“Finally we can turn status of Georgia as a transit country into reality, however, unfortunately, Georgia’s infrastructure is absolutely not ready for it,”- this is how Irakli Tsankashvili, chief executive of Logistics Solutions assesses current situation for transport and logistics in Georgia.
During his conversation with BM.GE, he talks about the challenges, which companies face in supply chain management and transportation of goods.
“Because of that difficult situation, which happens in Ukraine and in the region, demand for Georgian transport corridor is growing. Finally we can turn status of transit country for Georgia into reality, however unfortunately Georgia’s infrastructure is not ready to withstand such a big volumes.
This brings to country big losses. Sea ports can’t handle increased cargo volumes and there is huge congestion. Despite the fact, that railways’ infrastructure is in a bit better condition, still it is not possible to work smoothly as all components are related to each other. Wagons in ports can’t be loaded timely. We also have some wagons to be loaded in Poti, however we can’t bring empty ones to loading place, as there are other wagons from previous loadings still there and unless they will be loaded and released, there is physically no space for new ones and they are stuck at the border sorting stations waiting for their turn.
This causes disruptions in operations for us – logistics companies as well as for our clients. Containers are on detention, there are extra storage costs imposed, which is additional cost for us and ultimately our clients. We try our best not to increase cost to our clients and not to make them unhappy, but not everything is possible to be covered by us and such additional costs cause client’s disappointment. All of this causes disruptions in supply chains and increase transit time of goods”, - explains Tsankashvili
We have to mention, that workload of the company increased by 30%-40% after beginning of war in Ukraine. However as stated by CEO of Logistics Solutions, increased demand for transit of goods through Georgia shall be maintained in long-term and this shall be prioritized on higher government level.
“In the past most of transit was going through Russia’s so called “northern” corridor and this was much cheaper than “southern” corridor through Georgia and Azerbaijan. Cost is another problem. This shall be discussed on intergovernmental level and certain agreements shall be completed. Nowadays companies are forced to use our corridor for transit of their goods, as sanctions imposed on Russia by EU and US don’t leave them other alternatives, however as soon as sanctions will be lifted or alternatives will be offered, clients will run away if tariff policy will not be regulated and corridor will not become attractive. Country should use the situation wisely and maintain clients and cargo traffics which moved to Georgia recently”, explains Tsankashvili.
Founder of Logistic Solutions emphasizes on challenges in logistics sector in Georgia and says, that companies face other operational problems too. As he says, this sector is not regulated, which causes certain difficulties.
“This field is completely unregulated. Anyone can just register a LLC and baptizes himself as a “freight forwarder”. They say, that they are forwarders and provide service from home only with one laptop sitting on sofa, without any liabilities, capital, knowledge, experience. This is the field, which shall be controlled and regulated by relevant authorities. As an example I can tell you, that in order to register a LLC in Germany, you need minimum authorized capital of EUR 25,000.00, you have mandatory requirement of liability and other insurance coverages, you have to be a member of chamber of commerce, you have to take certain licenses and so on. There are absolutely no requirements in Georgia. Maybe such simple procedures are good for starting new business, but on the other hand it shall not be applicable for all types of businesses. Such “one man shows” have no infrastructure and insurance. Proper responsible companies are providing their services with insurance coverage, proper management structure, which is related to more operational expenses. As a consequence we have non-equal competition environment. Therefore it is very difficult to say, what is the market share of Logistics Solutions in Georgia”, - explained founder and chief executive of the company.
