logistic industry crusades against monopoly
06 March, 2014
logistic industry crusades against monopoly
The freight shipping and logistics business established in the port of Poti call upon the Georgian Prime Minister and Chairperson of the Parliament to pay attention to the emerging monopoly in the sector which obviously enjoys state support. On 3 March, 41 companies representing the logistics and freight shipping sector in Georgia, including some giant international maritime freight lines, sent an open letter to the Prime Minister of Georgia and Head of Parliament to take the market competition under their personal
control. They complain that earlier they have already sent out similar letters to Ministries of Economy and Finance, as well as to the Parliamentary Committees of Finance and Budget and Sector Economy, and Business Ombudsman raising alarm about the emerging monopoly in the Georgian logistics industry but to no avail – their voice remain unheard.
According to the terminals which handle cargo processing in the Poti port, APM Terminals Poti owned by the Danish A.P. Moller-Maersk, the largest container ship operator in the world which also owns and manages the Poti port, together with its adjacent Poti Free Industrial Zone, is poised with a privileged position by the Revenue Service of the Ministry of Finance. Representatives of the terminals declare that starting from this May the RS plans to give an exclusive right of cargo handling to APM Terminals, which puts the other 7-8 terminals in unequal competitive conditions and may send them off the business ultimately. On the other hand, the said rule violates the confidentiality of commercial secrets of maritime lines as far as the content of containers and attached documentation will be fully available to Maersk once they will be processed by the Maersk owned terminal. The point is that, in line with the world’s best practice, all maritime lines that perform service through their contracted terminals in every port in their network should help to define their special pricing and service policy and be competitive. To compel them to use only one terminal which belongs to a competitor company is far below the world’s best practice and undermines Georgia’s transit image, sector pundits say. Having monopolized the market, Maersk will dictate the prices and service policy and thus killing competition at the local market level completely which will affect the interest of consumers.
“It is an axiom that the monopoly entails the increase of prices and decrease in service quality,” Zurab Shengelia, Head of the Association of Freight Forwarders of Georgia, said. He asks the Georgian government to put all market players in equal conditions in line with the license terms put out by the RS. According to Davit Davitidze, a Member of the Supervisory Council of the Georgian Trans Expedition Poti terminal, the state did a good job when it made customs clearance procedures easier and removed long queues, but the full state service is available to APM Terminals alone while other terminals with similar infrastructure and licenses are overlooked. RS denied the terminals’ accusation, stating that only cars are handled exclusively through one terminal while the remainder of cargo is equally available to everyone and that no changes are in prospect. Terminals say the law is not executed.
“I cannot offer consumers similar services as the APM Terminals do. If customs officers do not come to my terminal or any other terminal except the APM for clearance procedures, how am I supposed to compete? Especially when customers are wary of long queues,” Davitidze said in an interview with Georgian Journal.
Companies operating in cargo transportation and logistics also seem to be under the threat of Maersk monopoly which obviously plans to enter all the freight shipping related businesses in Georgia. As a result, 41 companies employing around 5 000 people in Poti with salaries starting from GEL 600 to 1 000 may go bankrupt and all these people may lose their jobs. The APM Terminals cannot employ more than 200 people. This may lead to a social unrest in Poti where two thirds of the population is employed in the logistics sector. Moreover, the companies which face bankruptcy risks are Georgian taxpayers while APM is a foreign-based company paying only indirect taxes in Georgia. Thus, the state budget may also shrink. Why? This is question posed by the 41 affected businesses. They are demanding the answer as soon as possible.
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