Lack of investment is making the Poti Industrial Zone less attractive

2025-06-30

Today, four free industrial zones (FIZs) are operating in Georgia – Poti, Kutaisi, Kutaisi Hualing and Tbilisi Technology Park.

Based on proven experience around the world, the main purpose of a free industrial zone located near a port in a particular country is to supply cargo flows to the transport corridors passing through it. It is for this purpose that the Poti Free Industrial Zone was selected in 2009.

It is worth noting that, given its infrastructural capabilities, the lack of investment in recent years has led to the Poti FIZ losing its function of supplying cargo to the middle corridor, which is reflected in the reduction of employment and the insignificant number of companies located in free zones.

The Poti Free Industrial Zone covers an area of ​​300 hectares, of which only a small part - a fifth - has been developed.

For comparison, in the Aktau Free Economic Zone in Kazakhstan, the operation of which was determined by law until 2028, due to the growth of investments, by the decision of the President of Kazakhstan, its operation with the status of a free economic zone was extended until 2052, with the target indicator for 2052 providing for a total investment of 1.2 billion dollars.

In terms of employment, if we consider all four free industrial zones of Georgia, one medium-sized enterprise employs more people than the businesses in all four industrial zones combined.

The Poti FEZ has been operating since 2009. The zone is 75% owned by the Chinese energy company CEFC China Energy, which has transferred the right to manage the share to Smart Capital Group since 2018.

The connectivity of the Middle Corridor and the proximity to the Poti Port give the Poti FIZ an additional advantage in terms of investment inflow.

One of the important infrastructural problems of the Poti FIZ, which remains an unfulfilled promise from the state to this day, is the connection to the Poti Port via a railway line through the Poti FIZ.

The connection of the Poti Port with the Poti Free Industrial Zone by rail is envisaged by the National Transport and Logistics Strategy for 2023-2030, and the construction of the 1.8 km long railway is the responsibility of the Georgian Railways and should be implemented with its financial resources. The new railway section should connect the Poti FIZ to the Poti Port.

Currently, cargo that ultimately has to be transported to the port has to pass through the entire city, which is associated with additional transport congestion for the city. The existence of a railway section through the FIZ territory would completely eliminate the city's congestion. In fact, it would be possible to use the industrial zone territory as a transport corridor.

As a result, not only the industrial zone but also other companies outside the zone, which currently have to transport cargo to/from the port through the city, would find it easier to deliver/export products from the port area using the new railway line.

According to the statement of the director of the Poti FIZ in 2023 – “Connecting by rail is not a difficult project, it is possible to arrange railway infrastructure on this section in six months” – despite the promises made by the state, it has not been possible to implement both the construction of the railway section and the implementation of the project to develop the adjacent port in the northern direction.

The Poti FIZ is characterized by a lack of investments and, accordingly, low employment. In particular, in recent years, only about 500 jobs have been created in the Poti industrial zone, which is an insignificant indicator for generating additional cargo through the middle corridor.

As for large infrastructure projects in the industrial zone, they are mostly only in the process of discussion and promise. There are also projects that have been started and, for unknown reasons, are still unfinished.

One of the large investment projects announced in 2023 in the Poti FIZ with Uzbek investment was the construction of a multifunctional warehouse terminal on a 29-hectare territory. The investment cost of the project was 50 million GEL and envisaged the creation of up to 100 new jobs. To date, preliminary design studies are underway - in fact, the implementation of a financially viable project is in an uncertain phase.

In 2024, the launch of a copper concentrate terminal worth 5 million GEL was announced, which was to be implemented with Georgian-European investment. This project is also still unfinished for unknown reasons.

In the Poti industrial zone, in recent years, only projects of low financial capacity have been implemented. For example, with an investment of 0.4 million GEL, the Georgian company VG House established a wooden cottage factory, where it employed only 15 people. Also, Nuts Times built a pistachio processing factory, where it invested 0.5 million GEL and employed about 20 employees.

A few examples are enough to clearly see the trend of investment in the Poti Industrial Zone in recent years.

In contrast to the Poti Industrial Zone, a boom in investment inflows is observed in the Aktau Port Special Free Economic Zone in Kazakhstan.

By the decree of the President of Kazakhstan in 2002, the Aktau Port Special Free Economic Zone was created on 2,000 hectares, the functioning of which was determined until 2028.

In recent years, many financially viable industrial projects have been implemented in the Aktau Free Economic Zone. A list of companies' specifications is presented in the photo to illustrate the implemented projects. The main emphasis is on the development of local - Kazakh industrial potential. Among the implemented projects, many local companies are listed.

Given that the operation of the Aktau Port Special Free Economic Zone was considered positive in terms of attracting investments, the state decided at the end of 2024 to extend the term of the free zone until the end of 2052.

It is important that the state has set target indicators for the Aktau Free Economic Zone. In particular, the total volume of investments should reach 1.0 billion dollars by 2047, and 1.2 billion dollars by 2052.

The Aktau Free Zone is a clear example of how effectively Kazakhstan uses its own infrastructure, both to attract investments and to ensure cargo flows through the middle corridor.

 

Info: transcor.ge