Workshop on Corridor Development in the South Caucasus

WORKSHOP ON CORRIDOR DEVELOPMENT IN THE SOUTH CAUCASUS

RECOMMENDATIONS

Considering that :

►The President of Georgia, Mr. Mikhail Saakashvili, and the President of Azerbaijan, Mr. Ilham Aliyev, underlined in their statement in Baku (March 4, 2004), that all barriers, including legal, Customs and others, which create problems for the development of relations between Georgia and Azerbaijan, have to be abolished in the nearest future, infrastructure improved, and transport tariff system optimized; and that both countries would support effective collaboration to implement joint transport and communication projects;

►The President of Armenia, Mr. Robert Kocharian, and the President of Georgia, Mr. Mikhail Saakashvili, discussed cooperation on transport matters on March 12, 2004 in Yerevan;

►In terms of overall economic development, employment and taxes, the socio-economic impact of further facilitating international traffic in the South Caucasus will enable, in particular:

  1. Direct economic activity. Currently transit activities generate a transport turnover in excess of US$200 million for Georgia and US$300 million for Azerbaijan. There is a potential for additional turnover of about US$60 million for Georgia and US$80 million for Azerbaijan over the next three years, if transit conditions improve.
  2. Higher quality logistics services for trade.
  3. Transit contribution to the fixed costs of transport infrastructure.
  4. Increased operational efficiency of the transport sector through more active use of rail and road rolling stock, reduced transport cost and development of a more competitive transport sector.
  5. Development of value-added logistics services (packaging, distribution, etc.).
  6. Increased attractiveness of the region as a market for foreign direct investments and business in general; and

7. Increased government revenues as a result of direct economic activity.

►Competition for transportation of transit cargo is increasing on alternative corridors; and each million ton diverted from the East-West rail corridor reduces transit activity turnover by more than US$25 million;

►About 70 percent of the population lives along these corridors.

►Border control agencies have achieved progress and are preparing their modernization strategies.

►Several initiatives impacting corridors have been launched (TRACECA, Trade and Transport Facilitation dialogue with the World Bank, GUUAM, etc.).

►The coordination of activities among corridor countries needs strengthening.

Acknowledging recent intentions to eliminate the internal transit Customs document and progress in abolishing the convoy requirements for non-excise goods in Georgia, the participants of the Workshop on Corridor Development, representing the public, government and private sectors in the South Caucasus Countries, would like to bring to your consideration the following recommendations:

Proposed Transit Strategy

The main objective of the transit strategies is to create the necessary conditions in Georgia, Armenia, and Azerbaijan, to enhance their transit attractiveness, capture additional transit traffic and maximize the economic impact of transit activities, in close cooperation with the private sector, along their respective corridors Georgia - Azerbaijan and Georgia - Armenia.

Regional Short Term Recommendations

1. Complete the definition of aligned and integrated transit strategies in Georgia and in Azerbaijan, and in Georgia and Armenia, in active consultation with the main public and private stakeholders. Consider the development of a transit strategy in Armenia.

2. Actively support the implementation of the recommendations of the TRACECA Program aiming at the improvement and further development of transit and international trade, notably, the provisions of the technical annex of the Basic Multilateral Agreement concerning international transport for the development of the corridor Europe-Caucasus- Asia.

3. Consider the adoption of a national transit law and the implementation of regulations consistent with existing samples (e.g. http://iranlaw.online.fr/laws1.html) and international Conventions, taking into account the TRACECA Basic Multilateral Agreement.

4. Ensure the compliance of all relevant national legal and normative acts related to transit with the TRACECA Basic Multilateral Agreement. Better use the potential of international agreements, particularly bilateral agreements.

5. Coordinate and streamline the application of all border regulations among controlling agencies to minimize negative impacts on traders, while implementing their responsibilities and duties; and review actual border and clearance procedures on a regular basis.

6. Define more clearly the mandates of border control agencies (border police, Customs and others) in order to avoid overlap of responsibilities.

7. Start aligning existing trade and transport documents with existing United Nations format (layout key), codes, and international standards. Consider the development of a unified transit-transport document, accepted by all agencies for road transport of goods along the corridors, removing the need for separate permissions.

8. Increase cooperation to exchange customs data on a corridor basis, and automate this exchange.

9. Introduce one-stop processing of official controls at border crossings, in particular for phyto-sanitary and veterinary controls; accept and recognize certificates for food and animal products at the border.

10. Strengthen cooperation among existing national trade facilitation bodies and between Governments to facilitate a long-term dialogue and the alignment of their strategies.

11. Deepen the cooperation with the Permanent Secretariat of IGC TRACECA.

12. Ensure that fees collected at the border reflect the cost of services delivered by controlling agencies, in compliance with article VIII of the GATT.

13. Identify, publish, maintain and make easily accessible all data and documentary requirements for trade and transport transactions (in particular over the internet and in selected international language). Issue a practical handbook and guidelines for users and ensure their availability at borders and Customs offices.

14. Reconsider railway tariffs on transport of passenger and goods with a view to align them with the unified tariff system of the member countries in the TRACECA Program.

15. Facilitate the traffic of passengers, using all modes of transportation.

16. Improve the social conditions of staff working at official border control agencies.

Armenia-Georgia

17. Ensure legal basis for putting in force the International Auto Transportation Agreement (May 1997) signed and verified between two countries.

Armenia

18. Transform the container terminal of the railway station at Karmin Blur into a Customs terminal.

19. Harmonize the transit guarantee system with international practices.

20. Allow for the submission of trade information by traders, forwarders, transporters and brokers to Customs through electronic means as soon as feasible (using ASYCUDA direct trader input module).

21. Harmonize procedures and promote cooperation among border control agencies, transport authorities and law enforcement authorities.

22. Strengthen the dialogue and cooperation between the public and private sectors, including various NGOs and large firms, on trade, transport and transit facilitation, particularly before the adoption and implementation of normative acts and existing international standards.

23. Initiate drafting of Law on Freight Forwarding.Azerbaijan

24. Harmonize procedures and promote cooperation among border control agencies, transport authorities and law enforcement authorities.

25. Create a proper legal framework for the establishment of special economic zones and bonded Customs warehouses.

26. Harmonize the transit guarantee system with international practices.

Georgia

27. Assign government staff with clear tasks and responsibilities to implement a transport policy corresponding to the needs of shippers, transporters, forwarders, particularly with regard to commercial organizations, such as railways and ports, with partial or full state ownership.

28. Dedicate proper attention to transit aspects; establish a working group, possibly under the FIAS Commission at the Prime Minister level. The group would include private sector representatives such as NGOs and large firms involved in transit. It would be responsible for transit issues (fees, rail tariffs, special treatment for companies with public participation, etc.). The objective would be to ensure proper implementation of the strategy, enable timely decisions and negotiations of solutions on particular problems with relevant authorities in Armenia and Azerbaijan.

29. Finalize the Georgian Customs and Tax Codes and submit them to the Parliament after consultation with main stakeholders (public and private sectors, Chamber of Commerce, GEOPRO, GBC, NGOs and large firms) and monitor their effective implementation.

30. Simplify, and eliminate whenever possible, the permission system for excise and other goods, and allow for issuing those permissions, that are still considered necessary, at the border, preferably ahead of arrival.

31. Allow for the submission of trade information by traders, forwarders, transporters and brokers to Customs through electronic means as soon as feasible (using ASYCUDA direct trader input module) and redefine the associated procedure.

32. Introduce one-stop processing for Customs procedures, notably at the ports.

33. Eliminate part d of article 64 of the Georgian Tax Code, which stipulates that a non-resident person providing transportation services to a company registered in Georgia shall pay a 4% tax on the freight rate.

34. Facilitate the operation of privately owned railway rolling stock.

35. Subject imported trucks to the same taxation regime as other investment assets.

36. Strengthen the dialogue and cooperation between the public and private sectors, including various NGOs and largest firms, on trade, transport and transit facilitation, particularly before the adoption and implementation of normative acts and existing international standards.

Regional Long Term Recommendations

37. Harmonize the legal and regulatory framework for trade and transport with international norms and standards.

38. Set up clear and transparent border-crossing and Customs procedures, for example those concerning documents or payments of taxes and duties. Avoid frequent changes of existing rules and procedures, and ensure broad consultation and training before implementation.

39. Develop telecommunication, border, customs and transport infrastructure supporting trade.

40. Implement tools and regulations allowing for advance submission of information on freight transport means to border agencies for pre-arrival processing along the corridors to improve trade facilitation and security.

41. Harmonize data and documentary requirements for trade and transport among border agencies to allow for a single submission of information, using UN standards.

42. Consider using UN tools, such as UN electronic documents, for trade and transit facilitation.

43. Coordinate the processing of required data and documents among border agencies and other official control agencies.

44. Monitor the performance of the corridors, with tracking and performance indicators, under the joint oversight of national trade facilitation bodies (PRO Committees)and coordinate their activities on a corridor basis.

45. Ensure coordination with donors, international organizations, and international financial institutions regarding the possibilities to provide international support for the realization of the above activities.

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