing demand for hydrocarbon, energy, and light industry exports, mainly from Afghanistan in its process of reconstruction and Iran. Domestic demand is unlike to significantly increase, due to the strict transaction controlling system. (Namely price controls, a pervasive industrial licensing system, and tight control of banking and foreign transactions). GDP growth is estimated to be at an annual rate of 7-8% for the coming years. Growth will be based on capital-intensive extractive sectors, which will be unlikely to generate sufficient employment. Unemployment and social stress may increase if not active policy measurements are being undertaken.

Uzbekistan’s growth remained slow in 2002. Policies have remained unchanged for the large part and the medium term is for continued sluggish expansion. Although the government expresses its wishes to attract greater investments they are not acting towards carrying out far reaching economic and structural reforms. GDP growth slowed from 4.5% in 2001 to 4.2% in 2002. Per capita incomes in Tashkent peaked at $40 (at the official exchange rate), and lowest were recorded in Samarkand at only $10. The official unemployment statistics of 0.4% does not include unregistered unemployment and continues to mask disguised unemployment.

Generally, only moderate improvements can be observed. The production growth in value added agriculture rose slightly, grain production exceeded local consumption needs, the service sector grew slightly, cotton production declined mainly due to adverse weather conditions. The government procurement on cotton accounts for 50%. Farmers, despite being permitted to do so, have difficulty selling the remaining 50% on the free market due to lack of intact private marketing channels.

Uzbekistan reports an 8.5% growth in the industrial sector, however it remains unclear what drove it. Intensified import restrictions and a weaker exchange rate boosted the domestic manufacturing but hurt import dependent enterprises and retail trade, which output contracted. Oil and natural gas production increased slightly. Transport and communication sectors reported improved performance, which was mainly driven by the operations of Uzbekistan Airways. Regional income disparities are persisting.

The Staff Monitored Program (SMP) agreed between the government and IMF dominated macroeconomic policy in 2002. The government stated its intention to accelerate the

TRACECA Co-ordination Team - Global Feasibility Study September 2003 49 TRACECA - Global Feasibility Study 22 July 2003 transition to market economy and achieve macroeconomic stability primarily by reducing the state’s role in the economy and adopting tight fiscal and monetary policies. The policies where aimed to be in line with the recommendations of the SMP objectives. At the same time safeguards against outcomes unwanted by the government, ensuring government monitoring and control, were implemented. Three key areas were focused on: (i) liberalization of the foreign exchange regime, (ii) trade liberalization, and (iii) reform of the state procurement system for cotton and grain. The government devalued the official exchange rate and liberalized over the counter foreign exchange transactions conducted at a secondary market rate. However, in order to control imports and foreign exchange outflows trade and exchange restrictions were enforced, reducing demand for foreign exchange.

Overall growth rates are predicted to contract in the forthcoming years. The service and retail sectors will continue to feel the adverse affects of the restrictive government policies and trade controls. State-enterprises and private firms will not be able to attract significant FDI, unless substantial foreign exchange reforms are being undertaken. Taking into account the current state and sentiment of the government, specifically, the agricultural sector will not be able to experience significant growth unless the incentive structure of farming is altered through effective adoption of growth and liberalization policies.

Conclusive Remarks

It becomes evident that most countries are addressing the problems of transition. With respect to the common problems that NIS countries face positive development trends are definitely evident in most of the countries. Cooperation amongst the countries, and with the rest of the world is growing. GDP figures, as presented in the macroeconomic statistics tables, are supporting the positive trends estimated for the medium term future prospective. Providing that the regions will be spared from major external political and economic shocks, estimates should prove to be accurate, and the NIS countries will develop to become important players in world political and economic affairs in the future. Recent and projected GDP growths are summarized in the table below.

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Table1: Summary of GDP growth of TRACECA countries GDP growth rate Expected 2000 2001 2002 2003 2004 (%) average Central Asia na na 7.7 5.8 5.8 5.8 Kazakhstan 10 13.2 8 7.1 6 – 7 6 - 7 Kyrgyzstan 5 5.3 -0.5 5.2 na 5 Tajikistan na 10.3 9.1 7.1 na 7 Turkmenistan 17 20.5 na 7.5 7.5 7.5 Uzbekistan na 4.5 4.2 3.5 - 4 3.5 – 4 3.5 - 4 Caucasus Armenia 10 9.6 na na na na Azerbaijan 8.0 9.9 10.5 9.5 8 na Georgia na 4.5 na na na na Black Sea Region Bulgaria 4 4 na na na na Moldova 2.1 6.1 na na na na Romania 1.8 5.3 4.0 na na na Turkey na -7.4 na na na na Ukraine 5.8 9.1 na na na na

Source: World Bank Country Briefs, ADB Asian Development Outlook 2003

Regional Transport Developments

It is presumptuous to try and make a long-term forecast of regional transport developments in the TRACECA region. The uncertainties regarding political stability and sustained progress with political reforms are too great; sudden changes in currency and in trade related policies too dramatic. Although the transition process yielded tangible reforms in some countries, policy environment affecting cross-border as well as transit traffic remains a problematic issue. Non-physical barriers have surely the same effect as missing transport infrastructure.

On the other hand, there have often been such changeover situations in the past for groups of countries, for instance west European countries after world War II, or the integration of East European countries after the collapse of the former Soviet Union (FSU). And there are examples for successful economic recovery of these countries.

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One of the few certainties in quantitative empirical research on long-term economic growth is that political instability has a negative effect on growth and investment. Empirical research nonetheless, also indicates that growth of transport activities correlates with growth of the economy.

Available macro economic data as well as trade and transport data of the TRACECA database may provide a sufficient basis to estimate developments of future trade and transport patterns in the TRACECA region. As the database provides comprehensive information for the years 1998 to 2000, the year 2000 has been selected as base line for the purpose of this study.

The figure below indicates the structure of the forecasting methodology of this study to estimate the future transport pattern related to the TRACECA region. It encompasses a number of different effects including: projected economic growth of the countries, development of trade volumes, analysis of transport mode response related to traded commodities, and geographical distribution of trade flows.

Figure I: Structure of Forecasting Methodology

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Analysis of TRACECA Database

The TRACECA database provides information for the time period from 1998 up to 2000. The data of 1998 and 1999 was gathered and validated by the TRACECA Project. The TRACECA Coordination Team, in support for the Permanent Secretariat of the IGC, is currently involved in the data collection for the 2000 and onwards. Import and export data originate from national sources of the TRACECA member countries. As a result, a few inconsistencies in comparison to international data may exist. These differences, however, will not interfere with the validity of the analysis. Import and export statistics are based on national and regional economical activities. Statistics for the transit transport volume of the region is not included in the TRACECA database, and needs to be dealt with separately. By and large, the data provides an upright source for the purpose of drawing a global picture of current transport volumes.

Geographical Distribution of Trade

The Database provides information on trade and transport volumes detailed into categories of 46 countries, regions, and 25 commodity groups. This structure allows for a geographical analysis of trade/transport directions, as well as a transport mode related analysis of different commodity groups in the TRACECA region.

An analysis of the geographical distribution of current regional trade volumes provides for a reference point; a basis for estimating future transport developments and infrastructure needs. Following the underlying principle, that the transport of goods is determined by the economic distance/proximity to targeted markets, the geographical analysis of trade volumes provides a link for the allocation of transport volumes to transport corridors. Based on data of the year 2000, trade volumes have been identified between the countries in (i) Central Asia and (ii) the Caucasus, in addition to four principal directions to regions of the world:

Table 2: Trade Regions and related Transport Corridors Trade Region Transport Direction / Corridors European countries and Westbound on Euro-Asian corridors America Russian Federation and Via Russian transport corridors Belarus East and South East Asia Eastbound on Euro-Asian corridors; southbound via Iran and Persian

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Golf ports Middle East, Indian Sub- Southbound via Iran and Persian Continent and Africa Golf ports Between Central Asia and TRACECA Corridor Caucasus

Given that this study focuses on the transport corridor development between Europe and Central Asia, transport volumes related to Europe are further analyzed with regard to modal relationships. However, transport infrastructure along the TRACECA routes in Central Asia and across the Caspian Sea is facilitating trade with other indicated regions. Central Asia would provide transit infrastructure for east – west, e.g. between the Caucasus and China, as well as north – south directed trade. Therefore, related transport volumes need to be considered while keeping in mind possible future transport developments and infrastructure needs.

Transport Modes

Estimates of future transport volumes need to take into account the movement of commodities, and the response of transport modes to factors of demand. This is crucial for the awareness of future needs for transport services in the countries along Euro-Asian transport corridors. A more detailed look at the transport patterns of commodities of the oil sector in comparison to the non-oil sector, allows for further conclusions regarding transport mode options:

Oil Sector Non-Oil Sector • Pipeline • Railway • Railway • Road transport • Maritime, Ferry • Maritime, Ferry • Container

A comprehensive analysis of traded commodities within these sectors facilitates estimating future transport volumes. It also provides for a mechanism to allocate their likely distribution to transport modes. To obtain an appropriate level of details, the 25 commodity groups have been split into two groups in the oil sector and five groups in the non-oil Sector. These groups are related to certain transport patterns and modes:

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Table 3: Transport Modes of Commodity Groups Commodity Groups Transport Modes Oil Sector Crude Oil Pipeline, Railway Oil Products Railway Non-Oil Sector Bulk Commodities Railway Bulk Cargo3 Cotton Railway, Truck, Container Machinery etc. Truck, Container, Railway General Manufactured goods Truck, Container, Railway Cargo4 Other Products and Truck, Railway Food Stuff, etc

Crude Oil; primary transport infrastructure for crude oil includes: pipelines for land transport, large tankers for maritime transport, and oil terminals for intermediate handling. If pipeline infrastructure is missing, or capacities are not sufficient to deliver crude oil to its markets, transport is also carried out via rail. This is often the case in Central Asia where new markets for Kazakh crude oil emerge in China. Also, in the Caucasus existing pipelines to Black Sea ports are often not capable to cope with increasing Azeri, and Kazakh (-transit) crude oil outputs. Rail transport represents a temporary substitute mode to pipelines. However, it is less economical as transport occurs in tank wagons, for which the loading and discharging procedure is time consuming and empty wagons have to be returned. Rail transport of Crude oil in large quantities leads to saturation of railway lines and reduces capacities required for transporting other important commodities.

Oil Products are primarily transported by rail in tank wagons. Pipeline transport for oil products is not suitable as trade quantities are smaller and quality of the products can not maintained. Road transport provides for an alternative only on shorter distances.

Bulk Commodities include coal, coke, bauxite, ores, salt, grain and cereals, fertilizer, products of chemical industry, cement, construction materials, scrap metal, metal, timber,

3 The term “Bulk Cargo” is used in the study to describe these commodity groups 4 The term “General Cargo” is used in this study to describe these commodity groups

TRACECA Co-ordination Team - Global Feasibility Study September 2003 55 TRACECA - Global Feasibility Study 22 July 2003 wood, paper, rubber and plastics. The TRACECA statistics show that commodities of this group are predominantly transported by rail.

Cotton is a major export commodity of several countries in the region. The cargo density and its trade pattern provides for the need of container transport. Cotton can be loaded into 40ft cargo boxes and is generally traded FOB. It is transported to accessible seaports of the region and provides ideal return for a 40’ cargo box on their way back to the shipping lines depot at the ports. Furthermore, cotton is also transported by railway as larger quantities can be accommodated in rail wagons. Transport by road will take pace if return cargo for the trucks is available. Since cotton is a globally traded commodity the port of loading is not decisive. As a result, cotton transport of the region follows existing transport opportunities to save on transport expenses. For example, when Uzbekistan was building the Daewoo car assembly plant, empty return containers were utilized for cotton shipments to Pusan in the Republic of Korea. Today cotton is transported mainly to Black Sea ports, Persian Gulf ports, and Baltic ports.

Machinery and Equipment: This group is reported in the TRACECA statistics as a single commodity group, which is transported by rail and road. The data also provides facts on the current modal distribution, whereby future developments of the modal split need to be given further consideration.

Manufactured Goods: This group is also reported in the TRACECA statistics as a single commodity group. It is transported via rail and road. Future developments of the modal split need to be given further consideration. The modal split may differ from the group of Machinery, Equipment and Mechanism; therefore it is entered separately into the model.

Food Stuff, and Other Products: This commodity group includes animal products, primary and processed agricultural products, foodstuffs, textiles, and containers. Similar to the two groups mentioned above, its transport is carried out by rail and road. In this regard the statistical data are processed accordingly.

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Trade Volume of the Regions

Global Distribution

Gradual establishment of new industries and restoration of existing facilities in the production and manufacturing sector leads increasingly to resource processing within the countries. This results in increased trade of consumer products and manufactured goods on a national and regional level. The development of increased down stream production activities can also be observed in the oil sector, where traded volumes of oil products are increasing.

The total recorded transport volume (import and export5) of the year 2000 (Annex 1 “TRACECA Database Analysis”) for Central Asia and the Caucasus Region amounted to about 118.5 million tons. Oil and non-oil sectors accounted for 41% and 59%, respectively. The regional distribution is illustrated in the table below:

Table 4: Transport Volume of the Caucasus and Central Asian Region – Year 20006 Total Transport 2000 – Transport Volume of the Oil Sector Non-Oil Sector Volume – Oil Caucasus and Central Asian and Non-Oil Region with: (Million tonnes) (Million tonnes) sectors Import 0.405 4.517 4.922 • European countries Export 36.103 5.977 42.08 and America Total 36.508 10.494 47.002

Import 3.241 10.072 13.313 • Russian Federation Export 6.365 40.121 46.486 and Belarus Total 9.606 50.193 59.799

• East and South Import 0.027 0.674 0.701

5 The terms “import” and “export” indicate the direction of transported cargo volumes 6 Source: TRACECA database analysis

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East Asia Export 0.947 4.137 5.084

Total 0.974 4.811 5.785

Import 0.078 2.064 2.142 • Middle East, Indian Export 1.01 2.682 3.692 Sub-Continent, etc. Total 1.088 4.746 5.834

Import 3.751 17.327 21.078 Total Volume Central 7 Export 44.425 52.917 97.342 Asia and Caucasus Total 48.176 70.244 118.42

The distribution of the year 2000 transport volume of the Central Asian and Caucasus region including transport volume between the two regions is shown in the Figure II overleaf.

7 Transport volume does not include intra regional trade between Central Asia and the Caucasus countries

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Figure II: Trade Volume in 2000 of the Caucasus and the Central Asian Region8

8 Source: Analysis of the TRACECA database, transport volumes include transport between the Central Asian and the Caucasus Region

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Modal Split

To analyze future trends of transport patterns of the non-oil sector in the TRACECA region, traded commodities have been allocated for the study to two principle groups according their growths perspectives. Bulk cargo, which include coal, coke, bauxite, ores, salt, grain and cereals, fertilizer, products of chemical industry, cotton, etc. were produced in the period of the FSU in large quantities, but production has slumped significantly and it is not foreseen that future growth will reach or exceed previous levels. The database reveals that in 2000 the Central Asian and Caucasus region together were trading about 60 million tonnes of this commodity (49.6mt export, 10,2mt import) thereof 73% has been transported by rail and only 27% by road. Cargo characteristics and given trade patterns are not suggesting significant changes in this ratio.

The remaining commodity groups of the non-oil sector, which are described as general cargo include items such as machinery, equipments, manufactured goods, and foodstuff, are strongly associated to emerging private sector industries and consumer behavior. Therefore future trade developments are suggested being closely related to economical development of the countries. Central Asia and the Caucasus region traded 10.2 million tonnes in 2000 (6.8mt import, 3.4mt export) whereas trucks transported about 70% of the goods and railway only 30%. The ratio of import and export may change as manufacturing industries are emerging in the countries and available resources and agricultural products are being further processed and exported. Increasing transport volumes by road is suggested to be a prevailing trend for this group and the modal split is expected to change significantly in future

TRACECA Co-ordination Team - Global Feasibility Study September 2003 60 TRACECA - Global Feasibility Study 22 July 2003 toward road transport. Road transport offers a faster, more flexible, and competitive transport alternative. Increasingly, private actors play an important role in competing in this market segment.

Table 5: Modal Split Percent of Transport Railway Road Volume Bulk Cargo 73% 27% Consumer and Investment 30% 70% Products “General Cargo”

Future Trade and Transport Pattern in the TRACECA Region

Oil Sector The Oil Sector is clearly determined by the investment and production planning of the oil producing countries. A dominating role among the oil producing states are playing Kazakhstan in Central Asia and Azerbaijan in the Caucasus. Development of production is shown in the table below:

Table 6: Oil Production Caucasus and Central Asia 1994 – 2015 Oil Production 1994 1999 2000 2001 2002 2004 2010 2015 (mt) Azerbaijan 9.5 13.6 13.9 14.8 16.7 19.8 63 57 Kazakhstan 18.5 26.7 30.6 35 47 64 93 146 Turkmenistan 4.1 6.7 n.a. n.a. 8.3 n.a. 10.4 n.a. Uzbekistan 3.5 8.1 7.5 n.a. n.a. n.a. n.a. n.a.

Source: World Bank Country Briefs; ADB Key Indicators

Non-Oil Sector

Different transport and growth characteristics are inherent with the commodity groups of the non-oil sector. Countries traditionally trade large quantities of mineral resources and agricultural products. At the time, the recovery of industrial and production sectors is underway and the demand for consumer goods and services is increasing. To identify the

TRACECA Co-ordination Team - Global Feasibility Study September 2003 61 TRACECA - Global Feasibility Study 22 July 2003 growth potential of these sub-sectors, one may have a closer look at the economic parameters, which can differ significantly.

Trade volumes of the bulk commodity group are depending on resources and the economies of its exploitation. In the past extensive mining and cash cropping have been dominant economic activities. For obvious reasons9, little consideration was given in regard to the effects of possible economic constraints under market conditions; for instance, limitations of the cotton production due to irrigation capacities, or the dependency of mineral trade on world-market-prices and production costs. Current production levels of these commodities are sometimes half, than in the late 80s. As a result the growth potential for commodities is limited. It may never reach production figures above those of the years 1988/1989. Therefore appropriate growth rates for these commodities have been identified, reflecting possible recovery of the sector to a moderate level.

TRACECA trade data of 1998 and 2000 has been evaluated in this light. The results indicate that export of these commodities is only growing moderately at an annual rate of about 7% between 1998 and 2000. This reflects the current recovery process of the particular industries. For the purpose of this study it is assumed that output levels of 1990 may be again reached by the projective year 2015. A suggested average growth rate of 1.5% is calculated on the basis of the weighted production index for agricultural and mining of the countries in the region.

Trade volumes of the commodity group encompassing manufactured goods, consumer goods and other produces are showing strong growth rates. Between 1998 and 2000, trade of this group with Central Asia grew annually by 23%, whereby import increased by 30% and export by 11% every year on average. Growth in this commodity group is directly related to the growth of other sectors in emerging economies. These include new industries in the manufacturing sector, processing of agricultural products and resources, trading of consumer goods and of investment goods. There is also an evident direct relationship to economical activities of a country or a region and its economic growth.

In most countries of the world growth of international trade exceeds the growth of GDP considerably. Import and export elasticities normally range between 1.3 and 1.9. In eastern

9 The Soviet administration would not have planned to revert back to a liberal market economy.

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European countries trade elasticities even tend to be higher. The average trade- elasticity of this commodity group in TRACECA regions varied in countries between 1.6 and 5. High levels of trade elasticity may be influenced by recent imports of Machinery and other commodities. Investments in the oil sector may distort the overall picture and elasticities are not likely to be sustained over a longer period. For this matter the average trade-elasticity is estimated to be 2,5 in the context of this study (see Table “Trade Elasticities”, Annex 2).

According to these estimates, the development in Central Asia of the non-oil sector transport volume is expected to grow at an annual rate of 4.11%. This would result in a total transport volume with the European Region of 19 million tonnes in 2015. As part of this, bulk commodities are expected in the range of 7 million tonnes. Manufactured goods, consumer goods and other products lie in the range of 12 million tonnes (see Table “Trade Volume Central Asia”, Annex 3).

For countries in the Caucasus the non-oil sector transport volume is expected to grow by 6 % per annum, producing an overall transport volume with the European Region of 11.1 million tonnes in 2015. As a significant part of which, bulk commodities are expected in the range of 2.3 million tonnes. The commodity group of general cargo that includes manufactured goods, consumer goods and other products will lie in the range of 8.8 million tonnes (see Table “Trade Volume Caucasus”, Annex 4).

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Figure III: Estimated Transport Volume of the Caucasus and the Central Asian Regions with the European Region in 2015

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III. TRANSPORT SECTOR DEVELOPMENT

Roads and railways not only transport Central Asia's trade products, they are the avenues shuttling the economic hopes of each government. And they are not in great shape. International experts estimate that 1,500 km of roads in the region deteriorate each year, and that capital repairs have been well below annual requirements for years. Many rails use discarded track from Siberia, which makes for slow-speed traffic and frequent breakdowns. Rolling stock is poorly maintained. Both road and rail networks reflect outdated priorities.

The former economic integration of the Central Asian and Caucasus republics within the Soviet Union drove their transportation infrastructure toward European Russia, especially Moscow. The roads were developed to serve the monolithic Soviet economy and links with neighboring countries had no priority.

Rail is the most important mode of transport in the region, accounting for more than 75% of all freight and a significant percentage of inter-city passenger transport. The existing rail network already links the major cities and industrial centers of the region, and coverage is generally sufficient for current and short-term levels of economic activity. Freight volumes on the region's roads are increasing as a percentage of the transportation mix. Trucks can provide flexibility in distribution, particularly for emerging small traders and new businesses of the transition economies. As with the rail system, the road network of the TRACECA region is generally sufficient in the sense of linking together the major population, commercial, and industrial centers. However, international road transport corridors linking Central Asia with Europe are limited. Additional corridor routes are needed to meet future transport demands.

The need to upgrade the existing roads to meet the demands of future economic growth and activity is more urgent than new construction. Most of the network is badly deteriorated as a result of poor construction and lack of maintenance. The roads were not constructed to support a larger volume of heavy trucks. Deteriorated conditions cause slower travel with considerable wear and tear on vehicles and damage to goods.

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An IRU review of the transport situation on highways in the Russian Federation concluded that insufficient lengths and low technical conditions of highways account for 30% higher fuel consumption and 1.5 time higher transport costs compared to developed foreign countries10. Road conditions are similar in the TRACECA region and the conclusion of IRU is supported by analysis on transit times of Kazakh trucks on routes to Europe, showing that average driving speed on roads in TRACECA countries and the Russian Federation is 30% lower compared to Western Europe11. Bearing in mind that 80% to 90% of the distance of 5,000 to 6,000 km is driven on such roads the difference in speed has a significant impact on the level and cost of transport services.

The governments in the TRACECA region have identified a number of projects12 to improve the major highways; however, financing remains a major obstacle. Severe budget constraints are common. Regional infrastructure projects involving more than one country and their benefits are not limited to the country on which territory the investment is needed, cause particular problems in securing financing and coordinate implementation.

Countries of the TRACECA region receive assistance for the transport sector development from international financial institutions (IFI), bilateral donors, international organizations, and professional organizations. They also address development issues trough subregional organizations and intergovernmental initiatives (listing of organizations see table below). Prevalent focus is on infrastructure projects and on building capacities and formulating policies for trade and transport facilitation. The latter usually supports transitional processes, ongoing policy reforms and enhancement of regional cooperation.

Table 7: Organizations and Programmes involved in Transport Sector Development Subregional and International Organizations

! Economic Cooperation Organization (ECO) ! Intergovernmental Commission (IGC) TRACECA ! United Nations Economic Commission for Europe (UNECE) ! United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)

10 IRU, Road Transport in Russia 2002-2003 11 Analysis of data provided by KAZATO, carried out in the context of a UNESCAP case study on transit transport for Kazakhstan and Uzbekistan in December 2002 12 For example: (i) list of priority infrastructure projects of SPECA countries, regularly updated by the SPECA Project Working Group on Transport and Border Crossing facilitation (PWG-TBC); (ii) projects proposed by governments to IFI’s for financing.

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! United Nations Conference for Trade and Development (UNCTAD)

Donor Organizations

! EU Tacis TRACECA Programme ! EU Tacis assistance to national governments ! Bilateral Donor Programmes (e.g USAID, …)

Intergovernmental Programmes

! United Nations Special Programme for Economies in Central Asia (SPECA) ! UNDP Silk Road Area Development Programme (SRADP)

International Finance Institutions

! World Bank (IDA, IBRD, IFC) ! European Bank for Reconstruction and Development (EBRD) ! Asian Development Bank (ADB) ! Islamic Development Bank (IsDB) ! Kuwait Fund

Professional Organizations

! FIATA ! IRU ! UIC

While implementing trade and transport facilitation projects the organizations interact with concerned governments often in a similar manner and proposed actions are often alike. However, lack of coordinated activities among the programmes and project leads sometimes to duplication and may lead to inconsistent results having not looked at complex issues thoroughly enough.

To give an example: many programmes and organizations are recommending to the governments to establish national facilitation bodies with the participation of all ministries, agencies and stakeholders. The World Bank calls these bodies “Pro Committees”13, the UN “Facilitation Committees”14, and with in the TRACECA programme the countries have already established “National TRACECA Commissions” which are already implementing trade and transport facilitation measures. All the programmes provide somehow resources to

13 World Bank trade and transport facilitation project for the Caucasus countries 14 SPECA programme of work for transport and border crossing facilitation

TRACECA Co-ordination Team - Global Feasibility Study September 2003 67 TRACECA - Global Feasibility Study 22 July 2003 facilitate the work of these bodies. But human capacities of the countries are limited and repetition of similar exercises by different organizations wastes time and resources. In this regard a closer coordination of these organizations, programmes and projects would increase efficiency. Combining efforts and resources of interested organizations in providing support to these national facilitation bodies would improve their work significantly.

A high level of cooperation between IFIs and the TRACECA programme can be witnessed at physical infrastructure projects. E.g. feasibility studies, financed under the TRACECA programme, were jointly implemented with the EBRD and considered in their financing programme, or the rehabilitation projects for the roads between Almaty – Bishkek or Aktau - Atyrau were jointly financed by ADB and EBRD.

Projects related to policy reforms often face difficulties to reach anticipated objectives and tangible results within the given time frames. Policy reforms are linked to decision processes of governments with longer inherent time frames, where thorough scrutiny prevails over quick fixed solutions. Projects are set up in line with the different mandates of the organizations and programmes, and implementation follows according to their particular work practices.

IFIs and donor agencies tend to implement projects and programmes with international consultants in shorter periods of time. As a consequence they are facing difficulties to maintain sustained long-term programmes. Moreover, a frequent staff change in coordinating functions of long-term reform programmes is unfavorable for sustained programme management. Terms of references and contracts for consultants are provided by a donor agency sometimes with limited commitments of the beneficiary governments or agencies to the particular project.

Subregional and international organizations on the other side try to involve own staffs in substantive programme implementation and in doing so assure a long-term coordination and continuation of programmes. Despite a constrain of resources that limits the scope of activities of subregional and international organizations, work is carried out jointly and effectively with concerned government agencies on the basis of mandates endorsed by the governments.

The EU launched the TRACECA programme as technical assistance programme. The regional dimensions of TRACECA activities formed an intergovernmental programme where

TRACECA Co-ordination Team - Global Feasibility Study September 2003 68 TRACECA - Global Feasibility Study 22 July 2003 countries and governments gradually stepped up their commitments. By signing the Basic Multilateral Agreement (MLA) and establishing the Intergovernmental Commission (IGC), a new subregional intergovernmental organization has emerged. With the establishment of the Permanent Secretariat (PS) questions arise how the initial donor programme can be transformed into the activities of an intergovernmental organization. Aspects in this regard are further discussed in Chapter V of this study.

Financing Transport Sector Development

The financing of transport infrastructure projects by IFIs is a bilateral transaction and loans require a sovereign guarantee. Conditions for such loans include a minimum financial contribution from the borrower or beneficiary to the project and ranges between 20% and 25 %. Technical assistance projects are usually financed on a grant basis with little contribution by the beneficiary.

Since 1993 financing contributions and commitments from major development banks and donors for infrastructure investments and technical assistance amounts to US$ 3.5 billion.

Table 8: Financial Contributions of IFIs and Donor Organizations in TRACECA countries Institute Million US$ EU Tacis-TRACECA15 110 World Bank16 881 EBRD17 1,047 ADB18 388

15 Exchange rate between EURO and US$ has been selected as 1:1 for the purpose of the study 16 World Bank country briefs, commitment for the transport sector since 1991 17 EBRD signed projects per 31. December 2002, private sector: mill $ 27.835, state sector: mill $ 1,019.1 18 ADB, loans and technical assistance projects in Central Asia,

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IsDB19 137 Kuwait Fund20 16 JBIC / JICA21 1,000 Total 3,579

International Finance Institutions

EBRD’s lending volume for transport projects to the state sector of the newly independent TRACECA countries has been US$ 1.02 billion, whereby these loans have been committed in connection with Investment projects with a total volume of US $ 3.15 billion. A volume of US $ 2.12 billion was committed by the borrowers, beneficiaries, and co-financing partners. Private sector funding amounts to US$ 27.8 million with project volume of US$ 71.25 million. Borrowers of third parties contributed to EBRD’s transport sector projects US$ 2,175 million.

Since 1991 the World Bank committed US$ 881 million to the transport sector of TRACECA countries, thereof US$ 219 million for Central Asia, US$ 164 million for the Caucasus, and US$ 498 for the newly independent states of the Black Sea region. Borrowers contribution to this finance volume ranges at about US$ 176 million

The Asian Development Bank (ADB) focused its transport sector assistance to new member countries in Central Asia. Loans and technical assistance are provided to rehabilitation of roads and improvement of the railway sector. Further ADB initiated the programme Central Asian Regional Cooperation (CAREC) as regional initiative for the countries in Central Asia. Since ADB started its activities in Central Asia, loan commitments amounting to US$ 382 million and technical assistance for US$ 5.54 million have been allocated. As mentioned before, ADB is actively cooperating with co-financing partners and additional the co-financing of US$ 83.7 million was secured. Contributions from the borrower or beneficiary connected to the programme were US$ 171.4 million.

The Islamic Development Bank extended its activities also to a number of TRACECA countries and established a regional office in Almaty. About 35% of its funding volume is

19 IDB operations report March 2003 20 Finance of different road sections in Georgia including sections of the road Tbilisi – border to Armenia 21 Estimated by the TRACECA Permanent Secretariat

TRACECA Co-ordination Team - Global Feasibility Study September 2003 70 TRACECA - Global Feasibility Study 22 July 2003 allocated to the Transport sector amounting to US$ 137 million. The IDB provides also funding for technical assistance at about 2% of its funding volume.

The Kuwait Fund recently concluded a project in Georgia that includes rehabilitation of section of the road between Tbilisi and the border of Armenia, which is a vital part of TRACECA routes in the South Caucasus.

Donor Organizations

The regional dimension of TRACECA is further strengthening regional cooperation among the countries and achieved with signage of the MLA the establishment of the IGC TRACECA.

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The most visible result in this regard is the establishment of the Permanent Secretariat in Baku, which represents now an intergovernmental organization for the TRACECA sub-region and became the centre of all ongoing programme activities. Although the member countries’ level of commitment differs, TRACECA is providing a strong lead in formulation of regional policies and strategies for transport sector development of the whole region. In harmonizing transit transport between Central Asia and European countries, regional trade and transport standards are being adopted, which will become important for neighboring countries if they want to participate in regional trade with the TRACECA region.

Considering that TRACECA funding accounts only for less then 1.9% of the total investment volume for transport sector in connection with international finance mechanism, it has achieved considerable impact. Meanwhile, it provides substantial guidance and directions to the transport development at national and regional level, evidenced by increasing levels of cooperation with the TRACECA programme, and the entities the IGC by interested parties.

National Investments for Transport Infrastructure

The level of investments of the TRACECA countries has been relatively low due to lack of funds. Activities were limited to projects such as completion of some that started during the FSU and being of national importance, or building railway lines to reconnect separated national networks by new national boundaries. Available capacities and resources were overstretched with the maintenance of the eroding infrastructure, and the budget allocations for development projects had little priority.

The financing of infrastructure investments accounts for a significant portion of the national budgets. An analysis by the EU for 15 European countries (EU15) shows that annual transport infrastructure investments ranged between 0.5% and 1.5% of the countries GDP22. This ratio could be considered as level of annual transport infrastructure investments a country might need to meet economic needs. If applied to the TRACECA countries, annual levels for transport infrastructure investments would range at 2001 GDP levels for: Central Asia between US$ 190 million and US$ 575 million, Caucasus between US $ 55 million and

22 IRU, Comparison of Transport Infrastructure investments as % of GDP (EU15)

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US$ 166 million, and for the Black Sea region23 between US $ 700 million and US$ 1,360 million.

Current annual infrastructure investments of most of the TRACECA countries do not reach above indicated levels. This indicates that transport infrastructure is not yet maintained and developed at desired levels creating a favorable environment for development of agricultural and industrial sectors of a country. Although investment levels are still low, respective budgets are gradually increasing as indicated by increasing loan disbursements of IFIs. Considering qualitative aspects of infrastructure investments, the TRACECA programme provides vital instruments to national governments for coordinated planning and prioritizing of infrastructure investments, ensuring higher effectiveness.

Private Sector Investment

In addition to the investment activities of IFIs, Donors and public sector, private sector investments in areas of transport infrastructure are gradually emerging. Terminals, warehouses and service facilities to road and rail transport are being established, and rolling stock and vehicle are acquired by private enterprises in order to provide vital services to the to transport operation on the TRACECA corridor. For example the level of investment for the private oil terminal in Sangachal in Azerbaijan is about US$ 50 million, and the same level is being invested for a new private terminal at Batumi in Georgia. Private investors play an important role while pursuing commercialization and privatization of transport services for road and railway.

The commitments of governments and the development cooperation under the TRACECA programme for the transport sector development are certainly building higher confidence levels for investors.

23 except Turkey

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Transport Sector Reform Process

The transport sector reform process in the TRACECA countries is vital for economic stability, enables access to world markets via the TRACECA corridor as an alternative route and provides the basis for sustainable transport sector investments. For the purpose of the study, the reform process has been assessed by looking at institutional developments within the public sector of the countries and on the other side by examining the development of regulatory frameworks for transit transport.

Institutional Developments

The establishment of responsible ministries within the governments provides evidence for institutional development of the transport sector in TRACECA countries. Bearing in mind that former institutional structures in the transport sector were monopolistic and inhered regulatory as well as commercial responsibilities, the reform process has to deal in the first place with separation of these functions. Moreover, previous structures acted virtually independent and were not integrated in a national transport policy.

Countries took different approaches for their reform processes. Some countries already established responsible ministries for the transport sector such as Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Romania, Tajikistan and Ukraine. One of the first established ministries was the Ministry of Transport and Communication in Kazakhstan in 1993. Since then it has come a long way in developing its institutions for policy formulation and regulatory tasks. The other countries are following a similar process, whereby the implementation requires apparently a considerable time period until a fully functioning ministry is established. It also can be seen that success in this regard depends on the level of liberalization and private sector participation in transport operation. Far-reaching separation of policy formulation and regulatory functions from commercial and operational activities is understood to be favorable for the reform process. The latter should involve private sector operators in order to achieve competition in transport services.

TRACECA Co-ordination Team - Global Feasibility Study September 2003 74 TRACECA - Global Feasibility Study 22 July 2003 obvious in both countries when looking at the implementation level of international commitments such as those related to the Basic Multilateral Agreement.

Regulatory Frameworks for the Transport Sector

Road Transport Frameworks

The opening of the CIS countries to international trade has resulted in an increase in road transport with extensions to long distance activities. The market share of road transport has grown over the recent years, in particular for transportation of consumer goods and manufactured products from and to European countries. A regular transport between European countries and the countries of the Caucasus and Central Asia is now operating. It is carried out by operators form European and TRACECA countries with increasing participation of the private sector. However, there is a significant difference in regulations of the various trading areas and in compliance requirements. This situation presents problems for transporters of TRACECA countries when traveling to Europe. As the European Union (EU) extends eastwards, countries increasingly comply with EU Directives that became “international transport standard”.

The underlying framework for road transport consists of following regulatory instruments:

International conventions

Subregional cooperation agreements

Bilateral agreements and multilateral transit permit schemes

National regulations

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International Agreements and Conventions

United Nations Conventions and Agreements; 55 Agreements and Conventions in the field of transport have been prepared under the auspices of the UNECE that can be grouped as follows:

Transport infrastructure

Road Traffic and road signs and signals

Road vehicles

Other legal instruments related to road transport

Inland navigation

Border crossing facilitation

Transport of dangerous goods

Transport of perishable foodstuffs

Recognizing that harmonized transport facilitation measures at the national and international levels are a prerequisite for enhancing international transport, the UNESCAP Commission adopted the resolution 48/11 “Road and rail transport Modes in Relation to Facilitation Measures” in April 1992. The resolution recommended the member countries to consider acceding to seven international conventions related to facilitation of international transport.

Kyoto Convention; the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention), which has entered into force in 1974, is understood as a key legal instrument for harmonization of cross-border procedures. Since then the growth in international cargo, the incredible developments in information technology and a highly competitive international business environment, based on quality service and customer satisfaction, are influences that have created conflict with traditional Customs methods and procedures. The World Customs Organization (WCO) has therefore revised and updated the Kyoto Convention to ensure that it meets the current demands of

TRACECA Co-ordination Team - Global Feasibility Study September 2003 76 TRACECA - Global Feasibility Study 22 July 2003 international trade. The WCO Council adopted the revised Kyoto Convention in June 1999 as the blueprint for modern and efficient Customs procedures in the 21st century.

The revised Kyoto Convention is considered as the tool to assist the development of global Customs procedures. Once implemented widely, it shall provide international commerce with the predictability and efficiency that modern trade requires. The revised Kyoto Convention will come into force when 40 Contracting Parties to the Kyoto Convention (1974) have ratified or acceded to the Protocol of Amendment.

Implementation of the Kyoto Convention is considered as an important step towards accession to WTO. Among TRACECA countries, Kazakhstan has initiated to adopt the provisions of the Kyoto Convention as amended in 1999 and makes every effort such as revising the customs code and customs guidelines accordingly.

Countries have started to adhere to international transport agreements maintained under UNECE and as recommended by UNESCAP. However, the number of conventions ratified is still modest and the implementation process is lacking behind. Important conventions need to be ratified and relevant ministries and authorities need to consider a rapid improvement in adhering to international frameworks for movement of goods.

This work is closely associated with the institutional strengthening of the public administration in the transport sector. The case in point is to build up sufficient capability and resources within the Ministries of Transport and the subordinated administrations and authorities. A successful ratification of conventions means also that they become effective through adequate control and enforcement. This requires close cooperation both internationally and nationally between, for example, the transport authorities, the customs and the law enforcement authorities.

Subregional Cooperation Agreements

Beside the MLA, TRACECA countries have been involved in several other multilateral agreements on international transport. In 1995, China, Kyrgyzstan, Kazakhstan and Pakistan signed an agreement for traffic in transit. In 1998 member countries of the Economic Cooperation Organization (ECO) comprising Afghanistan, Azerbaijan, the Islamic Republic of Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan signed the Transit Transport framework Agreement. Also in 1998, China, Kyrgyzstan and

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Uzbekistan signed an agreement on international road transport. Those agreements are providing standards and regulations aiming at facilitation and harmonization of transit transport for the Countries of Central Asia.

In reviewing the developments with regard to the multilateral agreements it may be noted that the implementation process is still under way, some countries have only very recently ratified some of the agreements and implementation at national level is lacking behind. Following key issues should be considered:

Overlap of agreements; a number of TRACECA countries signed different multilateral agreements related to international transport need which contain different regulation, therefore countries need to carefully review the implementation of substantive articles of the agreements to avoid legal conflicts. They also need to clearly map their commitments to each contracting party as required by the different agreements.

Implementation of the agreements; the multilateral agreements were signed in the recent years. Some have been entered into force and some provisions have been implemented. However management systems for customs, immigration, traffic management etc. have not yet been put in place or adjusted according to the requirements of the agreements. The countries need to take actions to establish appropriate management systems within their concerned authorities for international transport under the agreements.

Accession to conventions on international transport; both the TRACECA and the ECO agreements encourage the contracting parties to accede to a number of international conventions for transport facilitation that provide a frame work beyond the regional limits of the said agreements. It should be noted that limited participation in the conventions by some countries cannot operationalize them in international transport. All countries and the relevant organizations should further pursue accession to relevant conventions and its subsequent implementation at national level.

Bilateral Agreements

TRACECA Co-ordination Team - Global Feasibility Study September 2003 78 TRACECA - Global Feasibility Study 22 July 2003 operators can operate on each other’s territory which include acknowledgement of each others national laws, restrictions to cabotage traffic, exceptions of transport that is allowed without holding a permit, conditions on distribution of permits to the national transport operators, and grants free of charge of a number of annual permits for preferential using each others national road network by truck operators of the contracting countries. Quotas of annual number of permits are usually ascertained through annual bilateral consultations on the basis of bilateral and transit transport requirements.

For example road transport between a Central Asian and a European country would require transit transport through a large number of countries. Truck operators need to obtain respective permits for all countries to pass through, in order to make use of preferential treatment under the bilateral regulations. Countries for which bilateral agreements do not exist, i.e. for Kazakhstan between Austria and United Kingdom, Kazakh truck operators are not permitted to enter or transit both countries, whereby in return truck operators from both countries could enter into Kazakhstan by a transit fee of about $160 according to the national regulation applicable for trucks not holding a permit.

The system of quotas through bilateral agreements appears to be complicated, since a number of government agencies are involved in this process. It has been reported some of the agreements have not yet been completed due to bureaucratic hurdles. Further reports indicate that bilateral quotas are often too low resulting in high prices for road permits. The difficulties of getting permits and their high price result to inconveniences – for example, by substituting trucks of one nationality for another, and transshipping loads from one truck to another at borders.

ECMT Multilateral Permits

The European Conference of Ministers of Transport (ECMT) operates a multilateral permit scheme for journeys between its member countries, which include Armenia, Azerbaijan, Bulgaria, Georgia, Romania, Russian Federation Turkey and Ukraine; however not all TRACECA countries have yet become member. ECMT permits may be used for journeys between member countries, including laden or empty transit journeys as well as third country journeys to other ECMT countries, which are prohibited by certain bilateral Agreements. Some countries - particularly Austria - impose additional restrictions on the use of ECMT multilateral permits.

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ECMT permits may not be used for (i) transit of ECMT countries on journeys to non-ECMT states; (ii) cabotage; (iii) unaccompanied trailers or semi-trailers; (iv) own account operations. The permits are valid for one calendar year and allow an unlimited number of journeys within that period. Permits may be transferred between vehicles but are valid for only one vehicle at a time. They must be kept on board for the whole journey. Each ECMT member country is allocated only a limited number of permits each year and an administration fee is applicable.

The ECMT permits are providing transport operators of the member countries with a greater level of liberal movement within the ECMT region. Although the ECMT permit scheme would be a step towards harmonization of road transport, the practice shows that ECMT permits may lead to distortion of competition. Further extension of the scheme to the TRACECA region needs careful scrutiny.

National Regulations

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NATIONAL Regulations for Road Transit in Kazakhstan and Uzbekistan

Kazakhstan has recently overhauled their rules and regulations for road transit by introducing the decree No 62 of the Government of the Republic of Kazakhstan, on 19 January 2002. This decree regulates entry, exit and transit of all foreign busses for more than nine passengers including the driver and trucks with loading capacity of over 3.5 tonnes. The decree sets out the regulations for transit permits taking into account bilateral and multi lateral agreements, and provides equal treatment for all countries. The current level of the fee for an entry/transit permit is about US$ 160 for trucks without permits obtained through bilateral quotas. The decree is not discriminating trucks of any foreign origin that comply with the set rules of the decree, and provide equal opportunity to obtain a permit for entry and transit. National regulations for road transit in Uzbekistan have a bilateral orientation where a number of related decrees of the Cabinet of Ministers of the Republic of Uzbekistan regulate entry/transit fees for vehicles of specific neighboring countries such as (i) Decree No 447, 28 September 1999 “On introduction of tax collection for entry and transit of road vehicles of Turkmenistan on the territory of the Republic of Uzbekistan”, (ii) Decree No 552, 31 December 1999, “On introduction of common tax rates for transit of freight road vehicles of neighboring countries through the customs territory of the Republic of Uzbekistan, (iii) Decree No 11, 8 January 2002, “On unification of collection for entry and transit of trucks and busses of the Republic of Tajikistan on the territory of the Republic of Uzbekistan”.

TRACECA countries attach high priority to transit fees for road transport, as it represents a source of income. Higher levels of the transit fees tend to have a prohibitive effect on transport of landlocked countries that depend on the transit routes through neighboring countries. Therefore agricultural products are traditionally important export commodities with limited sales margins. The level of transport costs decides on the feasibility for its foreign trade. In this regard it has been reported that high transport costs to traditional markets in the Russian Federation are prohibitive for agricultural products a number of Central Asian countries. Supply has been substituted by producers in Turkey, which benefit from lower transport costs to those markets.

An important step in implementing transport facilitation measures at national level would be the establishment of non-discriminatory national legislation for road transit transport. It needs to take into account requirements and commitments resulting from bilateral and multilateral agreements, as well as from acceded international conventions. The formulation of the legislation would help in framing a governing policy for the transport sector development. The recently introduced legislation in the Republic of Kazakhstan could be seen as an example in

TRACECA Co-ordination Team - Global Feasibility Study September 2003 81 TRACECA - Global Feasibility Study 22 July 2003 this regard, regulating clearly the terms for using roads while taking into account preferential treatment under bilateral agreements and commitments resulting from multilateral agreements and international conventions. If comparable governing policies with national regulations could be established in all TRACECA countries, transit and cross border procedures would experience a greater level of harmonization.

Even in the light of the new transit regulations in Kazakhstan road transport operators of Uzbekistan and Kyrgyzstan complain about high charges that are to be paid to “rent seeking” entities for transit through Kazakhstan at a level of US$ 1,500. A closer cooperation between the concerned authorities and transport operators of the region in the context of implementation of bilateral agreements may yield in reduction of these additional transit costs.

Railway Transport Frameworks

Besides relevant international conventions including the Customs Convention on Containers of 1972, the framework of legal instruments regulating railway transport is constituted for the TRACECA countries on one side through national regulations and on the other side through the two important railway specific conventions SMGS and CIM.

! The Agreement on International Rail Freight Communications (SMGS) which is managed by OSJD and the 24 member countries including all CIS Countries, China and the Islamic Republic of Iran,

! Uniform Rules Concerning the Contract for International Carriage of Goods by Rail (CIM), formulated by the Convention Concerning International Carriage by Rail (COTIF) and managed by the International Organization for International Carriage by Rail (OTIF).

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National regulations in respect to railway are usually defining the status of the national railway organization and their functions concerning the infrastructure (track), rolling stock and train operation. Historically, railway organizations of the former Soviet Union (FSU) inherited the monopoly on infrastructure and operation, but recent policy changes in some countries are considering private sector participation in railway operation. I.e. Kazakhstan recently introduced a legislation allowing private rail freight operators. Subsequently private entities have emerged operating also own rolling stock within Kazakhstan. As private rail freight operators are gradually emerging, difficulties are reported as they arise from the current regulations under SMGS since it is not covering sufficiently the function of freight forwarding business.

The railway organizations that are members of OSJD work under different legal, economic and technical conditions. The main difference is in the application of different systems of transport law (SMGS on the one hand and COTIF on the other) and the existence of different gauges (mainly 1435 mm and 1520 mm), with which the various standards and technical provisions are connected.

Despite efforts to harmonize the transport law, both systems are continued to apply in parallel for the future. This means it will be necessary to find a way of making it easier to transfer from one system of law to the other that might contribute towards bringing their individual parts closer together or even aligning them. In recent years, the tendency of both systems of transport law to extend the areas they have in common has emerged with the accession of the Islamic republic of Iran to SMGS.

The joint OSJD and UNECE work on using the SMGS consignment note as a customs transit document will also contribute towards making railway transport operations easier. Recommended actions in this regard are (i) adoption of a Resolution recommending Contracting Parties of the SMGS Agreement to adopt the SMGS consignment note as a Customs transit declaration, (ii) continued work towards finalizing a Convention including all facilitation measures similar to the procedures applicable to the CIM consignment note under the Common Transit system.

The TRACECA countries have made considerable progress in the first issue by deciding at the IGC Tashkent Conference in 2002 to use SMGS consignment note as the common transit document for rail transport under the TRACECA MLA. However, implementation is still

TRACECA Co-ordination Team - Global Feasibility Study September 2003 83 TRACECA - Global Feasibility Study 22 July 2003 in progress on TRACECA rail routes. This move may yield in harmonization of cross border documentation and would certainly streamline procedures. But the mayor differences between SMGS and CIM concerning harmonization of transport law and liabilities are not tackled. Adopting a transport law as defined under CIM would then clearly regulate transport reliabilities, providing a better legal basis and increased higher security for shippers and insurance companies, making the corridor more attractive.

Railway transit tariffs are set according to the so-called MTT (International Transit Tariff) scale, which is applied to rail freight traffic between OSJD member countries. The tariffs are based on a “Tariff Book” elaborated through a study during the time of the FSU and is revised twice yearly within the OSJD forums. The tariff setting mechanisms are institutionally and legally entrenched. Although the tariff is based on MTT, national governments set rates domestically. The tariff scales are based on long-discredited costing methodologies dating from the central planning era. The MTT scales allow heavy discounts, which compensate somewhat for the lack of rational costing and allows some commercial flexibility. In general high transit tariffs appear to cross-subsidize domestic traffic.

TRACECA countries introduced the TRACECA coefficient for the railway tariff in order to apply a harmonized pricing mechanism on the corridor, and increase competitiveness particularly to alternative routes via the Russian Federation

Because the traditional railway tariff MTT is commodity oriented it is perceived as an obstacle for multi-modal transport. Unit rates and through tariffs per container units would better serve the needs of the customers. The lack of containers in Central Asia and the Caucasus countries is only the physical sign of the problem, while the lack of common through-tariffs for container constitutes to be the major institutional barrier to its wider application. Inclusion of common through tariffs for international container transport in the framework of MTT would promote containerization and multi-modal transport in Central Asian and the Caucasus.

The ongoing TRACECA project “Unified Policies on Transit Fees and Tariffs” has focused on the railway tariff issue and developed a “TRACECA Transit Tariff (TTT)” which is currently discussed among the concerned railway organizations. As the new proposed tariff policy shall support multimodal transport in the region, ports and shipping lines are planned to be included in the tariff reform discussion. Adoption of the TTT on the TRACECA routes would

TRACECA Co-ordination Team - Global Feasibility Study September 2003 84 TRACECA - Global Feasibility Study 22 July 2003 be a milestone in the reform process and create a favorable environment for extending efficient container transport to the TRACECA region.

Regulatory Issues for TRACECA

Bilateral and multilateral agreements constitute a commitment of a government towards other countries; its execution at national level, however, depends on how effective individual countries have translated these commitments into their national legislation. As awareness about this issue is increasing among regulators in the region, it is addressed at a number of regional meetings. E.g. the SPECA PWG-TBC24 in this regard formulated in their “Action Programme on Transit Transport Cooperation for SPECA countries” following policy related actions:

! Develop guidelines to assist governments on ways to integrate relevant bilateral and multilateral commitments into national transport legislation

! Harmonize bilateral and multilateral agreements through cooperation at level of subregional organizations to improve conditions for transit transport cooperation

Both actions are relevant to improve trade and transport facilitation for TRACECA. With the TRACECA project “Common Legal Basis for Transport (CLBT)” issues regarding accession to international conventions and harmonization of the legal basis of TRACECA are already addressed. However, integration of bilateral and international commitments into national legislation and regulation mechanism is still a major issue in most of the countries and the TRACECA programme and the IGC may further address these issues through related projects and substantive work of the Permanent Secretariat.

24 The action programme was discussed and adopted by the SPECA PWG-TBC at its meeting in March 2003 in Baku, Azerbaijan

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IV. ANALYSIS OF EXISTING TRANSPORT ROUTES

The transit transport routes servicing the TRACECA countries in Central Asia and the Caucasus are manifold utilizing both road and railway transport. Given the current trade pattern, road transport is increasingly employed for the transport of manufactured and consumer goods. These goods are prominently imported from European countries and Turkey, whereby railway linkages are to a large extend used for the transport of oil, raw materials, bulk cargo, and containers.

The selection of transport routes and/or corridors therefore depends on a number of different factors such as transport mode, geographical location, cost, transport time, reliability and available services. Road transport operators are choosing different routes according to economical reasons. Routes and transport costs along the possible routes are depending on impediments in transit countries. Rail transport is commonly carried out on the network of the CIS countries. It is less impeded than road transport and costs are based on the application of traditional tariffs.

Container transport is only gradually emerging, as TRACECA countries in the Caucasus and Central Asia are landlocked, and have no direct access to maritime transport. Container transport depends heavily on the level of development of intermodal services of ports, railway, road and inland terminals.

The analysis of road, railway and container transport routes hereinafter is based on the information collected from government agencies and freight operators during missions to TRACECA countries in the Caucasus and Central Asia, as well as on respective reports and studies. For the purpose of this study major transport routes and corridors have been selected to reflect a realistic picture of the current transport situation. In this chapter factors related to distance, transport time and cost for the three transport modes have been elaborated in further detail as they are directly related to the feasibility of the TRACECA corridor.

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Road Transport

Road transport routes for transit transport of TRACECA countries in Central Asian and Caucasus are identified through the E-road network as laid down in the European Agreement on Main International Traffic Arteries (AGR), 1975, administered by UNECE, and the Asian Highway network for which currently an intergovernmental agreement is being drafted under the auspices of UNESCAP. Both network agreements identify transport routes and minimum required technical standards roads. The geographical coverage of both networks encompasses TRACECA countries and transit countries.

The assessment of road transport for transit traffic between Europe revealed that an increasing number of medium-sized operators in the region are being able to operate to and from Europe using modern trucks that meet high technical and environmental standards enforced in the EU. Compared to Europe a lower cost structure of TRACECA truck operators provides an advantage. It allows them to compete under present difficult conditions, where most road traffic is generated in foreign countries such as Turkey, Russia and European countries. This trend is reflected in UNECE statistics in the number of authorized persons to utilize TIR carnet and the number of TIR carnets issued by the IRU national associations in Central Asia and the Caucasus since 1996, in the tables below.

Table 9: Authorized Persons to utilize TIR Carnets in Central Asian and Caucasus Countries25

Number of authorized Country persons / operators

Armenia 4 Azerbaijan 11 Georgia 24 Kazakhstan 120

Kyrgyzstan 16 Uzbekistan 11

25 Source: UNECE, Oct 2002

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Table 10: TIR Carnets issued by the IRU National Association26 Country 1996 1997 1998 1999 2000 2001 2002 Armenia - - - - - 200 na Azerbaijan - 300 600 650 4,000 3,600 na Georgia 300 500 300 900 1,000 2,500 na Kazakhstan 2,000 0 3,500 9,000 7,000 8,000 10,000 Kyrgyzstan - - - - 100 550 na Turkmenistan - - - - - 150 na Uzbekistan 600 250 450 600 900 600 na

As mentioned above, road transport with European countries is mainly used for import of manufactured goods to the region. In this regard Kazakhstan’s road transport association (KAZATO) reported that 75% of current transport volume between Europe and Central Asia amounts for import into Kazakhstan, and only 25% for export to European countries. The import / export ratio is therefore 1:3, resulting in high number of empty return trips.

Central Asia - Europe

Depending on the country of origin or destination in Central Asia truck operators are choosing different routes. Truckers in Kazakhstan are preferring the “northern route” via the Russian Federation, Belarus and Poland into the European Union (EU) countries, whereby truck operators in Uzbekistan opt for the significantly longer “southern route” via Turkmenistan, Islamic Republic of Iran, Turkey, and the Balkan countries to enter into the EU region. However, road transport operators do not use TRACECA routes for transport between Europe and Central Asia due to many physical and non-physical barriers along that route.

The two major cities of Kazakhstan and Uzbekistan, Tashkent and Almaty, are in relative close proximity and the distance along the “northern route” from European countries to Tashkent is virtually the same as to Almaty. Distances of routes between Almaty respectively Tashkent in Central Asia and Berlin as European reference point are shown in the table below:

26 Source: UNECE TIR Handbook; KAZATO, Kazakhstan

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Table11: Transit Routes for Road Transport between Central Asia and Europe Transit Route* Length (km) 1. “Northern Route” (via Kazakhstan, Russian Federation, Belarus, 5,790 Poland, Germany) 2. “Southern Route” (via Uzbekistan, Turkmenistan, Isl. Rep. of 7,000 Iran, Turkey, European countries, Germany 6,250 3. TRACECA Route via ferry Aktau-Baku, Poti-Ilichevsk, Ukraine, (4,710 road) Poland, Germany (1,540 ferries) 5,980 4. TRACECA Route via ferries Turkmenbashi-Baku, Poti- (4,440 road) Ilichevsk, Ukraine, Poland, Germany (1,540 ferries)

* Tashkent (Uzbekistan) to Berlin (Germany)

Transport Time between Central Asia and Europe

Overall transport times of road transport between Central Asian and European countries vary between 10 and 20 days depending on the transport route and country. Factors influencing the transport time of road transport operators include: problems of border crossing procedures, regulations for issuance of visas, customs transit regulations, control stops by traffic police, and poor condition of roads. Reported transit times and related significant waiting times are summarized in the table below.

Table 12: Transit Time and Waiting Time for Road Transport in Central Asia

Transit time and waiting time on the “northern route” ! Average transit time is 10 to 13 days for destination in Germany (KAZATO) ! Russian customs operates a “Customs Convoy” which incurs sometimes 3-4 days waiting time for trucks (KAZATO) ! Waiting time at Belarus border ranges between 4 –7 days (KAZATO)

Transit time and waiting time on the “southern route” ! Average transit time is about 20 days (Central Asia Trans) ! Visa regulations for Turkmenistan require 5 to 12 days waiting time (Central Asia Trans, UZIFA, IRU Report) ! Ferry in Turkmenistan (IRU Report)

The comparison of both routes shows that road transport on the “northern route” is on average 7 to 10 days shorter than on the “southern route”. This allows Kazakh transport

TRACECA Co-ordination Team - Global Feasibility Study September 2003 89 TRACECA - Global Feasibility Study 22 July 2003 operators to run comparable transport services between Central Asia and Europe in 50% to 65% of the time that Uzbek transport operators require.

An analysis of the transit time on the “northern route” also indicates that more than 50% of transit time is spend with waiting at border crossing points at the Kazakhstan / Russian Federation border (3-4 days) and the Russian Federation / Belarus border (4-7days). Assuming that waiting times could be reduced through policy measures to reasonable levels, transit time then would be shortened by more than 50% to about 6 days.

The average driving speed of the trucks in various countries is influenced by of road conditions, institutional barriers within countries, and other stoppages. For transit through Belarus, Kazakhstan, Poland, the Russian Federation the average speed27 is about 50 km/h, while for transit through Austria, France, Germany, Italy, Spain average speed is about 70 km/h. Average speed is an indicator for conditions of roads and level of institutional barriers within transit countries. This explains the importance of improving the quality of road transport infrastructure, as it will be vital in order to achieve economical benefits from shorter transport times and reduced operations cost.

Transport Cost between Central Asia and Europe

Overall transport costs for transport between Central Asian and European countries are reported to be in the range of $ 6,000 to $ 10,000 depending on the nationality of the truck operator and the route that is being taken. The contract price for European trucker for example from Germany, is reported to be $ 8,000 to $10,000, for Kazakh trucks $ 6,000 to $7,00028 for origin/destination in Kazakhstan, and for Uzbek trucks $ 7,000 to $ 8,00029 for origin/destination in Uzbekistan. The rates are applicable to a standard European 12 meter semi trailer. The quoted prices are representing the contract price for a customer and include all applicable transport costs, fees and charges occurring during the transport. Due to the imbalance of transport volume the contract price also includes a portion for the empty return journey. Significant fees and charges as they have been reported to incur on the different routes are summarized in the Table below.

27 Analysis of truck transport data from KAZATO 28 KAZATO 29 UZIFA, Central Asia Trans

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Table 13: Transit Fees and Charges for Road Transport

Transit fees and charges on the “northern route” ! Russian customs operates a “Customs Convoy” and its official charge per truck is said to be US$ 200, but the total costs for the convoy per truck is reported to be US$ 1,500 (including rent sought by the convoy operators) ! Belarus is imposing a number of charges such as entry charge, customs stamp charges, compulsory insurance despite “green card”, ecological fees, local levies, parking fees, road fee for the main trunk route, etc., amounting to about US$ 300 per journey (IRU report)

Transit fees and charges on the “southern route” ! Turkmenistan is imposing variety of different charges and levies ranging according to reports from US$ 650 to US$ 1,000 depending on different factors.

By comparison there is a cost advantage of the “northern” over the “southern” route. Assuming a certain operating cost structure on the “southern” route, the additional distance of about 1,200 km leads to additional transport costs of approximately US$ 800. Considering the significant level of transit fees as they occur in Belarus, Russian Federation and Turkmenistan, transport costs can be reduced by almost 30% on the “northern route” and about 10% on the “southern” route if transit fees and “rents” could be eliminated through policy measures. Moreover, the “northern route” would bear a cost advantage of about US$ 2,150. Further potential for transport cost reduction lies with possible reductions of transit time if efficiency of transport and utilization of equipment can be increased.

Caucasus – Europe

Road transport routes of TRACECA connect Armenia and Azerbaijan with ports in Georgia linking to the road network in Turkey. Truck traffic initially increased via Georgian and Azeri roads. However, with emerging non-physical barriers, transit fees and “rent seeking” behavior in the Caucasus traffic levels slumped and trucks diverted to alternative routes. Today, trucks are taking different routes from Europe different routes namely: (i) TRACECA route from European countries to Bulgaria, ferry from Burgos to Poti, and Georgia to Azerbaijan; (ii) Northern route from European countries via Poland, Ukraine or Belarus, Russian Federation to Azerbaijan; (iii) southern route from European countries via Turkey, and Islamic Republic of Iran to Azerbaijan.

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Table 14: Transit Routes for Road Transport between Caucasus and Europe Transit Route (Baku – Frankfurt) Length (km) 1. “Northern Route” (via Russian Federation, Belarus or Ukraine, 4,384 Poland) 2. “Southern Route” (via Isl. Rep. of Iran, Turkey, European 4,564 countries) 3. TRACECA Route (via Azerbaijan, Georgia, ferry Poti-Burgos, 4,068 Bulgaria to European countries)

Transport Time between Caucasus Countries and Europe

Transport time between Europe and the Caucasus depends on the route taken by the truck operators. For transport to Azerbaijan there are three routes, which are mainly used. The choice depends on parameters such as nationality of the truck and type of cargo. Transit time and waiting time for road transport are summarized in the table below.

Table 15: Transit Time and Waiting Time for Road Transport of Caucasus Region

Transit time and waiting time on the TRACECA route ! Average transit time is 18 to 20 days for destination in UK or Germany ! Waiting time at ferry terminals ! Customs convoy through Georgia 2 –3 days, waiting times at customs terminals Transit time and waiting time on the northern route ! Average transit time is 12 to 15 days for destination in UK or Germany if customs convoy is not required ! Russian customs operates a “Customs Convoy” for special listed cargo which incurs sometimes up to 7 days for trucks ! Waiting time at Belarus border ranges between 4 –7 days Transit time and waiting time on the southern route ! Average transit time is about 18 to 20 days

! Transshipment time at Istanbul, Turkish trucks transship cargo at Istanbul as different trucks are used for the routes

The northern route is preferred for imports from European countries, as it requires the least number of visas for CIS drivers. But as the Russian Federation imposes a customs convoy for specified cargo, leading to increased fees and additional waiting times, trucks with such cargo prefer the TRACECA or the southern route.

Transit through Georgia also requires a customs convoy. There are stops at 4 customs terminals where accompanying customs officials are replaced. The journey is interrupted at every terminal and trucks have to wait for the formation of the next convoy. Transit through Azerbaijan in this regard is not interrupted, but it has been reported that foreign trucks are

TRACECA Co-ordination Team - Global Feasibility Study September 2003 92 TRACECA - Global Feasibility Study 22 July 2003 more often controlled then Azeri trucks. The TRACECA route in the Caucasus bears potential to reduce the transport time from currently 4 – 5 days to 1-2, only by elimination of the institutional barrier of the custom convoy in Georgia. Improved quality of roads in Azerbaijan and Georgia would further improve the transport time and reduce transport costs.

Transport Cost between Caucasus Countries and Europe

Transport costs for a 12 m semi-trailer from Europe to Azerbaijan are ranging between US$ 5,200 and US$ 6,500. The price depends on the route and nationality of the driver. Similar to Kazakhstan, import to Azerbaijan is exceeding export, therefore trucks are usually returning empty and this cost is included in the price. To use the empty capacity truckers take return loads at reduced prices and it has been reported that Ukrainian trucks are accepting return loads for about US$ 2,500 from Azerbaijan back to Europe.

Since Azerbaijan and Georgia are members of ECMT, transport operators are using “green permits” for their trucks. This represents an advantage over the bilateral third country permit system. However, ECMT permits are limited and if not available, trucks need to obtain permits under bilateral quotas. Concerned authorities issue these permits, but official quotas apparently exhaust soon and truckers have to find those on the grey market, where the price exceeds the official fee of US$ 20 by eight to ten times. Despite having either the ECMT permit or bilateral permits, it has been reported that Georgia is not granting the preferential treatment and truckers have to pay about US$ 250 for official road tax. As mentioned above, trucks are obliged to drive in a customs convoy in Georgia, with stops at 4 terminals resulting in additional convoy fees and unofficial “terminal fees”. Major fees and charges are summarized in the table below.

Table 16: Transit Fees and Charges for Road Transport of the Caucasus Region

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Transit fees and charges on the northern route ! Russian customs operates a “Customs Convoy” and its official charge per truck is said to be US$ 200, but the total costs for the convoy per truck is reported to be US$ 1,000 (including rent sought by the convoy operators) ! Belarus is imposing a number of charges such as entry charge, customs stamp charges, compulsory insurance despite “green card”, ecological fees, local levies, parking fees, road fee for the main trunk route, etc., amounting to about US$ 300 per journey (IRU report)

Transit fees and charges on the TRACECA route ! Terminal fees in Georgia at customs terminals US$ 20 to US$ 30 per terminal ! Road tax in Georgia US$ 250 (despite agreed preferential treatment) ! Bilateral road permits / third country permits cost in Azerbaijan US$ 150 to US$ 200 (official fee US$ 20)

Road Border Crossing

Border crossing times vary between a number of days and a few minutes. While crossing borders in Western European countries is experienced as a swift procedure, it is cumber some and time consuming among the CIS countries. A huge number of possible checks/inspections are applied to international road transport dependant on the particular country and they are related to (i) the cargo, (ii) the vehicle and (iii) the driver. Procedures related to cargo include customs control and inspection, veterinary and phytosanitary inspection. Procedures related to the vehicle can include check of fuel quantity for fuel taxation exceeding a given tax-free threshold, vehicle tax, road charges, transit fees, Green Card for vehicle insurance, mandatory national insurance payments, transport permits (bilateral, transit, third country, ECMT), payments for special for special permits, axle loads, gross vehicle weights and dimensions, vehicle certificate, road worthiness of vehicles, compliance with ADR and ATP provisions, customs security of transport vehicle, statistical data, etc. Procedures related to the driver include a check of provisions concerning the driving and rest periods, driving license, passport and visa.

The existing border procedures are not yet in compliance with principles of the revised Kyoto Convention. They also do not yet meet the obligations arising from the Basic Multilateral Agreement (MLA) of TRACECA, many bilateral agreements and international conventions that have been signed and ratified. Although these agreements have been concluded in

TRACECA Co-ordination Team - Global Feasibility Study September 2003 94 TRACECA - Global Feasibility Study 22 July 2003 order to simplify and harmonize cross border procedures, no significant changes happened over the past few years. As traffic increases, the border delays will become more severe.

TRACECA30 studies indicate that border-crossing procedures can be simplified and streamlined and recommend performance indicators to establish common standards:

Table 17: Road Border Crossing Performance Indicator Road Border Crossing Performance Indicator31 For outbound and inbound trucks average transit time through then control zone should not exceed 20 minutes per truck and should achieve a processing minimum of 3 trucks per hour per processing lane, with a future target of 10 Minutes per truck or 6 trucks per hour per lane with automation or the introduction of reduced controls

The recommendation is in line with respective provisions of the TIR convention and should be considered as a target performance, which could be achieved through implementation of a number of physical and legislative improvement measures.

TRACECA for Road Transport

TRACECA routes crossing the Caspian Sea and the Black Sea by ferry and with transit through Azerbaijan, Georgia and Black Sea countries are distance wise a viable alternative. TRACECA provides a shorter, or at least comparable, alternative for road transport between Europe and Central Asia. Although ferry services are in place TRACECA is currently perceived as not viable to access Aktau port in Kazakhstan due to poor road conditions, difficult transit regulations in Turkmenistan, insufficient cross Caspian Sea ferry services for trucks, and high “transit fees and charges” and non-physical barriers imposed along the route transiting through Turkmenistan, Azerbaijan and Georgia. Difficulties arising from present road conditions in Azerbaijan and Georgia are further constraining the development of TRACECA road transport for Central Asia.

Under present conditions truck operators in Central Asia are virtually confined to the northern or southern routes. By the end of 2002 when the TIR carnet system was about to be

30 TRACECA Project: Harmonization of Border Crossing Procedures, Recommendation of Border Harmonization Evaluation Workshop 31 TRACECA Border harmonization Evaluation Workshop, Baku September 2002

TRACECA Co-ordination Team - Global Feasibility Study September 2003 95 TRACECA - Global Feasibility Study 22 July 2003 suspended on the territory of the Russian Federation, Central Asian road transport operators realized the seriousness of their dependence on a single transport route. Suspension of the TIR system in Russian Federation would have brought Kazakhstan’s trucking services to Europe virtually to an end. To overcome the present route confinement alternative corridors need to be developed, whereby only TRACECA provides viable independent alternatives for road transport between Europe and Central Asia.

Feasibility of TRACECA for road transport is determined by competitive conditions of alternative routes. The table below summarizes the commercial parameters for TRACECA road transport for countries in Central Asia and the Caucasus.

Table 18: Commercial Parameters for Road Transport on TRACECA Routes Central Asia ! Transport time: currently 10-12 days - in future transport time may reduce to 6 days (as cross border and transit procedures can be harmonized / streamlined) ! Transport cost: currently US$ 6,000 – 7,000 - in future transport cost may reduce by up to 30% (as rent payments and high transit fees can be reduced). Caucasus ! Transport time: currently 12–15 days - in future transport time may reduce to 6 days (as cross border and transit procedures can be harmonized / streamlined) ! Transport cost: US$ 5,200 – US$ 6,500 - in future transport cost may reduce as rent payments and high transit fees can be reduced.

The assessment of road transport shows that conditions of road infrastructure and ferry services, “rent seeking” behavior, transit fees, and cross border procedures have been identified as the major barriers for TRACECA road transport. Efforts of the TRACECA programme in this area have not yet yielded in visible improvements of TRACECA’s road transport capacities.

The Development of road transport needs to be addressed with highest priority, and tasks for its development rests with the countries along these routes. As it is time for TRACECA routes, there is a need to step up the countries efforts to develop necessary subregional transport infrastructure and related transport services, as well as resolve institutional barriers and impeding issues through subregional cooperation.

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Railway Transport

Railway transport provides for the backbone for container and bulk cargo transport connecting Central Asian countries with Baltic Sea ports, Pacific ports, Black Sea ports, Mediterranean and Persian Gulf ports. The railway network adequately exists and countries are also developing additional routes for example to the Islamic Republic of Iran and China. However, the status of railway infrastructure in Central Asian and the Caucasus countries does not yet meet the performance standards as set in the “European agreement on important international combined transport lines and related installations”32 (AGTC), hence some countries in this region are still hesitant to accede to the AGTC.

The AGTC formalizes the transport network for multimodal transport and ensures conformity and application of internationally approved standards on agreed railway routes within the territory of its member countries33. Already a number of countries, which provide important railway linkages for transit transport to Central Asia and the Caucasus, have acceded to the AGTC, namely: Belarus, Georgia, Kazakhstan, Poland, and Russian Federation. The other countries in Central Asia and the Caucasus may also consider acceding to the AGTC. Hence its implementation would bring special focus on the identification of respective railway routes and terminals, and improvement of performances parameters and technical standards with regard to multimodal transport.

Central Asia - Europe

The length of railway routes between places in Central Asia and Europe differ by more than 1000 km, depending on the route. TRACECA provides a shorter alternative than the “Southern Corridor” and distances are slightly longer than the “TAR-Northern Corridor”. Only TRACECA and the TAR Northern Corridor are regularly in use for transport to Europe, as the southern corridor is also interrupted by a ferry link crossing lake Van in Turkey. Respective distances with Almaty, Baku and Tashkent as reference points are shown in the Table below.

32 AGTC is included in the list of International agreements and conventions in the field of transport of UNECE 33 Contracting Parties to the AGTC: Austria, Belarus, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Finland, France, Georgia, Germany, Greece, Hungary, Italy, Kazakhstan, Luxemburg, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, Slovakia, Slovenia, Switzerland, Turkey

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Table 19: Distances of selected Railway Routes between Cities in the TRACECA Region Asia and Europe

34 Distance Routes to Frankfurt / Germany (km) – Russian Federation – Belarus – Poland (TAR-Northern 6,350 Corridor) – Uzbekistan – Turkmenistan – Caspian Sea – Azerbaijan – Georgia – Black Sea – Bulgaria – Romania – Central Europe 6,700

Almaty Almaty (TRACECA Route) – Uzbekistan – Turkmenistan – Islamic Rep. of Iran – Turkey - 7,600 Bulgaria – Romania – Central Europe (Southern Corridor) – Russian Federation – Belarus – Poland (TAR-Northern 5,750 Corridor) – Uzbekistan – Turkmenistan – Caspian Sea – Azerbaijan – Georgia – Black Sea – Bulgaria – Romania – Central Europe 5,900 (TRACECA Route) Tashkent Tashkent – Uzbekistan – Turkmenistan – Islamic Rep. of Iran – Turkey - 6,800 Bulgaria – Romania – Central Europe (Southern Corridor)

Whether export of cotton and oil products, or import and transit of humanitarian goods, and containerized project cargo for newly established industries, rail transport is perceived as efficient and achieving sufficient performance levels.

Existing break of gauge points at Sarakhs (Turkmenistan/Islamic Republic of Iran) and at Brest (Belarus/Poland), as well as ferry links across the Caspian sea and the Black Sea are certainly operational hindrances, but do not cause exceptional delays compared with existing institutional barriers which represent the main reasons for waiting times and delays at border crossing points.

Transport Time between Central Asia and Europe

Transport time of railway transport depends primarily on the type of operation. The study distinguishes regular railway operations from block train operations, because transport times differ significantly. However, for railway transport between Europe and Central Asia regular operations is prevalent, regular block trains have not yet been established with the exception for a few routes.

34 UNESCAP, Land Transport corridors between Central Asia and Europe

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The TRACECA study on Railways Inter-State Tariff and Timetables Structure in 1997 indicates transit times between different places in Central Asia and Europe between 21 and 34 days. Freight forwarders in Central Asia reported that railway transport between Europe and Kazakhstan of Uzbekistan takes 30 – 35 days for single wagon shipments. The duration of transit time and its variation is seen as extremely problematic for providing efficient logistic services to customers. Shipments via TRACECA, as indicated by freight forwarders, require similar transport times as on the northern corridor. Transport times of whole train shipments or groups of wagons are faster, as shunting time is reduced. An example for reduced transit times has been given by company Intercontainer as they use the “Ost Wind” block train from Berlin to Moscow, thereby reducing the transit time to about 13 days from the Ruhr area in Germany to Almaty in Kazakhstan.

Transport Costs between Central Asia and Europe

Transport cost for rail shipments are determined by the MTT. Tariff agreements between Belarus, Russian Federation, Kazakhstan and Uzbekistan established favorable conditions for railway transit transport between Europe and Central Asia by applying the MTT on a through basis. Since 2001 when railway organizations of Azerbaijan, Georgia, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan, Ports of Aktau, Baku and Batumi, and Caspian Shipping Company and Ukrferry agreed to provide joint competitive tariffs through application of a “TRACECA Coefficient” the differences of transport costs compared to the Northern Corridor were reduced to the same level and competition was established.

Rail transport also competes with the road transport sector, where transport operators arrange unit shipments for the import of consumer goods of one or more covered wagons. In this regard rail transport offers price wise competitive alternatives, e.g. a consignment from Istanbul (Kapikule35) to Almaty or Tashkent loaded in a CIS wagon with a capacity of 135cbm or 53 tonnes costs about $ 7,500, compared to a truck capacity of about 84cbm and up to 25 tonnes and reported transport costs of about $6,00036. However, the transit time of conventional rail transport, which varies between 30 to 35 days for a single wagon, appears not efficient for the said shipment. Whereas reliability of rail transport is reported to be high

35 Kapikule is the border station Turkey / Bulgaria with access to CIS rail gauge (1520 mm) 36 UZIFA

TRACECA Co-ordination Team - Global Feasibility Study September 2003 99 TRACECA - Global Feasibility Study 22 July 2003 as far as the same sealed wagon can be used, and transshipments between wagons at break of gauge points can be avoided. In cases were the cargo has been transferred between wagons of different gauge (i.e. land route from Turkey via Moldova) pilferage has been experienced.

Caucasus – Europe

Railway transport of the Caucasus region is dominated by crude oil and oil product oil shipments, as pipeline capacities are limited. Despite the construction of new pipelines, an increasing volume of oil products will substitute crude oil shipments and high track usage will continue.

Railway transport is also used for some shipments from European countries to the Caucasus. Freight forwarders prefer rail transport for out gauge cargo and heavy shipments such as steel and heavy equipment. As security is perceived as an issue, high value shipments are not transported via traditional rail freight.

Two principle rail routes are used for transport between Europe and the Caucasus as shown in the table below:

Table 20: Rail Routes between Europe and the Caucasus Distance Routes to Frankfurt / Germany (km) – Russian Federation – Belarus – Poland (TAR-Northern 4,151 Corridor)

Baku – Azerbaijan – Georgia – Black Sea – Bulgaria / Romania / Ukraine 3,784 – Central Europe (TRACECA Route)

Transport Time between Caucasus and Europe

Rail transit time on the northern route for example from Europe to Azerbaijan is between 15 days and 18 days, whereby loading and lashing needs to be calculated with additional 7 to 8 days. In comparison container shipments by rail via TRACECA route take 21 to 22 days, including 4 – 5 days between Poti and Baku. 4 – 5 days for railway service between Poti and Baku is considered as slow. The distance is 865 km and if railway operation would perform

TRACECA Co-ordination Team - Global Feasibility Study September 2003 100 TRACECA - Global Feasibility Study 22 July 2003 with 300 km per day37, transit time could be reduced to less then 3 days. If block train operation would be introduced, then transit time can be reduced to less then 2 days with an average speed of 750 km per day. For example, oil trains between Baku and the Black Sea ports in Georgia are often operated as block trains with transit times as low as 26 hours and with border clearance at the Azerbaijan – Georgian border within 6 hours only.

Transport Cost between Caucasus and Europe

Transport costs are reported for rail shipments at US$ 85 per tonne on the northern route. Freight operators who are specialized on shipments via TRACECA reported that with the introduction of the TRACECA coefficient their price level is equal to the northern corridor, as the coefficient coordinates efforts to make current tariff setting mechanism competitive.

Railway Border Crossing

Crossing the borders by rail is accompanied by complex operational processes such as change of locomotives, crews and break of gauge operation, marshalling, technical inspection of train by railways of one or both countries, and preparation of rail transfer documents, and institutional procedures including customs check of railway bills against wagon list and cargo documents, customs inspection, veterinary and phytosanitary control.

Average border-crossing times in Europe range at 30 – 40 minutes, where as those in the CIS countries are measured in days rather then hours. UNECE recommendation for border stopping time is 60 minutes for international shuttle trains38, and 30 minutes for combined transport39.

TRACECA studies40 indicate that border-crossing procedures can be simplified and streamlined and recommend performance indicators to establish common standards:

37 UNESCAP, Land transport corridors between Central Asia and Europe, 1997 38 UNECE, Resolution 248 39 AGTC 40 TRACECA Project: Harmonization of Border Crossing Procedures, Recommendation of Border Harmonization Evaluation Workshop

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Table 21: Border Crossing Performance Indicators - Railway Railway Border Performance Indicators41 It is recognized that the Processing time for this type of operation is dependant on the size of train, number of wagons and whether wagons are being inspected by one or two railway organizations. However, it is considered that a target processing time of 120 minutes should be achievable, even on the largest international trains The breakdown of the 120 minutes is as follows: ! Railways – registration of documents – 30 minutes ! Customs – registration of documents – 60 minutes ! Railways – final preparation of documents – 30 minutes Inspection by both railways and customs should be completed within the overall time span of 2 hours In the case of total transit trains with bulk cargo this should be reduced to 90 minutes

TRACECA for Rail Transport

Intermodal / Container Transport

The commonly used containers in Europe (20’ and 40’) follow the standards of the International Standardization Organization (ISO). These containers can generally be used in all land and waterborne modes of transport. They are usually stackable and can be lifted with

41 TRACECA Project: Harmonization of Border Crossing Procedures, Recommendation of Border Harmonization Evaluation Workshop

TRACECA Co-ordination Team - Global Feasibility Study September 2003 102 TRACECA - Global Feasibility Study 22 July 2003 a spreader. However, they do not generally offer optimum loading capacity for ISO pallets (EURO) or fully utilize the maximum dimensions available in land transport. A 40’ container can accommodate 25 – 26 EURO pallets or 60 cubic meter (cbm), whereby a 12 meter trailer can take up to 30 to 32 EURO pallets or about 84 cbm. Therefore containers are not widely used in European land transport.

Shipments of TRACECA countries using ISO containers generally happen when one leg of the intermodal transport chain is carried out by maritime transport. For example shipments from America, Asia, and Europe have an initial sea transport leg via ports in the Mediterranean Sea, Black Sea, Persian Gulf, Pacific, or China. As shipping lines are connected to such transports, they are also providing container equipment and logistics and maintain container depots. If shipping lines are not offering such services, shippers have to purchase their own containers. There are also a few land transport container logistics provider, which are usually connected to rail transport, but their geographical coverage and container stocks are limited and they alone cannot offer sufficient land transport container service to the TRACECA region.

International shipping lines are gradually developing container logistics in the region. They more and more establish representations and develop logistical concepts in order to have better access Caucasus and Central Asian countries and canvass the market. This is evident as shipping line agents meanwhile maintain empty container depots in order to provide equipment for export shipments. Until now containers are primarily used for import cargo, but this trend appears to change as transport operators in Central Asia experience increasing empty container demand for export. This trend may be related to increasing processing and manufacturing activities, where the products are also being exported.

The length of railway routes, providing transport services for container of TRACECA countries to major seaports in the Pacific, Persian Gulf, Mediterranean Sea, Black Sea, and Baltic Sea, ranges between 865 km and 8,800 km depending on origin/destination. Respective distances with Almaty, Baku and Tashkent as reference points are shown in the table below.

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Table 22: Distances of Railway Routes between Places of the TRACECA Region and major Seaports Routing Distance (km) – Drushba – Shanghai (Pacific) 5,370 – Vladivostok (Pacific) 7,850 – Novorossiysk (Black Sea) 4,630 TRACECA – Aktau – Baku – Poti 4,600* (Black Sea) Almaty Almaty – Riga (Baltic Sea) 5,350 – Bandar Abbas (Persian Gulf) 4,800 [3770**] – Mersin (Mediterranean Sea) 5,421 – Drushba – Shanghai (Pacific) 6,320 – Vladivostok (Pacific) 8,800 – Novorossiysk (Black Sea) 3,950 TRACECA – Aktau – Baku – Poti 3,900* (Black Sea)

Tashkent Tashkent – Riga (Baltic Sea) 5,500 – Bandar Abbas (Persian Gulf) 3,800 [2770**] – Mersin (Mediterranean Sea) 4,421 TRACECA – Poti (Black Sea) 865 – Riga (Baltic Sea) 3,390 Baku – Bandar Abbas (Persian Gulf) 2,445 * Include distance across Caspian Sea Aktau - Baku (4 68 km) ** After commissioning of Mashad – Bafq section in Isl.Rep. of Iran

Among the possible routes for the TRACECA countries to access seaports, TRACECA routes are among the shortest, thereby providing most direct access to maritime transport via ports at the Black Sea. Shorter routes should also be time and cost wise more efficient, as physical transport is minimized. However, current transit times and costs on TRACECA routes are indicating that transport logistics has not yet reached competitive levels.

Central Asia

Transport for container shipments with destinations in Central Asia are predominantly organized by railway. Transit time for railway transport between Central Asian places and ports varies between 9 and 35 days. E.g. containerized shipments from the Republic of Korea to Uzbekistan were delivered from ports in China to the Kazakh border at

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Drushba/Alashankou within 7 days by block trains, and further 2 days for reaching the destination in Uzbekistan. The table below indicates transit times for container shipments on selected routes.

Table 23: Transit Time for Railway Shipments Routing Container Transport by Railway Transit time Ports in China – Alashankou / Drushba - Tashkent 9 days (Container Block trains “Deawoo shipments”) Ports in China – Alashankou / Drushba - Almaty (regular 15 – 23 days railway transport ) 12 – 18 days (to China border), (2-3 days waiting time at the border) Novorossiysk – Almaty (single container shipment) 14 days European country – Almaty/Kazakhstan via Northern 30 – 35 days Corridor and TRACECA Brest/Poland – Belarus – Russian Federation – 15 – 16 days (+/- Kazakhstan border 5days)

Average transit speed of railway transport for the above selected routes ranges between 200km/day and more than 700 km/day (including waiting time at border crossing). The latter performance was achieved while moving project cargo by block trains from ports in China via Drushba/Alashankou, Kazakhstan to Uzbekistan. Whereas the average transit speed ranges for regular railway shipments between 230km/day and 360km/day on the same route, which is currently perceived as acceptable.

The assessment of the costs for container shipments railway shipments between ports and Central Asian focused on per TEU. The table below shows the information made available for transport of container shipments from the given ports to Central Asian Destinations.

Table 24: Transport Cost for Container Transport by Railway Routing Cost $ 1,435 - $ 2,000 (20’) Istanbul – Novorossiysk – Almaty (sea / rail) $ 2,385 - (40’) Port in China-Drushba/Alashankou-Almaty $ 1,522 (20’)

Indicated transport prices for container transport to Central Asia also include a portion for return transport to the port/depot of the respective shipping line, due to the imbalance of current trade. An analysis of transport costs for container between ports and places in Central Asia shows that the transport costs measured in TEU/km for the railway movement

TRACECA Co-ordination Team - Global Feasibility Study September 2003 105 TRACECA - Global Feasibility Study 22 July 2003 varies between US$ 0.20 and US$ 0.24, which may be considered as reasonable compared with operational costs for rail container transport where the rate for TEU/km is understood to be in the range of US$ 0.1 - US$ 0.16.

The available data may also allow the conclusion that current market rates for transport of a 20’ container from ports to places in Central Asia ranges at about US$ 1,500. As the transport costs for container also include a portion for the empty return of the container to the depot it appears that the current price level may have only further potential for reduction if the market for import and export of container transport would be better balanced and secure business for full container shipment both ways. For comparison selected transport routes are shown in the table below:

Table 25: Comparison of selected Transport Routes for Central Asia 20’ Cont. to Distance (km) Time Cost (US$) Comment Almaty / Tashkent Novorossiysk Rail: 865 14 days 1,435 – 2,000 Regular Road: used Ports in China Rail: 2,445 15 – 23 days 1,522 Regular (Block-train: 9 used days) Poti Rail: 3,900 / 15 - 20 days 2,670 Not regular (TRACECA) 4,600 used

Caucasus

Container bound for Azerbaijan are transported via Bandar Abbas or Poti. The route via Bandar Abbas is about 1,400 km longer to Baku then the route via Poti, but transport costs are lower and transit times are comparable.

Table 26: Comparison of Routes for Container Transport to Baku 20’ Cont. to Distance (km) Time Cost (US$) Remark Baku Poti Rail: 865 Port handling. 1 day 800 (rail, 40’ and Road: 960 Truck: 4 – 5 days door/door single 20’ loading) only by Railway: 4 – 5 days 1,200 – truck 1,300 (truck) Bandar Abbas Ferry, Rail: Container loading: 2 days 1,250 (truck) Transit 2,445 Truck transport: 6-7 days through Iran Road: 2,300 (can exceed if problems unreliable with documents occur)

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A number of issues are impeding the transport from Poti to Baku such as: single 20’ container shipment and 40’ container cannot be transported by rail as 20’ containers need to be stored door to door for security reasons. Thus single 20’container shipments and all 40’ containers are being transported by truck. Documentation and procedures are cumbersome in Poti, average transport speed for railway is slow, and road transport is impeded by customs convoy regulations. If trucks wood have a free passage in Georgia, transport time between Poti and Baku could be reduced to about 24 hours. The possibility of faster rail transport for container is evidenced by the performance of present oil block trains between Azerbaijan and Georgia, which is in some cases as low as 26 hours transit time.

Container Transport for TRACECA

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V. TRACECA PROGRAMME REVIEW

A programme review can be performed either from a macro perspective looking at the overall objectives of the TRACECA programme, or at micro level, judging individual projects and activities. Divergence of micro level objectives and macro level goals inherits that accomplishment of overall objectives is not necessarily depending solely on the level of achievement of individual project goals. While a monitoring programme evaluates individual projects, this chapter is focusing on the projects contribution to the transport sector development and to regional cooperation.

Hereinafter, the TRACECA programme review is briefly analyzing the projects with regard to its contribution to the development of the transport modes and how the issues emanating from the analysis of existing transport routes of previous chapters are addressed by the TRACECA programme. Further project funding has been specifically dedicated to intergovernmental work and regional cooperation among the member countries, leading to the signage of the MLA and the establishment of the IGC and the Permanent Secretariat. Thus a basis has been created for regional cooperation of the TRACECA countries, which is being analyzed in the second part of this chapter.

TRACECA Projects

Since 1993 the Tacis TRACECA Programme is implementing 39 technical assistance projects and 14 investment projects with a total value of about EURO 110 million.

Technical Assistance Projects

Technical assistance projects were initiated in all areas of transport along the TRACECA corridor in order to begin with capacity building for the transport corridor development. The range of technical assistance included: projects for particular modes such as road, railway, and maritime sector, for all transport modes of one or more countries, for intermodal and trade and transport facilitation projects, for project coordination, and for regional cooperation. In the light of the analysis of existing transport routes and the feasibility of TRACECA routes (Chapter IV), the technical assistance projects have been grouped either according to the principle modes of transport: road, rail and intermodal/container transport, or be allocated to

TRACECA Co-ordination Team - Global Feasibility Study September 2003 108 TRACECA - Global Feasibility Study 22 July 2003 assistance for regional cooperation and programme coordination as shown in Annex 6 and summarized below:

Table 27: Distribution of TRACECA Technical Assistance Projects Budget (million Transport Mode Number of Projects EURO) Road 9 14.725 Rail 9 11.0 All Modes 7 10.53 Inter Modal Transport, 7 8.25 Container Transport Regional Cooperation, 7 13.2 Programme Coordination Total 39 57.705

Although projects may not always have achieved some of their objectives, substantial work has been undertaken in capacity building of government officials and stakeholders involved in transport sector planning and management.

Evaluation reports point out that the level of cooperation with the beneficiary organizations has always been critical for success of projects. However, projects with institutional and/or legislative components have been difficult as time frames for legal and institutional changes were beyond the sphere of the implementing contractor. As shown in the evaluation report42, projects are highly interlinked and have built on each other’s experience and achievements. This is an indication of the value of individual projects for the TRACECA programme.

Investment Projects

Beside the 12 investment projects with a total value of EURO 52.3 million, also 8 of the technical assistance projects are directly related to support of investment projects with a total value of EURO 10.775 million (see Annex 7). Some projects prepared feasibility studies for project financing by IFIs; other projects provided technical assistance for implementation of TRACECA investment project.

42 Evaluation of Tacis Regional TRACECA Programme, Draft report, June 2003

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The 12 TRACECA investment projects are being implemented either in conjunction with projects of IFIs or represent urgent rehabilitation measures to overcome bottlenecks of railway, road and maritime sector or provide equipment for intermodal transport operation. In view of the development of transport routes, the investment projects have been grouped (Annex 8) to the principle modes road, rail and intermodal as follows:

Table 28: Distribution of TRACECA Investment Projects Budget (million Transport Mode Number of Projects EURO) Road 1 2.5 Rail 4 22.075 All Modes 3 11.8 Inter Modal Transport, 6 15.925 Container Transport Total 14 52.3

The distribution of all TRACECA projects according the transport modes and project types (Annex 9) is shown in the figure below:

Figure IV: Distribution of all TRACECA Projects

Distribution of TRACECA Projects

Reg.Coop. 12% All Modes Intermodal 20% 22%

Road 16% Rail 30%

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Out of the total budget of EURO 110 million 12% is being spend on projects for regional cooperation and project coordination, and 78% on the development of the transport modes. Although the distribution appears even balanced, accomplishments of implemented projects may yield with different time lags. Investment projects provide equipment or infrastructure that is available for use immediately after delivery, whereby accomplishments of technical assistance projects may yield at later stages as and when the environment will be conducive. As described in chapter III, the countries are undergoing an institutional development process by establishing responsible ministries for the transport sector and adjusting their regulatory frame works, thus delivered technical assistance and capacity building of the TRACECA projects have positively contributed to this process at various levels.

A further analysis of the technical assistance projects concerning their responsiveness to current transport sector issues shows how individual projects have dealt with the different issue areas. Important issue areas which emanate from the discussion of the transport sector development and from the analysis of the of transport routes are summarized as follows:

Table 29: Transport Sector Issue Matrix for TRACECA Transport Sector Development Transport Routes / Services ! Accession to international ! Improve quality of roads Conventions and Agreements ! Build missing road links ! Non discriminatory national ! Reduce “rent seeking” behavior for legislation for international road transit, border crossing and permit

Rail ! Harmonize tariff for TRACECA ! Improve cross border movements region ! Cooperation of transport operators ! Establish unit based tariff and for intermodal container transport through tariff for container ! Increase security for container transport by rail transport

Container Container ! Allocate priority to container transport Intermodal / by rail 7. Promote policy reforms, deregulation of transport monopolies 8. Harmonize bilateral and multilateral agreements 9. Cooperation among national agencies / ministries 10. Capacity building 11. Private sector participation in transport services 12. Coordination with IFIs and international organizations Cross Cutting Cutting Cross

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The responsiveness to the above issue areas is shown in the table in Annex 10. Projects with a direct mode orientation for road and rail are dealing only with one or a few issue areas. Projects of the category43 Legal & Trade and Horizontal, which were initiated mainly in the context of the MLA, cover a wider spectrum of the issue areas. Assuming that improvement of transport services may only be successful if issues of the transport sector development are collectively pursued, such projects that cover a wider range of issues may yield better results for the transport corridor development.

Basic Multilateral Agreement

What has been achieved

A significant foundation for regional intergovernmental cooperation for developing the TRACECA corridor was laid with signing the Basic Multilateral Agreement (MLA) at the international conference “TRACECA – Restoration of the Historic Silk Route” at Baku in September 1998. Countries have taken ownership for the development of the TRACECA corridor with a firm commitment at presidential level, elevating the Tacis project “TRACECA Programme” to an intergovernmental programme.

The Permanent Secretariat, the annual TRACECA Conferences, and numerous working group meetings are a clear indication for active intergovernmental cooperation. Member countries are taking decisions by consensus, which in turn attach high priority to the implementation by ratifying IGC decisions.

Objectives of the TRACECA programme and provisions of the MLA are comprehensively framing the short and medium term task of the IGC and its subsidiary bodies. A unique structure has been built with establishment of the IGC, the PS and the working groups at regional level, and National Secretaries and National Commissions at national level. Hence actions of the TRACECA programme are followed through in the member countries regular feedback is ensured to the coordinating PS.

43 Brochure “TRACECA 1993 – 2002, published by the TRACECA Coordination Team

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Elapsed time of less than five years since signing the MLA can be considered as very short compared with what has been achieved. No other intergovernmental agreement of this dimension has ever been ratified by its signatories within just two years, and not to mention the establishment of basic functioning intergovernmental structures in less than five years. This progress is owing to a few visionary high-ranking politicians of TRACECA countries and a dedicated programme management of the European Commission.

Although important structures of the IGC have been established, its institutions are experiencing shortcomings while taking up the work. Mandates, legislative and programmatic structures, functions, responsibilities and administrative frameworks still need to be further refined. These tasks are underway, but cannot be accomplished over night as none of the CIS countries are experienced in intergovernmental work; moreover they are economies in transition with huge national tasks in building new governmental and economical structures, and new legal frameworks, thus additional regional requirements for economic cooperation in the transport sector are bringing an additional dimension to this process.

Member countries and the European Commission attach high importance to TRACECA alike. Further countries show initiatives to coordinate TRACECA activities with other transport sector programmes. For example the SPECA PWG-TBC included TRACECA projects into the Action Programme for Transit Transport Cooperation, and national secretaries of some countries are participating in SPECA meetings. Further countries also draw attention to the TRACECA programme at international fora such regional transport conferences and legislative meetings of UNECE and UNESCAP.

Need to strengthen the institutions

It is widely understood that the MLA and the IGC are forming the foundation for regional cooperation among the countries, hence questions arise how to improve the intergovernmental cooperation and to how to strengthen its institutions. As the coordination team is directly involved in the day-to day work of the IGC and the PS, a number of areas have been identified that need to be strengthened in order to enhance effectiveness of the IGC and the PS, which include the following:

Servicing of IGC meetings by the PS

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Long-term coordination of the substantive work programme at regional level

Transforming the Tacis project “TRACECA” into a substantive work programme of the IGC and the PS

Broaden the basis of the IGC for support and cooperation within the member countries

Increase activities and visibility of the IGC and the PS at international level

The work of the Coordination Team has evolved twofold, on one side the team of experts is coordinating all ongoing TRACECA projects with its offices in Baku, Odessa, and Tashkent, and on the other side is the Baku office deeply involved in supporting administrative, legislative and substantive work of to the PS. The latter is critical to sustain the function of the PS, as it is lacking own professional staff. In addition above-mentioned projects provide also substantive support to the PS in assisting the IGC in pursuing their three theme areas. However, due to shortages in core staff of the PS, project personnel are frequently requested to assist the PS in administrative and legislative work. Present conditions under which the PS has to perform its work are not satisfactory. Thus this process may only be sustained temporarily as the projects are on contractual basis and will end eventually, leaving the PS and the IGC behind without having established own professional and administrative capacities.

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The division for example could perform substantive task for project implementation such as of the three ongoing projects as the respective team leaders and coordinators do it. Regional projects that are related to the work of the IGC should continue with an adjusted structure as part of a substantive programme of the PS with “extra budgetary” funding. The new division of the PS then would manage these projects with funding provided by donors for additional expertise as well as organization and participation of meetings. Organizations like UNECE, UNESCAP, ECO, and OECD are following such a project funding practice in implementing their substantive work programme.

The professional staff of the PS should further provide substantive lead and support for the legislative work of the IGC, which means preparing of high quality meeting documents, organizing and servicing legislative meetings and preparing comprehensive meeting reports. Preparation of meeting documents and reports is a critical issue for the success of the commission, as both are the most important instruments to prepare the discussion and to disseminate recommendations and decisions.

Extra budgetary funding can be provided in many different forms such as providing Experts for administrative and professional support of the PS, seconding of government officials, providing budgets for particular projects, contributions to the regular budget, supporting

TRACECA Co-ordination Team - Global Feasibility Study September 2003 115 TRACECA - Global Feasibility Study 22 July 2003 participation of meetings, providing hosting facilities, etc. As described in Chapter III of this study a number of donors and funding institutions having strong interest in developing transit transport in the TRACECA region, and they may become part of a funding concept for the IGC TRACECA programme.

Recommended actions

From the viewpoint of the coordination team of experts following principle actions are necessary to ensure sustainable development of TRACECA and the work of the IGC:

Refinement of the meeting structure of the IGC and its legislative meetings

Elaboration of a detailed structure for the PS including administrative and substantive divisions, descriptions of tasks and responsibilities, and budget proposal for the regular budget

Elaboration of a medium term plan for the PS and a short-term (e.g. biannual) programme of work for legislative and substantive tasks

Elaboration of funding concepts for the regular budget and extra budgetary funding of the PS and its programme activities

Proposals in this regard may be prepared by the PS and discussed by an expert group meeting of the TRACECA countries in order to prepare recommendations for the IGC for consideration. Emphasize should be given on thorough elaboration of the proposal and concepts and on reaching wide consensus among the countries. With regard to new funding concepts, a dialogue with potential donors, organizations and countries needs to be initiated, whereby the TRACECA member countries should play a leading role.

A possible structure and functions of the IGC, the PS and the interaction with the member countries has been outlined in Figure V below. The proposed structure emphasizes on a clear delineation of regional and national spheres. Thus the IGC, the PS and the Working Groups are the mandated organs for regional coordination of the provisions of the MLA, and the National Secretaries and the National Commissions are the coordinating and implementing entities in the member countries.

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The Permanent Secretariat is coordinating the work of the TRACECA programme at regional level. It is further charged with task to facilitate the work of the IGC, that includes organizing the legislative meetings (IGC, Working Groups), preparing meeting documents, carrying out reporting and other mandated tasks arising from the MLA and requested by Working Groups.

The Working Groups are intergovernmental committees mandated by the MLA and being established through IGC decisions. As defined by the MLA, they are coordinating the transport sector development of TRACECA at regional level and prepare recommendations to the IGC for consideration. In order to achieve thorough scrutiny of development issues, the Working Groups are the bodies that shall perform in-depth discussion of substantive issues and reach consensus before submission of recommendations to the IGC. Hence nominated delegates from member countries participating in Working Groups shall be clearly mandated by their governments.

The National Secretaries are the Focal Points of the PS in the TRACECA member countries. They are playing a key role in reporting and coordinating between the PS and their National Commission in implementing the provisions of the MLA and IGC decisions at national level.

The National Governments are proposed to be primarily associated with the IGC with two key ministries, namely the ministry of foreign affairs and the responsible ministry for the transport sector. Involvement of both ministries is seen as vital as the work of the IGC concerns both, international affairs of a country and transport sector development at national level. As transport harmonization along TRACECA routes concerns a wider range of ministries and agencies in a country, all concerned entities (ministries and agencies) as well as professional bodies and private sector stakeholders are proposed to participate in the National Commissions.

Structure of the IGC TRACECA; as emanating from the MLA and taking into account principles of intergovernmental relationships, the structure of the IGC with its Permanent Secretariat and subsidiary bodies, and the interaction with national governments has been outlined in Figure V overleaf.

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Figure V: Outline Structure of the IGC TRACECA

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VI. CONCLUSIONS AND RECOMMENDATIONS

Analysis of trade and transport developments of the TRACECA region (Chapter II) outlines present macro economic environment and trade and transport volumes of the TRACECA countries, as well as expected trade and transport volumes for 2015 relevant for the TRACECA corridor, representing present and future demand for transport services.

Review of transport sector development (Chapter III) and analysis of existing transport routes (Chapter IV) shows how the transport sector and infrastructure responds to present demands.

Finally the TRACECA programme has been reviewed (Chapter V) with regard to its contribution to the transport sector development needs and emanating issue areas of present transport routes and operation.

Hereinafter, discussed feasibility considerations of this study are summed up according to the four selected aspects:

Competing alternative transport routes for TRACECA

Competition in transport services

Regional cooperation

Capabilities of existing transport routes and infrastructure

Feasibility of TRACECA Routes

Competing Alternative Transport Routes

Economical development of the landlocked countries depends not only heavily on the access to international markets, but also on the access of intra regional markets of the TRACECA region. Hence transit transport opportunities for landlocked countries in Central Asia and in the Caucasus are crucial while considering feasibilities of TRACECA. High transport costs TRACECA Co-ordination Team - Global Feasibility Study September 2003 119 TRACECA - Global Feasibility Study 22 July 2003 are burdening the economies of such countries and as the analysis of transport routes shows, substantial reduction to appropriate levels can only be achieved if competing alternative transport routes:

Road Transport

TRACECA routes provide shorter, or at least comparable alternative routes for road transport between Europe and Central Asia

TRACECA routes provide the only independent alternatives for road transport between Europe and Central Asia

Rail Transport

The effect of competing routes became evident with introduction of the TRACECA coefficient for railway tariff, resulting in tariff reduction of up to 20% on the northern route.

Rail transport of the TRACECA corridor is constraint by the bottleneck of the Caucasus railway, which is saturated among others by increasing transport of oil crude oil and oil products.

Container Transport

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Competition in Transport Services

Regional Cooperation

Capabilities of Existing Transport Routes and Infrastructure

The non-oil sector trade of the Caucasus and Central Asia with countries of the European region is likely to increase from about 10.5 million tonnes in 2000 to about 30 million tonnes in 2015. The railway network, which primarily carries bulk cargoes, needs to absorb additional 2 million tonnes of bulk cargo and growing quantities of oil products, which are

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Available capacities and condition of the railway network in the Russian Federation are not suggesting that such additional transport volumes will easily be absorbed. Own economic developments of the Russian Federation will certainly enjoy higher priorities in using the network and transport facilities. This is evidenced by already occurring shortcomings of capacities such as the port of Novorossiysk, where own oil shipments of the Russian Federation are already handled with priority. Similar prioritizing can be expected for bulk and general cargo shipments by rail in the future, leading to increased transport costs and reduced service levels.

The TRACECA corridor is crucial to provide in future sufficient transport infrastructure to enable competitive transport services for TRACECA countries to access European and World markets.

Focus Areas for TRACECA

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Areas that need to be strengthened in order to enhance effectiveness of the IGC and the PS are identified as follows (Chapter V):

Table 30: Identified Areas to Increase Effectiveness of the IGC ! Servicing of IGC meetings by the PS ! Long-term coordination of the substantive work programme at regional level ! Transforming the Tacis project “TRACECA” into a substantive work programme of the IGC and the PS ! Broaden the basis of the IGC for support and cooperation within the member countries ! Increase activities and visibility of the IGC and the PS at international level

In this context following principle actions are considered necessary to ensure sustainable development of TRACECA and the work of the IGC:

Table 31: Recommended Actions for Institutional Strengthening of IGC 5. Refinement of the meeting structure of the IGC and its legislative meetings 6. Elaboration of a detailed structure for the PS including administrative and substantive divisions, descriptions of tasks and responsibilities, and budget proposal for the regular budget 7. Elaboration of a medium term plan for the PS and a short-term (e.g. biannual) programme of work for legislative and substantive tasks 8. Elaboration of funding concepts for the regular budget and extra budgetary funding of the PS and its programme activities

While strengthening the institutions, activities and projects with focus on identified substantive issues should be gradually transformed from a donor programme to a programme of the IGC. While strengthening professional and programme management capacities of the IGC, project implementation should be integrated into the work programme of the PS. Identified issues as shown in the Table below would then be pursued at regional level by the programme of work of the PS.

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Container Container ! Allocate priority to container transport Intermodal / by rail 13. Promote policy reforms, deregulation of transport monopolies 14. Harmonize bilateral and multilateral agreements 15. Cooperation among national agencies / ministries 16. Capacity building 17. Private sector participation in transport services 18. Coordination with IFIs and international organizations Cross Cutting Cutting Cross

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ANNEXES

1 Tables 1.11 – 1.18, 1.20 - 1.27 Transport Flows of the TRACECA Subregions - Year 2000 (source TRACECA Database)

2 Table: Trade Elasticities

3 Table: Transport Volume Central Asia

4 Table: Transport Volume Caucasus

5 Table: Committed World Bank Loans for the Transport Sector

6 Table: TRACECA Technical Assistance Projects

7 Table: TRACECA Investment Projects

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Annex 1

Tables 1.11 – 1.18, 1.20 - 1.27 Transport Flows of the TRACECA Subregions - Year 2000 (source TRACECA Database)

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Annex 1.11 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: European Countries, America Oil Sector Non Oil Sector Bulk Cargo General Cargo

Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargol Central Asia 24) Kazakhstan Imp 14 162 0 14 162 406 623 3 406 626 121 039 158 030 377 599 656 668 1 063 293 1 077 456 Exp 906 392 22 297 090 23 203 482 3 116 318 78 691 3 195 009 24 795 82 304 29 741 136 840 3 331 849 26 535 331 Total 920 554 22 297 090 23 217 644 3 522 941 78 694 3 601 635 145 834 240 334 407 340 793 508 4 395 142 27 612 787 Kyrgyzstan Imp 2 238 0 2 238 114 288 0 114 288 15 657 2 702 24 706 43 065 157 353 159 590 Exp 748 0 748 14 480 20 208 34 688 7 284 234 10 954 18 472 53 159 53 907 Total 2 985 0 2 985 128 767 20 208 148 975 22 941 2 936 35 660 61 537 210 512 213 497 Tajikistan Imp 15 391 15 391 271 979 0 271 979 11 769 205 297 26 230 243 296 515 275 530 666 (1999 data) Exp 0 0 168 727 76 206 244 933 0 215 12 805 13 020 257 953 257 953 Total 0 15 391 15 391 440 706 76 206 516 912 11 769 205 512 39 035 256 316 773 228 788 619 Turkmenistan Imp 0 8 506 8 506 104 262 0 104 262 13 139 1 676 51 978 66 793 171 055 179 560 Exp 552 44 866 45 418 1 691 171 184 172 874 18 2 14 824 14 844 187 718 233 136 Total 552 53 372 53 923 105 953 171 184 277 136 13 157 1 678 66 802 81 637 358 773 412 696 Uzbekistan Imp 0 3 929 3 929 356 049 5 356 054 45 116 6 536 399 228 450 880 806 934 810 863 Exp 0 1 005 645 1 005 645 148 449 520 683 669 132 791 1 803 72 966 75 560 744 692 1 750 337 Total 0 1 009 574 1 009 574 504 498 520 688 1 025 186 45 907 8 339 472 194 526 440 1 551 626 2 561 200 Total CA Imp 16 400 27 826 44 225 1 253 200 8 1 253 208 206 721 374 241 879 741 1 460 702 2 713 910 2 758 135 Exp 907 691 23 347 601 24 255 293 3 449 664 866 972 4 316 636 32 887 84 558 141 291 258 735 4 575 371 28 830 664 Total 924 091 23 375 427 24 299 518 4 702 864 866 980 5 569 844 239 608 458 798 1 021 031 1 719 437 7 289 281 31 588 799

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Annex 1.12 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: Russian Federation Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargol Central Asia 24) Kazakhstan Imp 1 070 968 1 009 638 2 080 606 4 503 565 3 4 503 568 325 061 694 523 2 263 850 3 283 434 7 787 001 9 867 608 Exp 48 121 6 178 034 6 226 155 37 069 893 5 373 37 075 266 117 826 1 425 028 173 976 1 716 830 38 792 095 45 018 250 Total 1 119 089 7 187 672 8 306 761 41 573 458 5 375 41 578 833 442 887 2 119 550 2 437 826 5 000 264 46 579 097 54 885 858 Kyrgyzstan Imp 55 210 0 55 210 151 623 0 151 623 15 559 753 29 203 45 515 197 138 252 348 Exp 1 141 0 1 141 9 888 12 609 22 497 8 604 718 81 621 90 942 113 439 114 580 Total 56 352 0 56 352 161 511 12 609 174 120 24 163 1 471 110 824 136 457 310 577 366 929 Tajikistan Imp 0 31 564 31 564 167 095 0 167 095 2 915 17 230 41 973 62 118 229 213 260 777 (1999 data) Exp 0 4 4 54 022 7 072 61 094 0 1 476 98 370 99 846 160 940 160 944 Total 0 31 568 31 568 221 117 7 072 228 189 2 915 18 706 140 343 161 964 390 153 421 721 Turkmenistan Imp 1 218 20 504 21 721 168 037 0 168 037 29 373 2 788 27 954 60 114 228 151 249 872 Exp 0 0 0 354 7 115 7 469 133 8 4 937 5 078 12 547 12 547 Total 1 218 20 504 21 721 168 390 7 115 175 506 29 506 2 795 32 891 65 192 240 697 262 418 Uzbekistan Imp 0 40 494 40 494 446 610 643 447 253 39 880 1 876 62 456 104 212 551 465 591 959 Exp 0 127 060 127 060 35 056 192 768 227 824 17 504 2 884 490 565 510 953 738 777 865 837 Total 0 167 554 167 554 481 666 193 411 675 077 57 384 4 760 553 021 615 165 1 290 242 1 457 796 Total CA Imp 1 127 396 1 102 200 2 229 596 5 436 930 646 5 437 575 412 788 717 170 2 425 435 3 555 393 8 992 968 11 222 564 Exp 49 262 6 305 098 6 354 360 37 169 213 224 937 37 394 149 144 067 1 430 113 849 470 2 423 649 39 817 798 46 172 158 Total 1 176 658 7 407 297 8 583 955 42 606 142 225 582 42 831 725 556 854 2 147 283 3 274 905 5 979 042 48 810 766 57 394 722

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Annex 1.13 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: East and South-East Asia Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargol Central Asia 24) Kazakhstan Imp 26 136 0 26 136 229 017 1 229 017 37 726 32 263 12 647 82 636 311 653 337 789 Exp 59 915 192 915 250 3 758 206 981 3 759 187 15 829 64 183 5 506 85 518 3 844 705 4 759 955 Total 26 194 915 192 941 386 3 987 223 981 3 988 204 53 554 96 447 18 153 168 154 4 156 358 5 097 744 Kyrgyzstan Imp 0 0 0 21 021 0 21 021 3 701 16 743 22 278 42 722 63 743 63 743 Exp 186 0 186 78 763 758 79 521 1 059 0 16 516 17 576 97 097 97 283 Total 186 0 186 99 784 758 100 542 4 761 16 743 38 794 60 298 160 840 161 027 Tajikistan Imp 0 1 664 0 1 664 550 1 794 748 3 092 4 756 4 756 (1999 data) Exp 0 2 556 658 3 214 0 882 10 737 11 619 14 833 14 833 Total 0 0 0 4 220 658 4 878 550 2 676 11 485 14 711 19 589 19 589 Turkmenistan Imp 0 16 16 5 605 0 5 605 4 079 287 3 223 7 588 13 193 13 210 Exp 0 0 0 30 4 207 4 237 0 0 27 440 27 440 31 677 31 677 Total 0 16 16 5 635 4 207 9 842 4 079 287 30 663 35 029 44 870 44 887 Uzbekistan Imp 0 898 898 77 853 13 77 866 33 390 3 947 40 071 77 408 155 274 156 172 Exp 0 1 487 1 487 3 113 82 191 85 304 340 16 42 962 43 318 128 622 130 109 Total 0 2 385 2 385 80 966 82 204 163 170 33 730 3 963 83 033 120 726 283 896 286 281 Total CA Imp 26 136 914 27 050 335 160 14 335 173 79 445 55 034 78 967 213 447 548 620 575 670 Exp 245 916 679 916 924 3 842 669 88 794 3 931 463 17 228 65 081 103 162 185 471 4 116 934 5 033 857 Total 26 381 917 593 943 974 4 177 828 88 808 4 266 636 96 673 120 115 182 129 398 917 4 665 553 5 609 527

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Annex 1.14 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: Iran, Indian Sub Continent, Middle East, Africa, etc Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargol Central Asia 24) Kazakhstan Imp 3 687 0 3 687 24 899 0 24 899 8 181 18 740 40 072 66 993 91 892 95 579 Exp 40 816 0 40 816 1 968 871 2 724 1 971 594 14 034 25 791 1 669 41 494 2 013 089 2 053 904 Total 44 503 0 44 503 1 993 770 2 724 1 996 493 22 215 44 531 41 741 108 487 2 104 981 2 149 483 Kyrgyzstan Imp 7 351 0 7 351 7 327 0 7 327 2 162 2 522 11 173 15 857 23 184 30 535 Exp 525 0 525 21 794 977 22 772 18 347 10 4 500 22 858 45 629 46 154 Total 7 875 0 7 875 29 121 977 30 099 20 509 2 532 15 673 38 715 68 813 76 688 Tajikistan Imp 0 103 103 21 550 0 21 550 3 073 6 915 27 500 37 488 59 038 59 141 (1999 data) Exp 0 0 0 14 766 27 306 42 072 0 2 585 3 081 5 666 47 738 47 738 Total 0 103 103 36 316 27 306 63 622 3 073 9 500 30 581 43 154 106 776 106 879 Turkmenistan Imp 418 1 151 1 569 144 536 0 144 536 14 406 5 610 95 754 115 770 260 306 261 875 Exp 25 767 157 645 183 412 27 594 30 322 57 916 118 5 18 016 18 138 76 054 259 466 Total 26 186 158 796 184 981 172 130 30 322 202 452 14 524 5 615 113 770 133 908 336 360 521 341 Uzbekistan Imp 0 5 109 5 109 104 813 5 104 818 5 464 5 968 66 704 78 136 182 954 188 063 Exp 0 66 077 66 077 200 363 32 852 233 215 3 102 6 956 34 720 44 778 277 993 344 070 Total 0 71 186 71 186 305 176 32 857 338 033 8 566 12 924 101 424 122 914 460 947 532 133 Total CA Imp 11 456 6 363 17 819 303 125 5 303 130 33 286 39 755 241 203 314 244 617 374 635 193 Exp 67 108 223 722 290 829 2 233 388 94 181 2 327 568 35 601 35 347 61 986 132 934 2 460 503 2 751 332 Total 78 563 230 085 308 648 2 536 513 94 186 2 630 699 68 887 75 102 303 189 447 178 3 077 877 3 386 525

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Annex 1.15 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport within Central Asia Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargol Central Asia 24) Kazakhstan Imp 96 793 0 96 793 210 276 122 210 398 6 632 17 300 209 696 233 628 444 026 540 819 Exp 70 657 0 70 657 3 106 400 0 3 106 400 8 064 753 145 22 819 784 028 3 890 428 3 961 085 Total 167 450 0 167 450 3 316 676 122 3 316 798 14 696 770 445 232 515 1 017 656 4 334 454 4 501 904 Kyrgyzstan Imp 283 872 20 672 304 544 1 125 532 0 1 125 532 2 128 51 21 965 24 143 1 149 675 1 454 219 Exp 4 852 0 4 852 1 003 805 0 1 003 805 9 805 418 79 197 89 419 1 093 224 1 098 076 Total 288 724 20 672 309 396 2 129 336 0 2 129 336 11 933 469 101 161 113 563 2 242 899 2 552 295 Tajikistan Imp 22 726 269 084 291 810 605 733 702 606 435 790 21 506 10 936 33 232 639 667 931 477 (1999 data) Exp 6 093 327 6 420 204 691 17 204 708 366 22 282 7 033 29 681 234 389 240 809 Total 28 819 269 411 298 230 810 424 719 811 143 1 156 43 788 17 969 62 913 874 056 1 172 286 Turkmenistan Imp 0 1 189 1 189 575 396 0 575 396 4 609 106 5 238 9 952 585 348 586 537 Exp 41 430 37 952 79 382 143 417 102 143 519 122 21 6 665 6 807 150 326 229 708 Total 41 430 39 141 80 571 718 813 102 718 915 4 730 127 11 903 16 760 735 674 816 245 Uzbekistan Imp 0 35 288 35 288 3 080 989 68 3 081 057 3 620 96 123 312 127 028 3 208 085 3 243 373 Exp 0 2 295 854 2 295 854 697 007 1 946 698 953 11 821 702 57 889 70 412 769 365 3 065 219 Total 0 2 331 142 2 331 142 3 777 996 2 014 3 780 010 15 441 798 181 201 197 440 3 977 450 6 308 592 Total CA Imp 403 391 326 233 729 624 5 597 926 892 5 598 818 17 778 39 059 371 147 427 984 6 026 801 6 756 425 Exp 123 032 2 334 133 2 457 165 5 155 319 2 065 5 157 384 30 178 776 567 173 603 980 348 6 137 732 8 594 896 Total 526 423 2 660 366 3 186 789 10 753 245 2 957 10 756 202 47 956 815 626 544 750 1 408 331 12 164 533 15 351 322

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Annex 1.16 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with : Caucasus Region Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargol Central Asia 24) Kazakhstan Imp 14 484 0 14 484 3 966 0 3 966 2 811 753 1 661 5 225 9 191 23 675 Exp 200 2 858 3 058 539 763 0 539 763 2 631 1 838 936 5 405 545 168 548 226 Total 14 684 2 858 17 542 543 729 0 543 729 5 442 2 591 2 597 10 630 554 359 571 901 Kyrgyzstan Imp 0 0 0 85 0 85 5 1 1 339 1 345 1 430 1 430 Exp 61 0 61 584 0 584 930 0 1 401 2 331 2 915 2 976 Total 61 0 61 669 0 669 935 1 2 740 3 676 4 345 4 405 Tajikistan Imp 0 1 829 1 829 40 347 0 40 347 0 0 1 323 1 323 41 670 43 499 (1999 data) Exp 0 0 0 67 0 67 6 6 4 16 83 83 Total 0 1 829 1 829 40 414 0 40 414 6 6 1 327 1 339 41 753 43 582 Turkmenistan Imp 0 60 60 7 890 0 7 890 1 715 507 955 3 177 11 068 11 127 Exp 222 14 580 14 802 290 605 895 2 7 116 125 1 020 15 821 Total 222 14 639 14 861 8 180 605 8 785 1 717 514 1 071 3 302 12 087 26 948 Uzbekistan Imp 0 0 0 3 690 0 3 690 179 44 1 192 1 415 5 105 5 105 Exp 0 94 551 94 551 1 114 15 075 16 189 224 5 2 343 2 572 18 761 113 312 Total 0 94 551 94 551 4 804 15 075 19 879 403 49 3 535 3 987 23 866 118 417 Total CA Imp 14 484 1 889 16 373 55 978 0 55 978 4 710 1 305 6 470 12 485 68 463 84 836 Exp 482 111 989 112 471 541 818 15 680 557 498 3 793 1 856 4 800 10 449 567 947 680 418 Total 14 967 113 877 128 844 597 796 15 680 613 476 8 503 3 161 11 270 22 934 636 410 765 253

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Annex 1.17 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database TOTAL TRANSPORT CENTRAL ASIA (external trade) Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery etc. Manufact Products, Total General Total Non Oil Total (5) Total Commodities (1- Cargo (21) Goods (25) Commodity Cargol Sector Transport 4, 7-17) (19-20, 22- Central Asia 24) Kazakhstan Imp 1 129 437,6 1 009 638,0 2 139 075,6 5 168 069,0 6,0 5 168 075,0 494 817,2 904 308,8 2 695 829,5 4 094 955,5 9 263 030,5 11 402 106 Exp 995 586,8 29 393 173,5 30 388 760,3 46 453 051,1 87 767,7 46 540 818,8 175 114,2 1 599 144,7 211 827,7 1 986 086,6 48 526 905,4 78 915 666 Total 2 125 024,4 30 402 811,5 32 527 835,9 51 621 120,1 87 773,7 51 708 893,8 669 931,4 2 503 453,5 2 907 657,2 6 081 042,1 57 789 935,9 90 317 772 Kyrgyzstan Imp 64 798,5 0,0 64 798,5 294 343,8 0,0 294 343,8 37 085,1 22 720,7 88 698,1 148 503,9 442 847,7 507 646 Exp 2 660,3 0,0 2 660,3 125 508,9 34 552,4 160 061,3 36 223,8 961,6 114 992,9 152 178,3 312 239,6 314 900 Total 67 458,8 0,0 67 458,8 419 852,7 34 552,4 454 405,1 73 308,9 23 682,3 203 691,0 300 682,2 755 087,3 822 546 Tajikistan Imp 0,0 48 887,0 48 887,0 502 635,0 0,0 502 635,0 18 307,0 231 236,0 97 774,0 347 317,0 849 952,0 898 839 (1999 data) Exp 0,0 4,0 4,0 240 138,0 111 242,0 351 380,0 6,0 5 164,0 124 997,0 130 167,0 481 547,0 481 551 Total 0,0 48 891,0 48 891,0 742 773,0 111 242,0 854 015,0 18 313,0 236 400,0 222 771,0 477 484,0 1 331 499,0 1 380 390 Turkmenistan Imp 1 635,6 30 236,1 31 871,7 430 329,7 0,0 430 329,7 62 711,3 10 868,0 179 863,1 253 442,4 683 772,1 715 644 Exp 26 540,8 217 090,5 243 631,3 29 958,0 213 432,6 243 390,6 270,1 20,9 65 334,0 65 624,9 309 015,6 552 647 Total 28 176,4 247 326,6 275 503,0 460 287,8 213 432,6 673 720,4 62 981,4 10 888,9 245 197,1 319 067,3 992 787,7 1 268 291 Uzbekistan Imp 0,0 50 430,0 50 430,0 989 015,0 666,0 989 681,0 124 029,0 18 371,0 569 651,0 712 051,0 1 701 732,0 1 752 162 Exp 0,0 1 294 820,0 1 294 820,0 388 095,0 843 569,0 1 231 664,0 21 961,0 11 664,0 643 556,0 677 181,0 1 908 845,0 3 203 665 Total 0,0 1 345 250,0 1 345 250,0 1 377 110,0 844 235,0 2 221 345,0 145 990,0 30 035,0 1 213 207,0 1 389 232,0 3 610 577,0 4 955 827 Total CA Imp 1 195 871,7 1 139 191,1 2 335 062,8 7 384 392,5 672,0 7 385 064,5 736 949,6 1 187 504,5 3 631 815,7 5 556 269,8 12 941 334,3 15 276 397 Exp 1 024 787,9 30 905 088,0 31 929 875,9 47 236 751,0 1 290 563,7 48 527 314,7 233 575,1 1 616 955,2 1 160 707,6 3 011 237,8 51 538 552,6 83 468 428 Total 2 220 659,6 32 044 279,1 34 264 938,7 54 621 143,6 1 291 235,7 55 912 379,3 970 524,7 2 804 459,7 4 792 523,3 8 567 507,6 64 479 886,9 98 744 826

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Annex 1.18 Transport Volume of Central Asia by Regional Distribution - Year 2000 Source: TRACECA Database

Transport Volume with Russian Federation, Belarussia

Oil Non-Oil Total Total Export: 6 354 39 818 46 172 Total Import: 2 230 8 993 11 223 Transport Volume with European Region, America Total Volume: 8 584 48 811 57 395

Oil Non-Oil Total Total Export: 24 255 4 575 28 831 Total Import: 44 2 714 2 758 Transport Volume of Central Asia Transport Volume with FE Asian, SE Asia Total Volume: 24 300 7 289 31 589 Oil Non-Oil Total Oil Non-Oil Total Transport Volume with Caucasus Region Total Export: 31 930 51 539 83 468 Total Export: 917 4 117 5 034 Total Import: 2 335 12 941 15 276 Total Import: 27 549 576 Oil Non-Oil Total Total Volume: 34 265 64 480 98 745 Total Volume: 944 4 666 5 610 Total Export: 112 568 680 Total Import: 16 68 85 Total Volume: 129 636 765 Transport Volume with India, Iran Mid. East, Pakistan, Africa

Oil Non-Oil Total Total Export: 291 2 461 2 751 Total Import: 18 617 635 Total Volume: 309 3 078 3 387

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Annex 1.21 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: European Countries, America Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Total Bulk Cotton (18) Total Bulk Machinery etc. Manufact Products, Total General Total Non Total (5) Commodities Cargo (21) Goods (25) Commodity Cargo Oil Sector Transport (1-4, 7-17) (19-20, 22-24) Caucasus Armenia Imp 89 277 225 279 314 556 47 533 0 47 533 7 457 2 335 450 442 460 234 507 767 822 323 Exp 0 0 0 133 973 0 133 973 1 098 57 6 361 7 516 141 488 141 488 Total 89 277 225 279 314 556 181 506 0 181 506 8 554 2 392 456 802 467 749 649 255 963 811 Azerbaijan Imp 5 079 0 5 079 322 766 71 322 837 39 921 11 720 168 334 219 975 542 812 547 890 Exp 2 497 538 9 303 742 11 801 279 137 721 50 700 188 421 3 535 460 58 328 62 323 250 744 12 052 023 Total 2 502 617 9 303 742 11 806 358 460 486 50 771 511 257 43 456 12 180 226 662 282 298 793 555 12 599 914 Georgia Imp 40 866 0 40 866 287 369 0 287 369 30 941 8 358 425 289 464 588 751 957 792 823 Exp 29 226 17 268 46 494 860 629 0 860 629 45 337 54 103 544 148 935 1 009 564 1 056 058 Total 70 092 17 268 87 360 1 147 998 0 1 147 998 76 278 8 412 528 833 613 523 1 761 521 1 848 881 Total Imp 135 222 225 279 360 501 657 668 71 657 739 78 318 22 414 1 044 064 1 144 796 1 802 535 2 163 036 Caucasus Exp 2 526 764 9 321 010 11 847 773 1 132 322 50 700 1 183 022 49 970 571 168 233 218 774 1 401 796 13 249 569 Total 2 661 986 9 546 288 12 208 274 1 789 990 50 771 1 840 761 128 288 22 985 1 212 297 1 363 570 3 204 331 15 412 605

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Annex 1.22 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: Russian Federation Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargo Caucasus 24) Armenia Imp 0 1 004 443 1 004 443 16 265 0 16 265 3 690 357 22 755 26 802 43 067 1 047 510 Exp 0 0 0 5 898 0 5 898 6 653 103 8 756 15 512 21 410 21 410 Total 0 1 004 443 1 004 443 22 163 0 22 163 10 343 460 31 511 42 314 64 477 1 068 920 Azerbaijan Imp 3 090 0 3 090 831 299 7 831 306 30 585 702 56 724 88 011 919 317 922 407 Exp 11 082 0 11 082 45 941 1 995 47 936 9 489 110 77 193 86 792 134 728 145 810 Total 14 172 0 14 172 877 240 2 002 879 242 40 074 812 133 917 174 803 1 054 045 1 068 217 Georgia Imp 3 071 0 3 071 44 973 0 44 973 17 519 4 071 50 479 72 069 117 042 120 113 Exp 125 0 125 26 091 0 26 091 23 171 694 96 848 120 713 146 804 146 929 Total 3 196 0 3 196 71 064 0 71 064 40 690 4 765 147 327 192 782 263 846 267 042 Total Caucasus Imp 6 161 1 004 443 1 010 604 892 537 7 892 544 51 794 5 130 129 958 186 882 1 079 426 2 090 030 Exp 11 207 0 11 207 77 930 1 995 79 925 39 313 907 182 797 223 017 302 942 314 149 Total 17 368 1 004 443 1 021 811 970 467 2 002 972 469 91 107 6 037 312 755 409 899 1 382 368 2 404 179

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Annex 1.23 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: East and South-East Asia Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargo Caucasus 24) Armenia Imp 0 51 51 11 358 0 11 358 701 119 64 061 64 881 76 239 76 290 Exp 0 0 0 398 0 398 128 0 20 148 546 546 Total 0 51 51 11 756 0 11 756 829 119 64 081 65 029 76 785 76 836 Azerbaijan Imp 85 0 85 21 889 971 22 860 11 994 6 156 7 683 25 833 48 693 48 778 Exp 0 29 540 29 540 15 339 994 16 333 324 4 1 454 1 782 18 115 47 655 Total 85 29 540 29 625 37 228 1 965 39 193 12 318 6 160 9 137 27 615 66 808 96 433 Georgia Imp000000000000 Exp 125 0 125 540 0 540 0 0 1 166 1 166 1 706 1 831 Total 125 0 125 540 0 540 0 0 1 166 1 166 1 706 1 831 Total Caucasus Imp 85 51 136 33 247 971 34 218 12 695 6 275 71 744 90 714 124 932 125 068 Exp 125 29 540 29 665 16 277 994 17 271 452 4 2 640 3 096 20 367 50 032 Total 210 29 591 29 801 49 524 1 965 51 489 13 147 6 279 74 384 93 810 145 299 175 100

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Annex 1.24 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: Iran, Indian Sub Continent, Middle East, Africa, etc Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargo Caucasus 24) Armenia Imp 18 158 36 016 54 174 47 319 0 47 319 3 135 3 939 54 566 61 640 108 959 163 133 Exp 0 0 0 31 317 0 31 317 12 164 40 339 12 543 43 860 43 860 Total 18 158 36 016 54 174 78 636 0 78 636 15 299 3 979 54 905 74 183 152 819 206 993 Azerbaijan Imp 5 619 0 5 619 1 155 442 78 1 155 520 16 606 5 513 77 160 99 279 1 254 799 1 260 418 Exp 162 073 556 813 718 886 78 428 176 78 604 7 083 184 3 082 10 349 88 953 807 839 Total 167 692 556 813 724 505 1 233 870 254 1 234 124 23 689 5 697 80 242 109 628 1 343 752 2 068 257 Georgia Imp 236 0 236 21 823 0 21 823 7 225 0 54 418 61 643 83 466 83 702 Exp 0 0 0 63 662 0 63 662 24 172 0 140 24 312 87 974 87 974 Total 236 0 236 85 485 0 85 485 31 397 0 54 558 85 955 171 440 171 676 Total Caucasus Imp 24 013 36 016 60 029 1 224 584 78 1 224 662 26 966 9 452 186 144 222 562 1 447 224 1 507 253 Exp 162 073 556 813 718 886 173 407 176 173 583 43 419 224 3 561 47 204 220 787 939 673 Total 186 085 592 830 778 915 1 397 991 254 1 398 245 70 385 9 676 189 705 269 766 1 668 011 2 446 926

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Annex 1.25 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database Transport with: Central Asia: Kazakhstan, Uzbekistan, Kyrgyzstan, Turkmenistan, Tadjikistan Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargo Caucasus 24) Armenia Imp 2 842 2 288 5 130 443 0 443 260 13 357 630 1 073 6 203 Exp 0 20 20 394 0 394 348 40 198 586 980 1 000 Total 2 842 2 308 5 150 837 0 837 608 53 555 1 216 2 053 7 203 Azerbaijan Imp 52 823 0 52 823 479 951 100 480 051 3 603 217 2 423 6 243 486 294 539 117 Exp 10 540 0 10 540 199 448 0 199 448 13 866 613 2 853 17 332 216 780 227 320 Total 63 363 0 63 363 679 399 100 679 499 17 469 830 5 276 23 575 703 074 766 437 Georgia Imp 34 156 0 34 156 39 842 42 39 884 192 104 1 686 1 982 41 866 76 022 Exp 0 0 0 27 993 0 27 993 62 0 1 918 1 980 29 973 29 973 Total 34 156 0 34 156 67 835 42 67 877 254 104 3 604 3 962 71 839 105 995 Total Caucasus Imp 89 821 2 288 92 109 520 236 142 520 378 4 055 334 4 466 8 855 529 233 621 342 Exp 10 540 20 10 560 227 835 0 227 835 14 276 653 4 969 19 898 247 733 258 293 Total 100 361 2 308 102 669 748 071 142 748 213 18 331 987 9 435 28 753 776 966 879 635

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Annex 1.26 Transport Flows of the TRACECA Subregions (tonnes) Year 2000 Source: TRACECA Database TOTAL TRANSPORT CAUCASUS Oil Sector Non Oil Sector Bulk Cargo General Cargo Oil Products Crude Oil (6) Oil-Sector Bulk Cotton (18) Total Bulk Machinery Manufact Products, Total Total Non Total (5) Total Commodities Cargo etc. (21) Goods (25) Commodity General Oil Sector Transport (1-4, 7-17) (19-20, 22- Cargo Caucasus 24) Armenia Imp 110 277 1 268 077 1 378 354 122 918 0 122 918 15 243 6 763 592 180 614 186 737 104 2 115 458 Exp 0 20 20 171 980 0 171 980 20 391 240 15 674 36 305 208 284 208 304 Total 110 277 1 268 097 1 378 374 294 898 0 294 898 35 633 7 003 607 854 650 491 945 389 2 323 762 Azerbaijan Imp 66 696 0 66 696 2 811 347 1 227 2 812 574 102 709 24 308 312 324 439 341 3 251 915 3 318 611 Exp 2 681 233 9 890 095 12 571 328 476 876 53 865 530 741 34 297 1 371 142 910 178 578 709 320 13 280 648 Total 2 747 929 9 890 095 12 638 024 3 288 224 55 092 3 343 316 137 006 25 679 455 234 617 919 3 961 235 16 599 259 Georgia Imp 78 329 0 78 329 394 007 42 394 049 55 877 12 533 531 872 600 282 994 331 1 072 660 Exp 29 476 17 268 46 744 978 915 0 978 915 92 742 748 203 616 297 106 1 276 021 1 322 765 Total 107 805 17 268 125 073 1 372 922 42 1 372 964 148 619 13 281 735 488 897 388 2 270 352 2 395 425 Total Caucasus Imp 255 301 1 268 077 1 523 379 3 328 272 1 269 3 329 541 173 828 43 605 1 436 376 1 653 809 4 983 351 6 506 729 Exp 2 710 709 9 907 383 12 618 092 1 627 771 53 865 1 681 636 147 430 2 359 362 200 511 989 2 193 625 14 811 717 Total 2 966 010 11 175 460 14 141 471 4 956 043 55 134 5 011 177 321 258 45 964 1 798 576 2 165 798 7 176 975 21 318 446

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Annex 1.27 Transport Volume of the Caucasus Region by Regional Distribution - Year 2000 Source: TRACECA Database

Transport Volume with Russian Federation, Belarussia

Oil Non-Oil Total Total Export: 11 303 314 Total Import: 1 011 1 079 2 090 Total Volume: 1 022 1 382 2 404 Transport Volume with FE Asian, SE Asia

Oil Non-Oil Total Total Export: 30 20 50 ume with European Region, America Total Transport Volume of Caucasus Region Total Import: 0125125 Total Volume: 30 145 175 Oil Non-Oil Total ('000 tonnes) Oil Non-Oil Total 11 848 1 402 13 250 Total Export: 12 618 2 194 14 812 Transport Volume with Central Asia 361 1 803 2 163 Total Import: 1 523 4 983 6 507 12 208 3 204 15 413 Total Volume: 14 141 7 177 21 318 ('000 tonnes) Oil Non-Oil Total Total Export: 11 248 258 Total Import: 92 529 621 Total Volume: 103 777 880 Transport Volume with India, Iran Mid. East, Pakistan, Africa

('000 tonnes) Oil Non-Oil Total Total Export: 719 221 940 Total Import: 60 1 447 1 507 Total Volume: 779 1 668 2 447

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Annex 2

Table: Trade Elasticities

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Table: Trade Elasticities Products (General Cargo) 1998 2000 Average % GDP (2001) % GDP Elasticity tonnes tonnes growth p.a. growth (General 2000 Cargo growth) Central Asia Kazakhstan Imp 1,662,086 4,094,956 56.96% Exp 1,337,996 1,986,087 21.83% Total 3,000,082 6,081,042 42.37% 22,319.00 10.00% 4.24 Kyrgyzstan Imp 232,364 326,260 40.41% (1999 Data) Exp 178,904 179,088 0.10% Total 411,268 505,348 22.88% 1,525.00 5.00% 4.58 Tajikistan Imp 354,811 345,994 -2.48% (1999 Data) Exp 107,989 130,151 20.52% Total 462,800 476,145 2.88% 1,033.00 2.00% 1.44 Turkmenistan Imp 119,806 253,442 45.45% Exp 44,825 65,625 21.00% Total 164,631 319,067 39.21% 5,962.00 17.00% 2.31 Uzbekistan Imp 693,642 712,051 1.32% Exp 651,090 677,181 1.98% Total 1,344,732 1,389,232 1.64% 7,464.00 2.00% 0.82 Total CA Imp 3,062,709 5,208,953 30.41% Exp 2,320,804 2,881,071 11.42% Total 5,383,513 8,090,024 22.59% 38,303.00 9.12% 2.48 Caucasus Armenia Imp 24,802 460,234 330.77% Exp 1,325 7,516 138.16% Total 26,127 467,749 323.12% 2,121.00 10.00% 32.31 Azerbaijan Imp 338,413 219,975 -19.38% Exp 38,719 62,323 26.87% Total 377,132 282,298 -13.48% 5,716.00 8.00% -1.69 Georgia Imp 266,871 464,588 31.94% Exp 24,944 148,935 144.35% Total 291,815 613,523 45.00% 3,210.00 5.00% 9.00 Total Caucasus Imp 630,086 1,144,796 34.79% Exp 64,988 218,774 83.48% Total 695,074 1,363,570 40.06% 11,047.00 7.51% 5.33

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Annex 3

Table: Trade Volume Central Asia

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Table: Trade Volume Central Asia

Non-Oil Sector Trade Volume Development in Central Asia with the European Region until 2015

Country GDP (2001) % share of Non-Oil Sector Projected Elasticity Anuual Non-oil mill USD total trade with annual growth rate sector trade Europe Region growth GDP trade 2015 (mt) (mt) Year 2000

Central Asia 38,303 100.00% 7.367 5.17% 4.11% 18.907

Bulk comm. 5.570 1.50% 6.964 General Cargo 1.797 4.88% 2.50 12.20% 11.944 Kazakhstan 22,319 58.27% 4.395 6.50% 4.16% 12.096

Bulk comm. 3.602 1.50% 4.503 General Cargo 0.794 6.50% 2.50 16.25% 7.594 Kyrgyzstan 1,525 3.98% 0.211 5.00% 4.72% 0.546

Bulk comm. 0.149 1.50% 0.186 General Cargo 0.062 5.00% 2.50 12.50% 0.360 Tajikistan 1,033 2.70% 0.846 5.00% 6.50% 2.572

Bulk comm. 0.517 1.50% 0.646 General Cargo 0.329 5.00% 2.50 12.50% 1.925 Turkmenistan 5,962 15.57% 0.359 7.00% 6.69% 1.317

Bulk comm. 0.277 1.50% 0.346 General Cargo 0.086 7.00% 2.50 17.50% 0.970 Uzbekistan 7,464 19.49% 1.552 2.00% 2.69% 2.376

Bulk comm. 1.025 1.50% 1.282 General Cargo 0.526 2.00% 2.50 5.00% 1.094

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Annex 4

Table: Trade Volume Caucasus

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Table: Trade Volume Caucasus

Non-Oil Sector Trade Volume Development of the Caucasus with the European Region until 2015

Country GDP (2001) % share of Non-Oil Sector Projected Elasticity Anuual Non-oil mill USD total trade with annual growth rate sector trade Europe Region growth GDP trade 2015 (mt) (mt) Year 2000

CAUCASUS 11,047 100.00% 3.204 4.83% 6.00% 11.162 Bulk comm. 1.841 1.50% 2.302 General Cargo 1.363 4.83% 2.50 12.07% 8.860 Armenia 2,121 19.20% 0.650 4.00% 5.20% 2.182 Bulk comm. 0.182 1.50% 0.228 General Cargo 0.468 4.00% 2.50 10.00% 1.955 Azerbaijan 5.716 51.74% 0.793 8.00% 8.08% 4.984 Bulk comm. 0.511 1.50% 0.639 General Cargo 0.282 8.00% 2.50 20.00% 4.345 Georgia 3.210 29.06% 1.761 4.00% 4.46% 3.996 Bulk comm. 1.148 1.50% 1.435 General Cargo 0.613 4.00% 2.50 10.00% 2.561

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Annex 5

Table: Committed World Bank loans for the Transport Sector

TRACECA Co-ordination Team - Global Feasibility Study September 2003 148 TRACECA - Global Feasibility Study 22 July 2003

Table: Committed World Bank loans for the Transport Sector

(Source: World Bank country briefs)

Country GDP (million US$) Committed (million US$) Armenia 2,121 66 Azerbaijan 5,716 39 Georgia 3,210 59 164

Kazakhstan 22,319 135 Kyrgyzstan 1,525 22 Tajikistan 1,033 10 Turkmenistan 5,962 23 Uzbekistan 7,467 29 219

Bulgaria 13,553 95 Moldova 1,479 3 Romania 37,988 388 Ukraine 37,588 12 498

Total 139,961 881

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Annex 6

Table: TRACECA Technical Assistance Projects

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Table: TRACECA Technical Assistance Projects

PROJECTS CONTRACTOR SUB STARTING DURATION BUDGET CONTRACTORS DATE (Months) (EURO)

Henley "Dolphin" project, feasibility study for 1 West-East GmbH Management авг-95 27 475 000 caravanserai College

2 Transport Management Training Nethconsult GZB, Trademco дек-95 8 900 000

Transport Legal and Regulatory 3 Scott Wilson K. NEA дек-95 24 1 500 000 Framework Uniconsult, Recon 4 Maritime Training in Baku Port HPTI дек-95 24 1 350 000 S.A.

5 Regional Traffic Forecasting Model WS Atkins BCEOM, Systra янв-96 21 700 000

6 Road Transport Services (Caucasus) DHV Consultants янв-96 18 250 000

7 Intermodal Transport BCEOM DE-Consult, Systra янв-96 11 500 000 Railways Infrastructure Maintenance 8 TEWET DE Consult янв-96 14 1 200 000 (Caucasus)

Implementation of Pavement 9 Kocks Consult GmbH TecnEcon, Phoenix мар-96 21 2 000 000 Management Systems

FTA, West-East 10 Road Transport Services (Central Asia) GIBB мар-96 19 700 000 GmbH Booz Allen & 11 Ferry Terminals : Baku & Turkmenbashi RAMBOLL мар-96 23 1 550 000 Hamilton, Probel CIE Consult, Dan 12 Rolling Stock Maintenance SYSTRA мар-96 12 700 000 Rail Consult AS

13 TRACECA Trade Facilitation Scott Wilson K. BCEOM мар-96 16 980 000

Railways Infrastructure Maintenance Systra, Austria Rail 14 DE-Consult мар-96 11 1 200 000 (Central Asia) Eng. Joint Venture for the Trans-Caucasian 15 TEWET De - Consult, GTZ июл-96 12 2 000 000 Railways Calberson, Systra- 16 Railways Tariffs and Timetable SISIE июл-96 18 1 500 000 Axis TRACTEBEL 17 TRACECA Co-ordination Team Development сен-96 40 2 550 000 Engineering

Central Asian Railways Restructuring Systra, DE-Consult, 18 CIE Consult авг-97 11 2 000 000 and Telecommunications Studies UIC

Parkman, 19 Road Maintenance FINNROAD авг-97 24 2 500 000 Roughton

Feasibility Study of New Terminal Dornier System, 20 Facilities in the Georgian Ports of Poti HPTI авг-97 12 1 500 000 Rotterdam Maritime and Batumi

Restructuring of the Azeri and Georgian 21 GIBB CIE Consult июл-98 6 1 000 000 Railways

TRACECA Co-ordination Team - Global Feasibility Study September 2003 151 TRACECA - Global Feasibility Study 22 July 2003

PROJECTS CONTRACTOR SUB STARTING DURATION BUDGET CONTRACTORS DATE (Months) (EURO)

Intermodal Services Implementation 22 POLZUG AXIS, HPTI июн-98 24 1 600 000 and Training

International Road Transport and 23 Scott Wilson K. HPTI авг-99 18 2 800 000 Transit Facilitation (IRU) Uniconsult, TYPSA, Traffic Forecasting and Feasibility 24 BCEOM Port de Marseille, авг-99 18 2 000 000 Studies NEA, HPTI

Inter - Governmental Commission for 25 the Implementation of the Multi - Lateral AXIS Dec-99 14 1 100 000 Agreement on Transport

Caucasian Road Sector - Feasibility Study for the Rehabilitation and BCEOM, 26 KOCKS ноя-00 12 2 000 000 Reconstruction of the Road Link FINNROAD between Baku, Tbilisi and Yerevan Customs Facilities at C. Asian Road Tractebel 27 Computer Solution июн-01 18 2 000 000 Border Crossings Development IGC for the Implementation of the 28 Multilateral Agreement on Transport - AXIS янв-01 12 1 050 000 Continuation Compass Gmbh Harmonisation of Border Crossing Scott Wilson 29 (DE), NEA(NL), ноя-01 24 2 000 000 Procedures Kirkpatrick (UK) SEMA(BE) Tebodin (NL), Unified Policy on Transit Fees and Scott Wilson Corporate 30 ноя-01 24 2 000 000 Tariffs Kirkpatrick (UK) Solutions, Consulting (UK) Dornier System 31 TRACECA Co-ordination Team Consult Gmbh (DE), ноя-01 24 2 500 000 TRANSTEC SA (BE)

Pre-fesability Study of a New Rail Link Lahmeyer Int., 32 between the Ferghana Valley, Bishkek SENER Ingeneria ноя-01 12 1 500 000 and Kashgar (China) (SP)

Central Asia Railways 33 Italferr S.p.A (IT) янв-02 12 1 500 000 Telecommunications Common Legal Basis for Transit Lamnides & 34 Nov-02 24 2 000 000 Transportation Accociates (GR) Capacity Development for Senior NEA Transport 35 Jul-03 24 1 800 000 Transport Officials Reseach and Training 36 Moldova/Ukraine border crossings EURECNA S.R.I. Dec-02 12 2 000 000

37 Rehabilitation of Caucasian Highways. Louis Berger Nov-02 24 2 000 000

38 Railway Transit Oil Logistical Center UNICONSULT Dec-02 12 400 000 Supervision and Training for the supply 39 HPTI Jan-03 12 400 000 of navigational aid equipment GRAND 57 705 000 € TOTAL

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Annex 7

Table: TRACECA Investment Projects

TRACECA Co-ordination Team - Global Feasibility Study September 2003 153 TRACECA - Global Feasibility Study 22 July 2003

PROJECTS CONTRACTOR STARTING DURATION BUDGET DATE (Months) (EURO) 1 Rehabilitation of the Caucasian Railways Several contractors окт-95 9 5 000 000 Rehabilitation of the Red Bridge and Construction of 2 Khidmsheni JSC Azermost мар-97 18 2 500 000 the TRACECA bridge 3 Bukhara Cotton Export Distribution Center Several contractors фев-98 12 2 000 000 Container Services Between the Caspian Ports of Baku 4 GABEG фев-98 19 2 500 000 and Turkmenbashi Athena Hellenic Design and construction of Rail Ferry Facilities in the 5 Engineering and several фев-98 12 3 400 000 Port of Poti, Georgia other contractors

Improvement of the existing rail ferry terminal and 6 COSMAR/BCEOM июл-98 16 6 400 000 construction of facilities at Ilyichevsk, Ukraine

Establishment of a Ferry Cargo Movement Computer System and Supply and Installation of Computers and 7 Computer Solutions янв-98 17 1 500 000 Communication Equipment for the Ports of Ilyichevsk (Ukraine) and Poti (Georgia)

Cargo and Container Handling Equipment for the 8 Seaports of Baku (Azerbaijan), Turkmenbashi Several Contractors фев-98 18 5 825 000 (Turkmenistan), Poti (Georgia) and Ilyichevsk (Ukraine)

9 Rail Tank Wagon Cleaning Boilers in Baku (Azerbaijan) Noviter Oy июн-99 6 475 000

Intermodal/Terminal Equipment (Karmir Belur, BossProTec, HoldTrade, 10 авг-99 9 2 500 000 Chimkent, Aktau, Bishkek) PlanMarine, UnitExport

Supply of an Optical Cable System for Communication Siemens AG/Siemens 11 and Signalling to the Railways of Armenia, Azerbaijan фев-00 24 15 000 000 ATEA and Georgia

12 Rehabilitation of the Rail Ferry Terminal at Aktau. AZERCORPU окт-01 12 2 000 000

Pintsch Bamag Abtriebs- und Verkehrstechnik 13 Supply of navigational aid equipment Fev-02 6 1 600 000 GmbH, Transas Europe GmbH 14 Supply of tank wagons to Azerbaijan Railways CONEC Dec-02 3 1 600 000 GRAND 52 300 000 € TOTAL

TRACECA Co-ordination Team - Global Feasibility Study September 2003 154

Annex IV

TRACECA Co-ordination Team – Final Report – Annex IV 3 IGC / FinDoc 2/ page 1(3) Original: English

THIRD ANNUAL MEETING ТРЕТЬЕ ЕЖЕГОДНОЕ ЗАСЕДАНИЕ OF THE INTERGOVERNMENTAL COMMISSION TRACECA МЕЖПРАВИТЕЛЬСТВЕННОЙ КОМИССИИ ТРАСЕКА Yerevan/ Republic of Armenia, October 9-10, 2003 г. Ереван/ Республика Армения, 9-10 октября 2003 г.

AGENDA

DAY 1 - OCTOBER 9, 2003 10:00 – 11:00

OPENING OF THE 3rd ANNUAL MEETING OF THE IGC TRACECA 1st PLENARY SESSION

Participants: Delegations of the Parties to the Basic Agreement; Representatives of the PS IGC TRACECA; Representatives of the European Commission; Representatives of the applicant countries; Representatives of the international organisations; as well as guests, invited to the 1st opening session of the 3rd Annual Meeting of the IGC TRACECA Chairman Party: Republic of Armenia Co-Chairman: European Commission • Opening of the 3rd Annual Meeting of the IGC TRACECA (Mr. A. Manukyan, Minister of Transport and Communications of Republic of Armenia); • Welcome Speech of the Prime-Minister of the Republic of Armenia Mr A. Margaryan; • Welcome Speech of the representative of the European Commission Mr P. B. Knudsen; • Statement by the representative of the Republic of Azerbaijan on behalf of Depository of the Basic Agreement

11:00 – 11:15 Coffee - break

11:15 – 13:30 2nd PLENARY SESSION

Participants: 3 members of the Delegations of the Parties to the Basic Agreement, including the Heads of Delegations, National Secretaries and experts; Representatives of the PS IGC TRACECA; Representatives of the European Commission; Representatives of the applicant countries; Representatives of the international organisations • Adoption of the Agenda • Report on the activities of the IGC-TRACECA (Statement of Mr. R. Yunusov, Chairman-in-Office of the IGC TRACECA, Deputy Prime-minister of the Republic of Uzbekistan); • Hand over to the new Chairman-in-Office (Statement of Mr. A. Manukyan, Minister of Transport and Communications of the Republic of Armenia); • Statements of applicant countries on accession to the Basic Multilateral Agreement on international transport for development of the Europe – the Caucasus – Asia corridor Statements of the Heads of Delegations of the countries: Islamic State of Afghanistan; Islamic Republic of Iran. • Reports of the Parties to the Basic Agreement on the activities done on implementation of the decisions adopted earlier and recommendations within the framework of the IGC TRACECA Statements of the Heads of Delegations of the Parties: Republic of Azerbaijan; Republic of Bulgaria; 1

3 IGC / FinDoc 2/ page 3(3) Original: English Georgia; Republic of Kazakhstan; Republic of Kyrgyzstan; Republic of Moldova; Romania; Republic of Tajikistan; Republic of Turkey; Republic of Uzbekistan; Ukraine; Republic of Armenia.

13.30 – 14:30 Lunch

14:30 – 15:30 SECOND PART OF THE 2nd PLENARY SESSION

Statements of the representatives of international organisations

15:30 – 16:30 FIRST PART OF THE 3rd PLENARY SESSION Participants: 3 members of the Delegations of the Parties to the Basic Agreement, including the Heads of Delegations, National Secretaries and experts; Representatives of the PS IGC TRACECA; Representatives of the European Commission; Representatives of the applicant countries; Representatives of the international organisations 1. About joint financing of the PS IGC TRACECA - Adoption of joint financing for the period December 2003 – December 2004 - About stepwise introduction of the system of joint financing 2. Adoption of the Rules of Procedures of the IGC TRACECA and Statute of the PS IGC TRACECA; 3. Approval of establishment of the IGC TRACECA Working Group (Council) of the Heads of Railways, Ports and Shipping Companies;

16.30 – 16.45 Coffee- break

16:45 – 18:00 SECOND PART OF THE 3rd PLENARY SESSION

4. Signing of the Tashkent Protocol on Amendments to the Basic Agreement; 5. Adoption of the draft Protocol on Amendments to the Technical Annexes on International Road Transport and Customs Documentation Procedures for its further approval in the Parties; 6. Adoption of the draft Protocol on Amendments to the Technical Annex on International Road Transport for its further approval in the Parties; 7. Adoption of the draft Protocol on Amendments to the Basic Multilateral Agreement (draft new Technical Annex on multimodal transport) for its further approval in the Parties; 8. Adoption of the draft Protocol on Amendments to the Basic Multilateral Agreement (draft new Technical Annex on TRACECA investment) for its further approval in the Parties; 9. Adoption of the draft Protocol on Amendments to the Technical Annex on Custom Documentation Procedures (Article 2, clause 1) for its further approval in the Parties; 10. Transfer of authority to the Permanent Secretariat of the IGC TRACECA to sign Memorandums of understanding with international organizations and international financial institutions (IFI’s)

3 IGC / FinDoc 2/ page 3(3) Original: English

19:00 – 21:00 Dinner

DAY 2 – OCTOBER 10, 2003 10:00 – 11:00 1st SESSION

MEETING OF THE HEADS OF DELEGATIONS OF THE PARTIES TO THE BASIC AGREEMENT Participants: Heads of Delegations of the Parties to the Basic Agreement and of the European Commission - Elections of the Secretary General of the PS IGC TRACECA under the Chairmanship-in-Office of the Republic of Armenia;

11:00 – 11:30 Coffee- break

11:30 – 13:00 2nd PLENARY SESSION Participants: 3 members of the Delegations of the Parties to the Basic Agreement, including the Heads of Delegations, National Secretaries and experts; Representatives of the PS IGC TRACECA; Representatives of the European Commission; Representatives of the applicant countries; Representatives of the international organisations 11. Presentation of strategy of the transport corridor Europe – Caucasus – Asia development for the period 2004-2008 and recommendation on the new project proposals for the Action Plan 2004-2006; 12. Adoption of the Yerevan Declaration; 13. Adoption of the Final Resolutions of the 3rd Annual Meeting of the TRACECA Intergovernmental Commission; 14. Address of the new Chairman-in-Office of the IGC TRACECA.

13:00 CLOSING of the 3rd Annual Meeting of the IGC TRACECA

3 3 IGC / Doc 16 / page 1(1) Original: English

THIRD ANNUAL MEETING ТРЕТЬЕ ЕЖЕГОДНОЕ ЗАСЕДАНИЕ OF THE INTERGOVERNMENTAL COMMISSION TRACECA МЕЖПРАВИТЕЛЬСТВЕННОЙ КОМИССИИ ТРАСЕКА Yerevan / Republic of Armenia, October 9-10, 2003 г. Ереван / Республика Армения, 9-10 октября 2003 г.

YEREVAN DECLARATION

Intergovernmental Commission TRACECA assembled at its Third Annual Meeting on 9-10 October 2003 in Yerevan, Republic of Armenia, guided by the ideas and aims of the Brussels Declaration (1993), the Basic Multilateral Agreement on International Transport for the Development of Transport Corridor Europe-Caucasus- Central Asia (1998) and Baku (1998) and Tashkent (2002) declarations expressing endeavors and further development commercial and economic relationships, transport and communication links between regions of Europe, Black Sea, South Caucasus, Caspian Sea and Asia, hereby declare:

The Transport Corridor Europe - the Caucasus - Asia “TRACECA” was established in May 1993 in Brussels by 8 Independent States and the Commission of the European Union and is having successful development and more increasing significance in the process of integration. IGC Third Annual Meeting coincides with the 10th anniversary of EC-TRACECA program, which has opened new perspectives for the development of commercial and economic relationships, revived the ancient Silk Road and supported to the rapprochement of the countries and nations participating in the program. During the 10 years of its development TRACECA has proven its considerable role in forming global transport system, strengthening the bilateral and multilateral mutually beneficial relations, peace, security and economic progress.

TRACECA will further continue to provide the most favorable conditions for transportation of humanitarian aid and reconstruction materials to Afghanistan. It’s gratifying that the active process of stabilization in Afghanistan opens new perspectives of development of the international transport corridor between the East and the West. In this respect, IGC TRACECA welcomes the readiness of the Islamic State of Afghanistan for joining to the Basic Agreement and becoming full member of TRACECA program.

IGC TRACECA welcomes the readiness of the Islamic Republic of Iran for joining to the Basic Agreement and TRACECA program, which will allow the engagement of additional freight flows from the East and the West.

IGC TRACECA on its Third Annual Meeting adopted Final Resolutions, which shall bring TRACECA to a new level of its development.

Optimistic forecasts of development of the international trade along the TRACECA corridor by international institutions require the Parties to the Basic Agreement and the European Union to transform TRACECA into the most attractive, safe, economically efficient international transport corridor, linking Europe and Asia via South Caucasus. Current changes and developments in the regions along the TRACECA Corridor – the “New Silk Route of the 21st Century” - require the adoption of adequate decisions at the level of Heads of the States.

In view of the above, IGC TRACECA verifying the importance of convening the Second TRACECA Summit, which was initiated and supported during the Tashkent Conference of IGC, refers to the European Union to support actively this initiative. IGC TRACECA took into consideration information of Georgian Party on readiness to hold Second TRACECA Summit in the first half year of 2004 in Tbilisi, Georgia.

Yerevan Declaration was adopted on the consensus by the Parties of the Basic Agreement, in presence of all Parties, at the 3rd Annual Meeting of the Intergovernmental Commission of TRACECA in Yerevan, on October 10, 2003. 3 IGC /Fin Doc 6 / total pages 2 Original: English

THIRD ANNUAL MEETING ТРЕТЬЕ ЕЖЕГОДНОЕ ЗАСЕДАНИЕ OF THE TRACECA INTERGOVERNMENTAL COMMISSION МЕЖПРАВИТЕЛЬСТВЕННОЙ КОМИССИИ ТРАСЕКА Yerevan / Republic of Armenia, October 9-10, 2003 г. Ереван / Республика Армения, 9-10 октября 2003 г.

PROTOCOL ON AMENDMENTS

TO THE BASIC MULTILATERAL AGREEMENT ON INTERNATIONAL TRANSPORT FOR DEVELOPMENT OF THE EUROPE - THE CAUCASUS - ASIA CORRIDOR

In accordance with Article 11 (Presentation of Amendments and Additions) of the Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus- Asia Corridor and the Final Resolutions of the 2nd Annual Meeting of the Intergovernmental Commission TRACECA on the transport corridor Europe - the Caucasus - Asia it was agreed to incorporate the following amendments to the Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor:

1. To make the following amendment to Article 4 (Facilitation of International Transport) of the Basic Multilateral Agreement on International Transport for Development of the Europe - the Caucasus - Asia Corridor adding item 4 stipulated as follows: “ 4. For 3 years when the given amendment comes into force, the Parties have to ensure free issue of single/double entry visas for persons transporting and/or accompanying humanitarian goods and reconstruction materials transported to Afghanistan via the “TRACECA” international transport corridor Europe- the Caucasus-Asia”;

2. In accordance with Article 3, Item c) and Article 8, Item 6, p. g) of the Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor to make an amendment to Article 4 (Documentation Procedures) of the Technical Annex on Customs and Documentation Procedures to the Basic Agreement, adding the item 5 stipulated as follows: “5. The Parties will not apply customs deposits, bank guarantees, financial risk insurance policies, railway guarantees for transit of goods by railway transport”.

3. To make an amendment c) to the Appendix 2 of the Technical Annex on International Railway Transport to the Basic Agreement stipulated as follows: “c) to apply VAT zero-rate on railway transport services on international and transit railway connection, including transportation, forwarding, loading/unloading and storage services” ;

4. In accordance with Article 10 (Technical Annexes) and Article 11 (Presentation of Amendments and Additions) of the Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor to adopt a new Technical Annex to the Basic Multilateral Agreement on International Transport for the Development of the Europe-the Caucasus-Asia Corridor on International Customs Transit Procedures in the TRACECA transport corridor Europe - the Caucasus - Asia for goods transported by railway with SMGS bill. (Annex: Technical Annex on International Customs Transit Procedures in the corridor Europe - the Caucasus - Asia for carriage of goods by rail using “SMGS” railway bill to the Basic Agreement).

This Protocol comes into force in accordance with Articles 11 (“Presentation of Amendments and Additions” and 13 (“Entry into force”) of the Basic Multilateral Agreement on International Transport for the Development of the Europe-the Caucasus-Asia Corridor.

3 IGC / Doc 6 / page 2(2) Original: English Done on the 3rd Annual Meeting of the TRACECA Intergovernmental Commission on the transport corridor Europe - the Caucasus - Asia at Yerevan on 9th October 2003 in one original copy in the English and Russian languages, both of them being equally authentic.

In witness whereof, the undersigned plenipotentiary Heads of Delegations have signed this Protocol.

For the Republic of Armenia For the Republic of Moldova Signed signed

For Romania For the Republic of Azerbaijan signed Ratified by Milli Mejlis of the Republic of Azerbaijan, May 13, 2003 signed

For the Republic of Bulgaria For the Republic of Tajikistan signed signed

For Georgia For the Republic of Turkey signed Signed

For the Republic of Kazakhstan For Ukraine signed Signed

For the Kyrgyz Republic For the Republic of Uzbekistan signed

3 IGC / Fin Doc 6A/ total pages 4 Original: English

TECHNICAL ANNEX ON THE INTERNATIONAL CUSTOMS TRANSIT PROCEDURES IN THE CORRIDOR EUROPE - THE CAUCASUS - ASIA FOR THE CARRIAGE OF GOODS BY RAIL USING THE “SMGS” RAILWAY BILL

TO THE BASIC AGREEMENT

Article 1 General provisions

The provisions of this Technical Annex shall regulate the international customs transit procedures for the carriage of goods by rail in the frame of “Basic Multilateral Agreement on international transport for development of the Europe – the Caucasus – Asia corridor” using the SMGS railway bill: a) bilateral, between the Parties; b) in transit, through the territories of the Parties.

Article 2 Definitions

For the purpose of this Technical Annex terms have the following meaning: а) "international customs transit" - means a customs procedure under which goods are carried across one or more frontiers under customs controls from a customs office of departure to a customs office of destination; b) "SMGS Agreement" - means the Agreement on International Goods Transport by Rail, which entered into force on 01.11.1951 with changes and editions on 01.01.1998; c) "railway bill" - means the SMGS Railway bill subject to the Agreement on International Goods Transport by Rail; the railway bill may consist of a system of electronic exchanges of data; d) " competent authorities " - means the customs authority or any other authority responsible for applying of this Technical Annex; e) " customs office of departure " - means any customs office in a country, where an international customs transit operation begins in respect of all or part of a consignment; f) " customs office of destination " - means any customs office in a country, where an international customs transit operation ends in respect of all or part of a consignment; g) " customs office of transit " - means any customs office, through which a consignment enters or leaves the territory of a Party during an international customs transit operation; h) " customs payments " - means the customs duties and all other duties, taxes, fees and other charges which are collected on, or in connection with the importation or exportation of goods, but not including fees and charges limited in amount to the approximate cost of services rendered; i) "principal" - means a private individual or legal entity which itself or, if need be, by means of an authorized representative, manifests through a declaration designed for this purpose a willingness to carry out an international customs transit operation;

Article 3 Objective

The objective of this Technical Annex is to establish the TRACECA international customs transit procedure for the carriage of goods undertaken by railway transport, with usage of SMGS Railway bill.

1 3 IGC / Fin Doc 6A/ total pages 4 Original: English

Article 4 Scope

Each Party recognizes the SMGS Railway bill, used in accordance with the provisions of this Technical Annex, as a customs transit document.

Article 5 Modification of the railway bill

For the purposes of this Technical Annex, the railway bill may not be modified in form or content without the prior agreement of an Intergovernmental Commission “ТRАСЕCА”.

Article 6 Legal value

1. A railway bill used in accordance with this Technical Annex and indemnifications measures taken by the competent authorities of a Party shall have the same legal effect in the other Parties as a railway bill used in accordance with the rules and identification measures taken by each Party’s own competent authorities. 2. Finding reached by the competent authorities of the Party when inspections are carried out under this Technical Annex shall have the same probative force in the Parties as findings of each Party’s own competent authorities.

Article 7 Mutual assistance

The competent authorities of the Party shall communicate to one another, insofar as their laws permit, all information available to them, which might contribute to the satisfactory application of this Technical Annex. As a result, the competent authorities shall communicate to one another all findings, documents, reports, and records of proceedings and information relating to transit operations carried out under the cover of a railway bill, and to infringements and irregularities, which have occurred in the course of or in connection with such operations.

Article 8 Control of records

1. National railway companies of each Party, if it is necessary, in accordance with the national legislation supply the competent authorities of the Parties in which they established with copies of the transport documents, which they have at their disposal. 2. National railway companies must arrange to keep the transport documents, which they have at their disposal for at least one year.

Article 9 Responsibilities

1. A national railway company which accepts goods for carriage under TRACECA international Customs transit procedures shall be a principle and shall as such be responsible to the competent authorities of the Party whose territory is entered in the course of such carriage for the proper conduct of the international Customs transit operation. 2. Where a consignment is accepted for carriage from a railway company of a third country, national railway company which takes over the consignment under international Customs transit procedures shall when that consignment enters the territory of the Parties become a principal and be responsible to the competent authorities of the Parties whose territory is entered in the course of such carriage for the proper conduct of the international Customs transit operation. 3. National railway companies of the Parties shall be jointly and strictly responsible with national railway companies referred to in paragraphs 1 and 2 to the competent authorities of the Parties for the proper conduct of International Customs transit operations entering the territories of the Parties. 4. In accordance with the responsibilities stipulated in paragraphs 1 to 3, national railway companies shall be liable for any Customs payments, which may become due as a result of an infringement or irregularity 2 3 IGC / Fin Doc 6A/ total pages 4 Original: English committed by national railway company in the course of or in connection with the undertaken transit operation.

Article 10 Exemption from duties and taxes

A national railway company responsible for the proper conduct of an international Customs transit operation in accordance with the provisions of this Technical Annex shall be exempted from Custom payments in relation to goods which: a) Have been destroyed as a result of force majeure or unforeseeable circumstances, duly established; b) Are recognized as missing for reasons deriving from their nature and characteristics, including natural wear or shrinkage under normal conditions of transport.

Article 11 Guarantee waiver

For the purpose of applying this Technical Annex, national railway companies of the Parties shall be exempted from the obligation to furnish a guarantee.

Article 12 Label

National railway companies shall ensure that when consignments are carried by rail under International Customs transit procedures in accordance with the provisions of this Technical Annex, that the Railway bill bears a special mark (stamp), a specimen of which is given in Appendix 1.

Article 13 Amendment of the carriage contract

If it necessary, national railway companies shall be permitted to modify a carriage contract only with prior agreement from Customs in accordance with a written statement of consignee or consignor of goods.

Article 14 Formalities on departure

At the start of a transport operation the railway bill shall be presented to Customs at the office of departure together with the documents required for the custom purpose of completing formalities and controls.

Article 15 Identification measures

As a general rule, and having regard to identification measures applied by a national railway company, Customs at the office of departure may not apply additional measures of identification.

Article 16 Waiver of Formalities at the Customs office of transit

Pursuant to this Technical Annex, simplified procedures are carried out at Customs offices of transit, active on the territories of contracting parties, i. e. representing to the customs offices of transit in these countries SMGS railway bill, which should contain all necessary information for custom purposes.

The competent authorities as documents enabling them to check the proper conduct of transit operations shall treat the transport documents provided for in article 8.

3 3 IGC / Fin Doc 6A/ total pages 4 Original: English

Article 17 Formalities at the Customs office of destination

In accordance with rules, acting on the territory of the Parties, SMGS railway bill should be submitted to the Customs office of destination.

The Customs office of destinations shall forthwith return the railway bill to the railway company after stamping sheet 1 and shall retain the additional copy of the freight bill.

Article 18 Infringements and irregularities

Where an infringement or irregularity is committed in the course of the connection with an International Customs transit procedure, culpable persons will be held responsible to these competent authorities of the Party in the territory of which the infringement or irregularity was committed.

Article 19 Additional facilities

This Technical Annex shall not prevent the application of additional facilities which Parties grant or may wish to grant either by unilateral provisions or by virtue of bilateral or multilateral agreements provided that such facilities do not impede the application of the provisions of this Technical Annex.

Appendix 1

An example of a mark (stamp) (In accordance with Article 12)

TRACECA TRACECA

(White mark on blue background) size 5,0 cm X 3,0 cm

4 3 IGC / FinDoc 1 / page 1(2) Original: English

THIRD ANNUAL MEETING ТРЕТЬЕ ЕЖЕГОДНОЕ ЗАСЕДАНИЕ OF THE INTERGOVERNMENTAL COMMISSION TRACECA МЕЖПРАВИТЕЛЬСТВЕННОЙ КОМИССИИ ТРАСЕКА Yerevan / Republic of Armenia, October 9-10, 2003 г. Ереван / Республика Армения, 9-10 октября 2003 г.

FINAL RESOLUTIONS

TRACECA Intergovernmental Commission at the Third Annual Meeting held in Yerevan, the Republic of Armenia, in October 9-10, 2003: - discussed items, according to the adopted Agenda (Appendix: 3 IGC/FinDoc 2) - considered report of the Chairman-in-Office of the IGC TRACECA, Deputy Prime-Minister of the Republic of Uzbekistan, Mr. R. Yunusov; - considered outcomes of implemented TRACECA projects during 2002-2003 and issues of further development of the Europe - the Caucasus - Asia international transport corridor and increasing its competitiveness; - discussed proposals for strengthening mutual cooperation between the Parties to the Basic Agreement; - in accordance with Article 8 (items 5, 6) of the “Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor”

ADOPTED THE FOLLOWING DECISIONS:

1. Joint financing of the PS IGC TRACECA Adopt the Recommendation of the IGC TRACECA to the Governments of the Parties to the Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor on the System of joint financing of the work of the Permanent Secretariat of the IGC TRACECA (Appendix: 3 IGC/FinDoc 3). For the period from December 2003 - December 2004 the Parties will contribute to the financing of the Permanent Secretariat of the IGC TRACECA on equal basis i.e. EURO 7.000 (seven thousand) each. The total amount of the contribution will make 15% (i.e. EURO 84.000) of the budget of the PS IGC TRACECA. Charge to the Permanent Secretariat of IGC TRACECA in close collaboration with the Parties to prepare the draft Resolution of IGC TRACECA on the System of joint financing to be approved at the Fourth Annual Meeting of IGC TRACECA. 2. Rules of Procedure of the IGC TRACECA and Statute of the Permanent Secretariat of the IGC TRACECA; Adopt the Rules of Procedure of the Intergovernmental Commission TRACECA and the Statute of the Permanent Secretariat of the IGC TRACECA (Appendix: 3 IGC/FinDoc 4 и 3 IGC/FinDoc 5). 3. Establishment of the IGC TRACECA Working Group (Council) of the Heads of Railways, Ports and Shipping Companies; Take into account information on successful conducting of the Joint Meeting of the representatives of UIC, Permanent Secretariat of IGC TRACECA and Heads of Railways, Ports and Shipping Companies of TRACECA countries, held in Baku, Republic of Azerbaijan, July 17-18, 2003 Approve establishment of the IGC TRACECA Working Group (Council) of Heads of Railways, Ports and Shipping Companies as a coordinating body of the main infrastructure and transport operators of TRACECA countries. 4. Protocol on Amendments to the Basic Multilateral Agreement In accordance with the Article 11 (Presentation of Amendments and Additions) of the “Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor” and on the basis of Final Resolutions of the Second Annual Meeting of Intergovernmental Commission TRACECA on the transport corridor Europe – the Caucasus – Asia, authorized Heads of delegations signed the Protocol on Amendments to the Basic Multilateral Agreement on International Transport for Development of the Europe-the Caucasus-Asia Corridor. (Amendment: 3 IGC/FinDoc 6). 5. Draft Protocol on Amendments to the Technical Annexes on International Road Transport and Customs Documentation Procedures Adopt as a base Draft Protocol on Amendments to the Technical Annexes on International Road Transport and Customs Documentation Procedures (Amendment: 3 IGC/FinDoc 7) Recommend to the Parties to agree on the Protocol in the shortest possible time for its further signing at the next Annual Meeting of IGC TRACECA.

3 IGC / FinDoc 1 / page 2(2) Original: English

6. Draft Protocol on Amendments to the Technical Annexes on International Road Transport Adopt as a base the Draft Protocol on Amendments to the Technical Annexes on International Road Transport of the Basic Multilateral Agreement (Amendment: 3 IGC/FinDoc 8) Recommend to the Parties to agree on the Protocol in the shortest possible time for its further signing at the next Annual Meeting of IGC TRACECA. 7. Technical Annex on Multimodal Transportations Adopt as a base the Draft Protocol on Amendments to the Basic Multilateral Agreement (Amendment: 3 IGC/FinDoc 9). Recommend to the Parties to agree on the draft Technical Annex on Multimodal Transportations in the shortest possible time (Amendment: 3 IGC/FinDoc 10) for further signing of the Protocol on Amendments to the Basic Multilateral Agreement at the next Annual Meeting of IGC TRACECA. 8. Technical Annex on TRACECA Investment Adopt as a base the Draft Protocol on Amendments to the Basic Multilateral Agreement (Amendment: 3 IGC/FinDoc 11). Recommend to the Parties to agree on the draft Technical Annex on TRACECA Investment (Amendment: 3 IGC/Fin Doc 12) in the shortest possible time for further signing of the Protocol on Amendments to the Basic Multilateral Agreement at the next Annual Meeting of IGC TRACECA. 9. Draft Protocol on Amendments to the Technical Annexes on Customs Documentation Procedures Adopt as a base the Draft Protocol on Amendments to the Technical Annexes on Customs and Documentation Procedures (Amendment: 3 IGC/FinDoc 13). Recommend to the Parties to agree on draft Protocol in the shortest possible time for its further signing at the next Annual Meeting of the IGC TRACECA. 10. Authority of the Permanent Secretariat of the IGC TRACECA Transfer to the Permanent Secretariat of the IGC TRACECA authority to sign Memorandums of Understanding with International Organizations and International Financial Institutions (IFI’s) according to the PS IGC TRACECA proposal and in agreement with the Parties. 11. Secretary General of the IGC TRACECA In accordance with Article 3.3 of the Statute of the Permanent Secretariat of the IGC TRACECA the members of the IGC elected Lyudmila Trenkova as the Secretary General of the PS IGC TRACECA for the term of presidency of the Republic of Armenia in the IGC. 12. Strategy of the transport corridor Europe – Caucasus – Asia development for the period 2004- 2008 and proposals to the TRACECA Action Plan 2004-2006 Adopt the draft Strategy paper of development of the transport corridor Europe – Caucasus – Asia for the period 2004- 2008 (Amendment: 3 IGC/FinDoc 14) for further elaboration of its final version and recommend the Parties to supplement the presented proposals to the TRACECA Action Plan 2004-2006 (Amendment: 3 IGC/FinDoc 15) with new proposals by the end of 2003 for its further approval. 13. Next Annual Meeting of the IGC TRACECA

In accordance with the Rules of Procedure of IGC TRACECA, the Third Annual Meeting of the IGC TRACECA recommended to summon the next IGC TRACECA Annual Meeting in Baky, Republic of Azerbaijan, at the end of 2004. 14. Yerevan Declaration Adopt Yerevan Declaration. (Amendment: 3 IGC/FinDoc 16)

The Final Resolutions of the IGC TRACECA have been adopted on the consensus by the Parties of the Basic Agreement at the 3rd Annual Meeting of the TRACECA Intergovernmental Commission in presence of all Parties, in Yerevan, Republic of Armenia, on October 10, 2003.