July 2015 Erasmus University Rotterdam Web viewJuly 2015 Erasmus University Rotterdam. ... Nijdam, van der Lugt and de Langen (2012) ... Truck, rails and planes

July 2015 Erasmus University Rotterdam

The role of port in the corridor

Bachelor thesis of Ayla Abbasova: Urban& Port and Transport Economics

Erasmus University Rotterdam

Under supervision of Dr. Erwin van Tuijl

Ayla Abbasova 1


Abstract-The aim of the paper is to analyze how important is the role of port in the corridor. The analysis is based on an example of Port of Baku, which was located on the international trade route

since ancient times. But not only the good location of the port, but also a well-developed hinterland contributes and highlights the

performance of the port. The role of Port of Baku in TRACECA was examined through the separate analysis of a port, its hinterland

infrastructure and a corridor. The results have shown that ports in Azerbaijan are of a great importance for the development of the

trade in the corridor.

Key Words: Port of Baku, TRACECA, hinterland, corridor

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Table of Contents

Chapter 1 Introduction.................................................................................................................................41.1 Relevance........................................................................................................................................................ 41.2 Aim..................................................................................................................................................................... 61.3 Research question.......................................................................................................................................61.4 Method............................................................................................................................................................. 71.5 Structure..........................................................................................................................................................7Chapter 2 Theoretical Review...................................................................................................................82.1 Port.................................................................................................................................................................... 82.1.1 What does it mean to be a port?........................................................................................................82.2 Hinterland Infrastructure.....................................................................................................................112.2.1 What is a hinterland infrastructure of the port?.....................................................................112.3 Corridors.......................................................................................................................................................132.3.1 What does it mean to be a corridor?.............................................................................................132.3.2 What is the role of TRACECA in the corridor trade?..............................................................152.4 Conclusion................................................................................................................................................18Chapter 3 Methods used for results part.........................................................................................18Chapter 4 Results...........................................................................................................................................194.1 Port of Baku.................................................................................................................................................194.2 Hinterland Infrastructure of the port..............................................................................................234.2.1 Road Transport......................................................................................................................................234.2.2 Railway Transport................................................................................................................................254.4 Ports of Baku in TRACECA................................................................................................................264.4.1 Alyat International Port......................................................................................................................27Chapter 5 Conclusion, Recommendations and Discussions.................................................305.1 Conclusion....................................................................................................................................................305.2 Recommendations....................................................................................................................................335.3 Discussions.................................................................................................................................................. 33

Bibliography..........................................................................................................33

Chapter 1 Introduction

1.1 Relevance

There are more than 2000 ports around the world, starting with small docks

handling only several hundred tonnes per year to the biggest harbors such as

Rotterdam, Shanghai and Singapore, each handling multiple of small ones. The

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history of ports and maritime transport goes back in ancient times. They have

developed in the same path with the international trade evolvement, which was

hereditary in formation of the present-day world. Therefore, ports and sea

transport plays a critical role in global business world.

Though the role of ports is enormous, the first thing that comes to mind when

thinking about port’s role, is a harbor as a part of supply chain. Ports provide

with facilities to store and handle freights, they deal with postponed

manufacturing, picking and packing, provide ships with required space and

conditions (Mangan & Lalwani, 2008).

There are a number of papers focused on the role of ports today. For instance, a

paper by Mangan and Lalwani (2008) states that an increased accentuate on the

role of ports should be considered with the changes in world trade and sea

transportation specifically. These authors also mention a number of changes that

caused an increased demand and the role of ports. These include a drastically

increase in vessels size, expansion of global shipping companies, specialization,

unitization and transshipment (Mangan & Lalwani, 2008). The role of ports has

been also highlighted, as operations became more capital intensive, labor saving

and space consuming. The alterations have also occurred in the port market: as

there is an increased competition between ports, lowers the transportation

period (being pushed by liners), fear of overcapacity. The above-mentioned

changes reiterating the role of ports can be observed as a generally tendency.

This paper will analyze the role of port in gateway logistics and apply it to one

specific port: Port of Baku. It is notable, that there had been limited research

conducted on the role of Port of Baku for Azerbaijan and its economy previously,

making the following research challenging and more interesting. Therefore, the

focus of the paper is Azerbaijan (Baku) and its Port.

Azerbaijan, with the capital city in Baku is located on the shore of the Caspian

Sea. Though the country is landlocked, an access and connection to the Caspian

Sea makes it crucial to evolve the sea transportation and land transportation

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modes. Being the biggest inland sea in the world, the Caspian Sea is ringed by

five countries: Azerbaijan, Russian, Kazakhstan, Turkmenistan and Iran (Ziyadov,

2011). Therefore, these states are the predominant maritime merchants in

Caspian region. Based on provided data, in 2010 11.7 mln tons of goods have

been consigned through ports in Azerbaijan, out of which 9.5 mln tons were

transit transshipments (Ziyadov, 2011). The sea transportation through Caspian

Sea plays a critical role for Azerbaijan, as the country does not have a land

connection with any Asian countries. The country and the sea play a bridging

role between Europe and Asia. The connecting role of Port of Baku has been

explicitly shown in Taleh Ziyadov’s paper (Ziyadov, 2011).

The sea transportation through the Caspian Sea has an influence on the whole

Euro-Asian supply chain. The important role of Azerbaijan in Eurasian trade is

reflected in Port of Baku’s position in “Transport Corridor Europe Caucasus Asia”

(TRACECA), which was established in 1993. TRACECA project was created as a

restoration of the historical Silk Road and is known as a new Silk Road of the 21st

century. The main aims of TRACECA project are the following: evolvement of

economical relationships between countries, improvement of transport ties of

international transportation routes, creation of circumstances for transit trade,

transportation policy evolvement and evolution of programs aimed to organize

multi-modal transshipment (TRACECA, 2015). Notable to mention, that the

headquarter office of TRACECA is located in Baku. An important role Port of

Baku with its hinterland infrastructure in the project will be discussed in this

thesis.

.

1.2 Aim

A role of port varies from pail transshipment destination to crucial logistics

point, which in turns relies upon the supply chain structure of dock users. The

aim of the paper is to examine the current role of port from logistics and supply

chain prospect. As the role of port depends on location, trade routes, this paper

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will mainly focus on the Port of Baku. The paper will also analyze why is the Port

of Baku so important for Azerbaijan as a part of transport corridor. As a role of

Port of Baku is tied to the role of Baku in TRACECA project, the hinterland

infrastructure, which is tightly connected to the transportation system

development, will also be highlighted in the paper. It will be reflected how the

logistical aspect and developed hinterland infrastructure of Port of Baku

influenced its role of the bridge.

1.3 Research question

Therefore, the main research question investigated in the paper is the

following:

“How important is Port of Baku for Azerbaijan in a corridor between Europe and

Asia?”

In order to answer to the question there are several sub-questions created to

support and guide the main research question:

1. What does it mean to be the port?

2. What is a hinterland infrastructure of the port?

3. What does it mean to be a corridor?

4. What is the role of TRACECA in the corridor trade?

5. What is the role of Azerbaijan in TRACECA?

1.4 Method

The research in the paper is based on the literature review. The data will be

analyzed using the qualitative research methods. The SWOT analysis is used as a

tool for an overview of the current situation of the Port of Baku. The paper will

draw its results and conclusions from the different papers review and

examination of the current tendencies.

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1.5 Structure

To get an answer to the research question, the paper will be structured as

following. The theoretical part will set up a hypothesis constructed to reply to

the main question. The hypothesis will be composed based on the literature

review. Additionally, the theoretical part will give answers to the first four

theoretical sub-questions. This part is necessary as it provides a general

overview and puts a fundament for the subsequent part of the paper. The result

part of the paper, applying the theory to the Port of Baku, will find an answer to

the last sub-question related to the Port in Azerbaijan. This part is responsible

for the hypothesis analysis and testing. Additionally, the end of the results part

will clarify whether the hypothesis is accepted or rejected. The conclusion part

providing an answer to the main research question will consist of the short

summary, emphasizing the main findings and policy recommendations for the

paper.

Chapter 2 Theoretical Review

The role of theories is to explain, predict and master various events, phenomena

and relationships. Theoretical framework provides a context for analyzing

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hypotheses, creates a frame of references crucial for observations, definitions,

interpretations and generalizations (PeopleLearn, 2008).

The following paragraph will provide the concepts necessary for the solid and

reliable background, critical for the research. Therefore, the first four theoretical

sub-questions are answered in this part. The theoretical part is divided into

three parts: port, hinterland and corridor, which in combination create a

sufficient upbringing for the analyses.

2.1 Port

2.1.1 What does it mean to be a port?

To better understand the role of ports, definitions are explained. The words like

port, harbor and haven are usually tightly linked to each other. However, this

paper will mainly concentrate on port. The Table1 provides an overview to

common definitions of the port:

Table 1: definitions of port

“An entry place for global shipping

transport and area of economic

activities, connected to the advent of

goods and vessels.”

(Nijdam, van der Lugt, & de Langen,

2012)

“A geographical area where ships are

brought alongside land to load and

discharge cargo- usually a shelter deep

water area such as bay of river mouth”

is a port.”

(Stopford, 1997)

“Extents linked to sea, ocean or river,

equipped with specific facilities

allowing them to manage loads”

(Tarantola, 2005)

Source: Author

From the definitions provided above the unifying tendency is observed: the port

is a place/area or extent, which deals with the discharge/load (loading

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management) of ships/shipping transport. From this point, the definition of the

port that best suits this paper is therefore the following:

“Port is a place located on the shore of sea, river or ocean, used to receive vessels

and transfer goods from and to it. Additionally, it applies certain machinery,

facilitating loading and unloading processes.”

The above definition of the port highlights two major roles of port. First of all, a

port is a bud in transportation group, standing in a line with other nodes of

transportation like airports, railroad stations. Additionally, it is a place where

economic activities connected with advent of ships and freight to the port take

place.

It is usually the case that a port consists of several terminals, which are “specific

parts of harbor consisting of one or more wharfs related to special type of cargo”

(Stopford, 1997). There are various categories of freight in harbors: liquid bulk

(crude and refined oil products), dry bulk (coal and iron), unitized freight

(consisting of Ro-RO and Lo-Lo goods) and other consignment products. More

than 6 billion tones of goods are transported every year by sea transportation.

Out of them 45% are liquid bulks, 23% dry bulk and 32% general cargo (OECD,

2012).

To better understand what the port is, a deeper insight into functions and roles

of the port from different perspectives is presented in addition to information

provided in introduction part. Table 2 presents four main functions of the port:

Table 2: Different functions of Port

1) Administrative Making sure that the legitimate,

political and economical importance

of the government is secured

2) Development Ports contribute, advocate and

investigate local and international

economy

3) Commercial Ports are worldwide connection

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points for various types of the

transport to interact: transition of

goods, stowing and discharging

4) Industrial Control goods and products export

and import

Source: (Port Reform Tool Kit, 2015)

Different authors in their papers focus on only one function of the port,

emphasizing its importance. For instance, a paper by Robinson (2002), argues

that due to a fast and intensive reorganization of supply chain and logistics way,

in which ports are entrenched, their role is now seen as an essential part in

value-driven chain system. Robinson (2002) shows that port adds value to

carriers and suppliers; therefore it should be considered not just a shipment

place, but also more as a part of a complex value chain scheme (Robinson, 2002).

Nijdam, van der Lugt and de Langen (2012) in their paper emphasize a role of

port as a place of storage place where goods and passengers have to interim

their journeys. Authors in the paper also mention fortification side of the port

that is crucial for achievement economies of scale and efficiency improvement

(Nijdam, van der Lugt, & de Langen, 2012). Another function of the port that was

not mentioned in the table of ports function is a port in gateway logistics. A

paper by Tongzon and Oum (2005) focused on this important role of the Port. A

gateway in the paper is considered as a bud in international supply chain, which

plays a bridging role between regions by providing different types of

transportation systems. The importance of the port is highlighted by its role in

gateway logistic accomplishment. The influence of the port on efficient

transshipment and amalgamate between sea and land transportation is being

analyzed (Tongzon & Oum, 2005).

To sum up, being located on the side of a sea or ocean, a port is exploited for

ships take in and the transportation of goods from different extent. Additionally,

on the examples provided in papers of Ross Robinson (2002), Nijdam, van der

Lugt, de Langen (2012) and Tongzon together with Oum (2005) it can be

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concluded that ports serve a number of functions. Starting with its role in a

value-driven chain system, continuing as a storage place and finally as a bridge

between regions.

The following parts of thesis analyze the importance of hinterland infrastructure

and role of corridors. Thus, the paper focuses on the importance of port in the

corridors, being a part of the gateway logistics.

2.2 Hinterland Infrastructure

2.2.1 What is a hinterland infrastructure of the port?

To start with, the hinterland is an extent, where the freight is transshipped over

the land, after it has been dispatched in the port. The hinterland infrastructure

includes different transportation modes such as road, rail and air and interior

estuary. However, the majority of goods due to the big volumes are traveled by

road and railway hinterland from the port. (Nijdam, van der Lugt, & de Langen,

2012). To emphasize the quality, adeptness and competence of the port, the well-

developed hinterland infrastructure is essential. A well- located port will have no

value if there is no link between various parts of the transportation points. As the

port is not the last stop for goods, it is critical to have a well- developed

hinterland infrastructure. According to Noteboom, the extent of the port is

mainly dependent on the size and population of its hinterland. Hinterland is a

place where the port deposits a vast of its goods (Notteboom, 2008). Hinterland

infrastructure creates corridors for the goods to reach their final destination. An

expansion of the corridor has a positive effect on port’s image and profit. Being

one of the largest ports in the world, the Port of

Rotterdam has a curvaceous hinterland infrastructure. It has a good network

with the German Ruhr extent and Western Europe central location (Kreukels &

Wever, 1996).

Figure 1: Hinterland Infrastructure

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Source: (Economist, 2013)

As it can be seen from Figure 1, there is a thorough railroad connection starting

in Sweden and enfolding a number of countries. It worth mentioning, that

Belgium and Germany can be attained in 12 hours, whereas places in Central

Europe in only 48 hours (Port of Rotterdam, 2015). Therefore, the well-

developed hinterland infrastructure contributed to the current position of the

port in the world.

Another example is a port of Singapore, which is one of the biggest ports in the

world. There are more than 400 ship lines working in the port. Moreover, it has a

link to 600 ports multinational. The location of the port simplified the

connection between different parts of the hinterland, highlighting the efficiency

and sustaining the competitiveness of the port (Backes Vier, 2010).

Therefore, different transportation types define the hinterland, which is a place

to which goods are being transported to using different types of transportation,

once they have been shipped. Truck, rails and planes help to deliver goods to the

final destination. From the examples of Port of Rotterdam and Singapore the

importance of the hinterland infrastructure was highlighted. It was emphasized

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that a well-developed hinterland is necessary to efficient works of corridors for

goods transportation. The significance of the full- fledged hinterland

infrastructure can be seen in short- timed transportations, well constructed

connections between different transportation systems, leading to the more

efficient operational system.

2.3 Corridors

2.3.1 What does it mean to be a corridor?

In order to transfer goods from ports to the hinterland, there is usually a need in

one or several transportation corridors. In most cases they consist of different types

of transportation systems: road, railways. The benefit of these corridors is that they

try to avoid the city centers and manage the transshipments in most efficient way.

They try to simplify the transportation process, benefiting from the shortest routes

and shortening the transfer time. It is of the best convenience in big cities, where the

coordination and management of goods is a big problem (Nijdam, van der Lugt, & de

Langen, 2012). Creation of these corridors evolves the quality of hinterland

accessibility.

An example of Great Silk Road is taken in order to explain what it means to be a

corridor. The road played a bridging role between countries of different civilizations

and socio- economic systems. Due to the instable measurement systems, decline of

the ancient society, naturalization of economy in Europe and internal wars, there

was a need in strong and reliable connection system that built a bridge between

Europe and Asia. The countries located on the route of this corridor were the part of

the new, more developed, simplified and efficient trade system (Waugh, 2012). The

Table 3 presents a list of advantages and disadvantages of the Great Silk Road:

Table 3: Advantages/ Disadvantages of the Great Silk Road

Advantages Disadvantages

1. International division of labor Created the working places, as there

1. InsecurityInsecurity, people and goods might

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was a need in translators, camels and caravanserai.

have not reach their final destination

2. Development of the cities located on the trade routes.

2. The decay of the cities located far away from the trade routes

3. A single monetary system

To simplify the trade, as not every country could produce gold and silver money

3. A high specialization in the goods

being in demands the most.

4. Protection of the traders’ rights

Could have been protected from petty thieves.

5. Constant development of goods and technologies.

Countries contributed to the trade with the things they were best at.

6. Knowledge and idea sharing.

Geography, math, history and religion.

Source: (Latov, 1999)

It can be concluded from the table that benefits of these corridor outweighed the

disadvantages. The trade expansion, improvements of living and working conditions

are consequences of the evolvement of this trade corridor. However, the problem

with security, the fear of getting robbed and degradation of the cities behind the

corridors remain to be disadvantages of the Great Silk Road.

From the history of the Great Silk Road a number of trends remaining in modern

economy can be observed: International economic relations endure to be a crucial

stimulant of the economic development of the civilization. Being a part of

international trade benefits all the countries participating in it, export and import of

goods leads to the spontaneous evolvement of different trade institutions. The

polycentric (with several centers of power) system is more stable and efficient,

whereas monopolization in the end is short- lived and unreliable (Latov, 1999).

Besides the TRACECA project there is a Great Smart “Silk Road” project (still has to

be launched) that is also considered as a restoration of the Great Silk Road in the 21st

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century. The route of the project will go through China, Japan and India to the

Middle East and Africa to Europe through Cyprus. The goal of the project is to bring

development, integrity, harmony and security (Abdoullaev, 2014).

Another project worth mentioning is Atlantic Gateway and Trade corridor freed in

2011 in Canada. The corridor aims to connect market in North America with markets

in Europe, Latin America, Asia and the Caribbean through the Suez Canal. The aim of

this project was to enhance the trade relationship between regions, by using a well-

developed transportation system and to emphasize the importance of Canadian

trade (Atlanticgateway, 2009).

Hence, it can be concluded, that there is a unifying goal of corridors. From the

examples of Great Silk Road, a Great Smart Silk Road and Atlantic gateway and

Corridor it can be seen that the aim is to create a more progressed, secured and

organized trade system.

2.3.2 What is the role of TRACECA in the corridor trade?

A New Silk road passes by Europe and Asia through different corridors and ways.

Majority of rails and roads are under control of various organizations including

UNECE, UNESCAP and IRU. TRACECA project was initiated under EU international

transshipments requirements. The project was established in May 1993 within

Brussels international conference. In 1998 an agreement, which played a crucial role

in development of trade relationships between Europe-Caucasus-Asia, was signed in

Baku. Twelve countries took part and contributed to this agreement: Armenia,

Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan,

Turkey, Ukraine and Uzbekistan (Ziyadov, Strategic Assessment of Euro-Asian Trade&

Transportation, 2011). The existence of this agreement has a positive effect on the

evolvement and expansion of the trade relationships in these countries. Starting

from 1998, EU has applied more than 80 development projects, aimed to improve

the connection between different regions. A number of companies assist TRACECA,

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for instance EBRD has invested more than 700 mln in projects related to

development of ports, railways and roads routes of TRACECA.

Another project of 2009 signed by Azerbaijan, Armenia, Georgia, Kyrgyzstan and

Tajikistan focused on evolvement of multimodal transport. This agreement

played a critical role for Azerbaijan, as TRACECA’s routes in Azerbaijan included

different types of transport modes: road, railway and sea (Ziyadov, Strategic

Assessment of Euro-Asian Trade& Transportation, 2011). The proper

coordination of the countries policies at the Black and Caspian Seas and effective

organization of different transport modes is critical for the progressive

development of TRACECA into cost-efficient, speedy and trustworthy transport

corridor.

Therefore, it can be concluded that TRACECA tries to obtain the development of

trade relationships between areas through implementation of agreements

achieved and investments in improvement of different types of transportation

modes.

Hypothesis

Being a part of research, hypothesis are guesses conducted by researcher, which will

either clarify or resolve a problem or will counselor him for the further analysis

(Word Central, 2015). The function of the hypothesis is: first of all to put the main

research question in a testable form, assist by either confirming or disconfirming

specific theories used for sub- questions, specify the data necessary for the research

and recommend the most applicable ways and mechanisms for the research analysis

(Sharma, 2013).

From the theoretical review provided above, the role of port focused in the paper is

established. Additionally, the description of the advantages and functions of the

corridor have been also mentioned. The aim of the paper, which is to analyze the

importance of the role of port in the corridor project, is presented in Table 4.

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Table 4: Aim of the paper

Source: Author

The theoretical review gives a solid background necessary in hypothesis formation.

Therefore, in order to answer to the research question the following hypothesis is

created:

“The well developed hinterland and location of the port influence the role of the

port in the corridor.”

Well- developed hinterland implies there is a good linking connections between

different types of transportation, assisting to deliver the goods to final destination.

Additionally, the well-located port opens larger possibilities for trade, highlighting

the efficiency of port.

The constructed hypothesis plays a linking role between the Port of Baku and

TRACECA. The analysis in the empirical part of the paper will either prove or reject

the hypothesis therefore leading to an answer to the main research question.

2.4 Conclusion

To sum up, the role of port, which is an area, located next to the sea, ocean and river

and used by ships and goods transportation, concentrated in the paper is its function

in a gateway logistics. Additionally, a progressed hinterland infrastructure, which

stands for the connection ties between different types of transportation, plays a

critical role in simplified accessibility of different extents and goods transshipment.

The last part of the theoretical review shows the importance of the corridors on the

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Importance of Port

Corridor Project

(Port of Baku) (TRACECA Project)The well-developed hinterland and location of the port influence the role of the port in the corridor.

17


example of the Great Silk Road, a Great Smart Silk Road and Atlantic gateway and

Corridor.

The next part of the paper will try to apply the obtained theory to the specific port

(port of Baku). Based on the theory review it will show the connection between the

Port of Baku, its hinterland infrastructure and TRACECA project.

Chapter 3 Methods used for results part

At the beginning of the paper the method part gave a general overview to the

methods applied throughout the paper. This section gives a more specific

outlook to the ways implemented, focusing on the results. For the wholeness of

the paper the theory used in theoretical framework, which was firstly divided in

three parts: port, hinterland and corridor and then again divided into four sub

questions, will be applied to the case of Port of Baku. As the paper is entirely

based on the qualitative analysis, the desk research is being conducted. The desk

research collects data available from the existing sources and analyses it. It

offers the cheapest and quickest way of information gathering and further

analyzing (Flyvbjerg, 2006).

For the method part of the paper related to the port of Baku the main

information is gathered from: Port of Baku, State Statistical Committee of

Azerbaijan and TRACECA. To analyze the Port of Baku, the case study research is

conducted. This type of the research methods bring to the simplified

comprehension of the complicated issue related to the subject. It helps to

highlight the analysis of the constrained number of events and conditions and

the link between them (Jensen, 2005).

The first part of results is devoted to the Port of Baku. The main features of the

port are discussed along with the explanation how important can the port can be

considered as a corridor. The second part of results refers to the hinterland

infrastructure of the port, as the theoretical part has explained, the well-

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developed hinterland infrastructure has advantages and influences the role of

port in the corridor. The pluses and minuses of the hinterland infrastructure of

the Port of Baku are listed and analyzed. The SWOT analyzes is used as a tool for

straightforward comparison of the advantages and shortages of port’s

hinterland. It will show both weak and strong sides of two types of hinterland:

road and railway. The last part of the results part gives an answer to the very last

sub-question and provides with a background necessary for the hypothesis

justification. This part will also present a SWOT analysis that facilitates the

understanding of available information.

Chapter 4 Results

4.1 Port of Baku

There are ten major ports in the Caspian Sea, Baku (Azerbaijan), Aktau

(Kazakhstan), Turkmenbashi (Turkmenistan), Astrakhan, Makhachkala and Ola

(Russia), Anzali, Amirabad, Neka and Noshahr (Iran). Each port’s share in the

Caspian Sea is presented in the Figure 2.

Figure 2: Ports in Caspian Sea (in %)

Source: (Ziyadov, Baku International Sea Port , 2010)

Today, as it can be seen from Figure 3, the port of Baku is mainly trading with

port of Aktau, Anzali, Amirabad, Makhachkala and Turkmenbashi.

Figure 3: Marine Routes of Port of Baku

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Source: (Turabov, 2013)

Dating back to the 16th century, when the sea trade was one of the main activities

in city, Port of Baku is the most aged port in the extent. It was the Soviet Union in

1900s contributing to the reconstruction of the Port of Baku to the way it looks

today. The biggest part of the trade during the Soviet Union period was betwixt

Port of Baku, Turkmenbashy and Nowshar (Tochintskaya, 2012).

It is Azerbaijan State Maritime Administration who is in charge of

implementation of policies and evolvement programs for sea transportation and

port sector. The transshipment of cargo via sea is maintained by the Azerbaijan

State Caspian Shipping Company (CASPAR), which is also in charge of technical,

restoration, trading, supplying and shipment organizational procedures of the

port.

The maritime fleet of Baku counts 70 ships, including 34 tankers, 26 dry cargo

ships, 2 Ro-Ro ships and 8 consignment barges (Ziyadov, Strategic Assessment of

Euro-Asian Trade& Transportation, 2011).

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When considering the overall volumes traded via port, 18 millions are

partitioned between 4 terminals: the main Cargo (2 mln), Dubendi Oil (8 mln),

passengers and ferry terminals (8 mln). From the picture below it can be seen

that 5.7 mln tons have been griped by port of Baku in 2010. There is an

availability of 24,000 m2 of open space used for the freight storage and 15,000

m2 of shaded area.

When having a closer look at the terminals: the main cargo terminal mainly deals

with general and dry freight. From figure 4, it can be seen that the cargo terminal

had a general turnover of 610,000 of freight in 2010. When considering the

imports which stand for 82% of the total trade over, more than 80% come from

ports of Iran (cement), 15% from ports of Turkmenistan (aluminum, chemical

products) and less than 5% from European ports (equipment and machines)

(Ziyadov, Strategic Assessment of Euro-Asian Trade& Transportation, 2011).

Figure 4: Turnover of the Cargo Terminal


Speaking of the Ferry Terminal reflected in Figure 5, which plays a crucial role in

gateway between Europe and Asian trade, more than 80% is the transit freight,

coming mostly from Kazakhstan and Turkmenistan. The majority of trading

goods are transported from Asia to Europe, from Kazakhstan and Turkmenistan

to Europe through ports of Black Sea, making a port of Baku a transit point

(Rzayeva, 2009).

Figure 5: Turnover of the Ferry Terminal

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Dubendi Oil terminal, stemming the oil from Kazakhstan and Turkmenistan and

is considered the biggest oil terminal in the Absheron extent, counts 2 wharfs

with an accessibility of 5,000-13,000 tons at once. Figure 6 shows that the

biggest part of the general turnover is transit, highlighting the bridging role of

Baku.

Figure 6: Turnover of Dubendi Oil Terminal


Therefore, from the main activities of the Port of Baku ‘s terminals it can be

concluded that the goods mainly transshipped through port are transit goods,

transported mostly from East to West (Turabov, 2013).

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4.2 Hinterland Infrastructure of the port

4.2.1 Road Transport

It has been mentioned in theoretical part that to analyze how well is the

hinterland infrastructure developed, the analysis of truck and railway transport

mode should be conducted. To see how well is developed the hinterland

infrastructure of the Port of Baku, the separate analysis of the road and railway

infrastructure is implemented.

To start with, the roads of Azerbaijan having the length of 25,000 km, play a

critical role both in Caucasian and Europe/Asia area, by performing a vital

connecting route between extents. More than 5,000 km are considered

international, contributing to the trade evolvement (Turabov, 2013).

Road and truck transshipment is the most efficient type of transportation within

the TRACECA project, therefore making the development of road transportation

more attractive in Azerbaijan. However, for today, Azerbaijan lacks accessibility

to the huge tracks, by not meeting the high European standards, implying that

the major part of the road transportation avoids Baku (Tochintskaya, 2012). The

SWOT analysis presented in Table 5 will analyze 2 preeminent road routes

playing a central role in international transshipments: Southern and Northern

Roads.

Table 5: Road Hinterland Advantages Disadvantages

Southern Route

Rotterdam-Germany-Austria-Hungary-Bulgaria –Turkey –Georgia or Iran- Baku

1. Can use either way from Georgia or Iran to get to Baku.

2. Has a length of 5,600 km and total cost is 2700-2900 euro. Time needed 9-11 days.

3. The way through Iran gives a chance to ship goods to Central Asian countries.

1. The length of the transshipment. Can choose an option from Germany to Latvia-Russia-Baku (6,5 day).

2. Is expensive. 3. The presence of

bribery on the boarder with Georgia

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Northern Route

Rotterdam-Germany-Poland- Belarus or Ukraine –Baku

1. The length is 4,900 km.

2. The cost 1600-euro. 3. A 10-day trip.

1. The lost of three days due to the checking at the boarder.

2. The bribery at the check points on the boarder with Russia and Belarus conduct over 8% of the total cost of transshipment

Source: Author

From the SWOT analysis in Table 5 it can be concluded that the northern route is

more preferable as it offers the cheaper and shorter transportation.

Though it can be concluded that TRACECA is interested in transportation via

road in Azerbaijan, a number of reconstructions and evolvements have to take

place first. There have to be changes undertaken on the boarder with Georgia,

Russia and Belarus necessary for the increased efficiency. Additionally, an

improved type of network is essential between Port of Baku Authority and

CASPAR, in order to reduce the delay times.

4.2.2 Railway Transport

The railway transportation is the second type of transportation playing a crucial

role in TRACECA’s international transshipments. To give a general picture of the

advantages, disadvantages, opportunities and weaknesses of the port and its

hinterland, SWOT analysis is performed in Table 6.

Table 6: Railway Hinterland

Strengths Weaknesses

1. The short distance between Port and Baku Railway Station.

2. Implementation of electric shifts.

1. Little investment to the development of the port and station equipment.

2. Long time transportation

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3. Possibility to undertake the import/export actions at the station.

period from Baku to the boundary.

Opportunities Threats

1. The construction of the new Alyat Port.

2. The need to cut transportation cost will increase the demand for road transportation.

3. The implementation of the new line Baku/Tbilisi/Kars.

4. The new State program used for bridges and equipment reconstruction.

1. Majority of freight comes from one port (Turkmenistan).

2. Mostly all the vessels belong to CASPAR.

3. High level of bureaucracy.4. The decrease in the trade level

due to crises.5. The shut border with Armenia.

Source: Author

One of the advantages of the Ports location is its short distance accessibility to

the railway station, which in turn minimizes the security problems during

transportation. The electric system availability at the station improves the speed

and facilitates the managerial procedures. The condition for the import/export

activities saves time and simplifies the burden of the port. Speaking of the

opportunities, the construction of the new port in Alyat will provide a possibility

to renew the port and railway facilities to the level set by international

standards. Additionally, the construction of the railway station at Alyat improves

the service provided; emphasizing the efficiency both of the port and the station.

The new State program will improve the rate of motion (will reach 160 km/h)

and reduce the time travelled. As for the weaknesses, the current condition of the

equipment is less than satisfactory, requiring the soon renovation. Moreover, it

takes over 15 hours to get the boarders of the country (Ziyadov, Strategic

Assessment of Euro-Asian Trade& Transportation, 2011). Coming last, being a

threat, the trade between Turkmenistan and Azerbaijan implies that wants of

Turkmenistan can have a substantial effect on the total volumes traded of

Azerbaijan. Additionally, the fact that CASPAR owns the majority of vessels in

Azerbaijan, reduce the possibility of the cost reduction, as the entry for the

different shipment companies in the market is restricted. The high level of

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bureaucracy also complicates and stagnates the trading procedures. Another

thing worth mentioning is the economic crisis that might occur and lead to

reduce trading amounts (Ziyadov, Strategic Assessment of Euro-Asian Trade&

Transportation, 2011).

Thus, from the SWOT analysis it can be concluded that the network between

station and the Port is in a good condition, emphasizing and contributing to the

role of port in corridor. However, there are a number of improvements that

should have been undertaken for the more efficient results of the Port: new or

reconstructed equipment, increased number of operating shipping companies.

4.4 Ports of Baku in TRACECA

To start with, Azerbaijan is a country having all necessary resources, facilities

and climate to be one of the most important areas contributing to the Euro-Asian

trade. Remaining its crucial position in Central Eurasian trade, Azerbaijan adds

to the trade expansion in the region.

To have a closer look at the role of Azerbaijan’s hinterland, the logistic

development of the state is considered. The history of Azerbaijan shows that a

country was a transit point for many caravanserais and other huge trading

centers within the Great Silk Road. The country was worldwide famous for silk,

carpets, jewelry.

Today, considering the logistic sector development in Azerbaijan it can be seen

that the country is just getting acknowledged with the concept, however showing

a big potential. The World Bank Logistics Performance Index that considers

boarders, transshipments, logistics, tracking & tracing and timing, gave an 89th

place out of 155 countries evaluated (Worldbank, 2015). As stated above, one of

the reasons restraining the timing is the delay on boarders, which in majority

cases are associated with bribery.

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The transit role of Azerbaijan in TRACECA is proved by the 82% of the total 9.4

mln tones of goods transported, being transit through Azerbaijan in East-West

directions (TRACECA, 2015).

Though the Port of Baku played a vital role in transshipments for TRACECA, the

efficiency and timing were in need in urgent and substantial redevelopments.

4.4.1 Alyat International Port

The new Alyat Project, which is financed by TRACECA highlights the role of trade

through Azerbaijan. The construction is aimed to improve and alter shortages

and lacks of Port of Baku, which as the result will improve the position of

Azerbaijan and play a critical role in International transshipment and supply-

chain between East and West. The port’s role in the Caspian region will be

considered as a main logistical center, linking good markets of Europe and Asia.

The Table 7 presents main advantages and disadvantages of the new Alyat

project and will make comparisons between new and existing Port of Baku.

Table 7: Port of Baku vs. Port of Alyat

Advantages/TRACECA

Disadvantages/TRACECA

The Great Silk Road

Port of Baku

1. One of the biggest ports in the Caspian Sea

2. Is considered as transshipment, but oil trade is mainly dominated

3. The close location to the northern boarders

4. The railway station is just in 2 km distance

1. The monopoly of CASPAR at the port- high prices

2. Bribery at the boarder

3. Delays in deliveries

4. Problem with security

5. Old machinery and technology

1. 1.Port of Baku is located on the route of the Great Silk Road

2. Improves and expands the trade volumes

3. Creates working places

Alyat Port

1. Plans to handle 25 mln tons of cargo and 1 mln TEUs

1. Financed by TRACECA, the project might

1. Improved security

2. Development

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2. Is only 70 km away from Port of Baku

3. Faster and more competitive transshipment from Alyat to Georgia, Iran, Turkey, Russia and Southern Europe

4. Availability of airlift from Baku Airoport

5. Connection of Port of Poti and Alyat by land

6. An increased number of shipping companies operating in the port.

7. Border Control and Customs

8. International standards are met

be closed any time

2. The presence of many international shipping companies might kick the local companies from the market

of the other regions

3. Creation of working places

4. Greater number of countries to trade (opportunity to learn, exchange)

Source: Author

Port of Baku

Though the Port of Baku plays a crucial role for the trade in TRACECA, as it is one

of the biggest ports in the Caspian area and as it follows the conditions of the

Great Silk road, a number of disadvantages overweight the list of advantages.

The port is well located and is considered as a transshipment destination.

However, the old technology, corruption, security problems and existence of

monopoly, diminish the value of the port in international trade. The construction

of the new Alyat Port is seen as a solution to all shortages of the port of Baku.

Port of Alyat

The construction of the new Port of Alyat once more highlights the important

role of Azerbaijan for TRACECA. The change of the port location, an improved

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hinterland, investment in machinery and technology are signs that TRACECA is

more than interested in the developing the conditions that highlight the role of

port in the corridor. By having a closer look at the hinterland infrastructure of

the Port of Alyat the crucial role of the new port in corridor is depicted.

As a port plays a linking role between sea and land transportation, the

development of its hinterland goes in the same path with its economic

presentation.

In the Caspian extent, the port of Alyat will have a linking role with ports Poti,

Batumi, Makhachkala and Astara. The new port’s location at the east-western

and north-southern routes gives a possibility for the freight transshipment to

and from Western Europe, Central Asia, Middle East and China. The aim of the

hinterland is to attain as much cargo from the regions as possible to implement

their export and import through cargo gateway. Figure 7 gives a general picture

of the port new Port of Alyat.

Figure 7: Port of Alyat

Source: (Turabov, Transport Policy and Economy Department , 2013)

Conclusion

The Table 7 has shown a parallel between port of Baku, port of Alyat and a

corridor being the Great Silk Road. From a number of similarities such as:

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contribution to the trade evolvement, promotion of security and exchange it can

be concluded that both ports and a corridor followed similar aims.

The hypothesis “The well developed hinterland and location of the port influence

the role of the port in the corridor “that was created to answer to the research

question can therefore be answered on the example of the Port Alyat. The

improved hinterland infrastructure of the new port and a new location

highlighted its position in the corridor between Europe and Asia. The increased

efficiency, new ties, expanded trade volumes are the consequences of the

creation of the new port.

Chapter 5 Conclusion, Recommendations and Discussions

5.1 Conclusion

This paper analyzed the role of port in the corridor on the example of Port of

Baku. The theoretical framework is divided into three parts: port, hinterland and

corridor, giving an answer to 4 sub-questions that are necessary for the solid

background, used as a foundation of the results part. The Table 8 shows the main

findings of the paper.

Table 8: Summary

Theory Port of Baku Port of AlyatPort Ports play a crucial

role in economic development of a country. The focused role of port- as a gateway logistics.

Plays a transit role between Eurasian trade. However, can improve efficiency, as has shortages: delays, old machinery and corrupts.

Meets European standards, opens the market for shipping companies

Hinterland

Hinterland infrastructure uses different types of transportation to deliver goods to the final destination. The most common modes of transportation:

Playing a bridging role in Eurasian transshipment, a well-developed hinterland plays a critical role for Port of Baku. However, a number of improvements should

Financed by TRACECA, it was constructed to improve the efficiency of the old port, expand the economics relationships

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road and railway. be undertaken to make the work of the port more efficient.

Road Is more efficient for the short distance transshipments as it is fast.

There are 2 routes: Southern and Northern. Should be altered, as there are a lot of delays.

Has a land connection with Ports of Poti and Baku.

Railway Used for the heavier goods transshipment.

Bribes on the boards, delays restricted the development of economic relationships.

Improved board and custom service, faster transshipments.

Corridor Since ancient times the trade corridors played an important role for the countries development. Example of Great Silk Road shows both plusses and minuses.

Though the location of the Port is very crucial in Eurasian transshipments, ships tried to avoid it.

Crucial role for TRACECA (under their sponsorship).

Source: Author

Port

From the analysis results it can be concluded that both ports of Azerbaijan in the

Caspian Sea: the Port of Baku and Alyat play a critical role in international trade,

as they are located on the corridors routes. The construction of the Port of Alyat

highlights the importance of trade through Azerbaijan and improves the

shortages of Port of Baku.

Hinterland Infrastructure

The hinterland infrastructure of the Port plays a crucial role, as it assists to

deliver goods to the final destination. The well- developed hinterland

infrastructure consists of developed ties between different types of

transportation (road and railway). Though Port of Baku has a good hinterland

infrastructure, a number of improvements (boarders, tariffs, organizational)

should take a place first. The hinterland of the Port of Alyat will open the market

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to other shipping companies, expand the trade connections, and therefore

improve the general picture of the corridor trade in Azerbaijan.

Corridor

Since ancient times Baku was located on international trade routes. Today, ports

of Baku play a bridging role between Europe and Asia. The interest of TRACECA

in evolvement of the port in Azerbaijan can be seen in their sponsorship of the

Port of Alyat. The aim of TRACECA is to develop the economic ties of the regions

and expand the trade.

An answer to the main research question of how important is Port of Baku for

Azerbaijan in the corridor between Europe and Asia can be seen in the

hypothesis analysis. The construction of the new port, financed by TRACECA

highlighted the importance of the Port for Azerbaijan, being a transit point

between Europe and Asia. The aim of constructing the port is in improvement

the efficiency, expansion of the trade connections by creation of new economic

ties, new machinery and increased competition. Therefore, a new Port of Alyat

can be seen as a prove of the importance of role of Port for Azerbaijan in the

corridor trade between Europe and Asia.

5.2 Recommendations

There are a number of limitations and recommendations for the paper.

To start with, for the better analysis of importance of the Ports in Azerbaijan in

Caspian extent, the comparison with other ports in the region will be helpful. It

will show what are the advantages and shortages of the port. Another thing

worth mentioning is the statistical analysis that can be conducted based on the

data available on Statistical Comity of Azerbaijan. Simple regression analysis can

be presented to analyze the connection between for instance the investment in

port and its performance.

5.3 Discussions

There are several policy recommendations worth mentioning. To start with, the

policy of the port should attract different shipping companies, contrary to the

case of Port of Baku, where only CASPAR shipping company operates. There are

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a number of pluses followed from implementation of this policy; the competition

level will increase the quality and effectiveness of deliveries, decrease the

operational costs of shipping. Additionally, the board custom regulations should

be controlled and checked due to the fear of corruption that ruins the reputation

of the country and restricts the transshipments. These steps should be

undertaken by Port of Alyat in order to improve the effectiveness and efficiency

of the port.

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