Analysis of Armenia's cargo transportation routes and development of export promotion support mechanisms

30 August, 2023

The Ministry of Economy of Armenia and the European Bank for Reconstruction and Development (EBRD) with coordination by the Investment Council of Armenia and funding by the UK aid from the UK government within the framework of the UK-EBRD "Investment Climate and Governance Initiative" have initiated a program with the aim:

a/ to identify those products produced in Armenia that have export potential and high viability in the conditions of increased transportation costs and

b/ on the basis of this, to develop support mechanisms for SMEs, which can be proposed by the Armenian government in the future.

The project was implemented by "MB Consulting" CJSC and included the following studies:

1. Identification of products with high export potential

Based on an in-depth study of the current export structure of Armenia, taking into account historical data and the seasonality of foreign trade, as well as the main partner countries, the groups of products with great export potential were presented. The report also presents the methodology for selecting products with export potential, and the unrealized export potential of selected product groups, both in terms of value and according to the markets with the greatest export potential.

The full report is available here

2. Analysis of main cargo transportation and logistics routes in Armenia

In order to provide exporters with a comprehensive analysis of cargo transportation options, a detailed study of Armenia's geographic location and communication options (land, water, air) was conducted. The analysis also presents currently available logistics channels and analyzes logistics costs and duration. According to the report, the average cost of cargo transportation from Yerevan to the final destination, calculated for 1000 km, is 4,500-5,000 USD and may last 20-30 days (depending on the mode of transportation, international commercial conditions, possibilities of departure and return destinations, etc.).

The full report is available here

3. Proposals for logistics support mechanisms for SMEs in Armenia

Based on the first two reports, specific proposals for improving logistics and transportation for small and medium-sized enterprises (SMEs) were developed, including:

  • Creation of a digital platform/market for cargo transportation,
  • Regular container train to Poti / Batumi,
  • Creation of Prep FBA (Fulfillment for Amazon) or similar service and integration with other e-commerce platforms;
  • Direct scheduled flights to world centers (Middle East, USA) or more frequent flights to Liège (Belgium).

The full report is available here

4. Evaluation of the impact of support mechanisms

In order to evaluate the impact of initiatives aimed at improving export transportation costs, the gravity model approach was used.

The results of this model estimation show that transport/logistics costs have a significant negative impact on export volumes. Specifically, a 1% decrease in spending increases exports of food and alcoholic beverages, mixed consumer goods, and low value or volume goods by 0.24%, 1.79%, and 1.17%, respectively.

The full report is available here

Overall, the assessment shows that the initiative to introduce a regular container train has, in value terms, the greatest potential to increase exports.

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