Armenian Railways: Five Year Business Plan



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Base Case


The base case scenario is the scenario hwtsl considered to be most likely to occur. The underlying economic assumptions of this scenario is that Armenia’s borders with Azerbaijan and Turkey remain closed. It is based on the following forecast for economic growth in Armenia.
Base Case: Forecast of Economic Growth





2000

%


2001 %

2002 %

2003 %

2004 %

2005 %

Overall GDP

-5.4

7.7

4.1

4.6

4.7

4.7

Industrial Sector GDP

3.4

4.0

4.6

5.1

5.6

5.6

Construction Sector GDP

7.1

10.0

7.4

7.4

7.0

7.0

Personal Consumption

-5.0

3.8

1.1

2.0

2.4

2.4

Exports

17.1

15.0

11.7

11.4

10.7

10.7

Source: PlanEcon, Review and Outlook for the Former Soviet Republics (October 2000).
Export, import and domestic freight traffic are based on historical traffic levels and the forecasting factors described in the market segment summaries. This is detailed in the table below. Armenian Railways currently carries no transit traffic. In the base case, borders are expected to remain closed and AR is forecast to continue to carry no transit traffic.
Traffic Forecast Factors


Market Segment

Domestic

Import

Export

Oil

Industrial Sector GDP

Industrial Sector GDP

None

Grain

Personal Consumption

Personal Consumption

None

Minerals

Construction Sector GDP

Construction Sector GDP

Exports

Ferrous Metals

Industrial Sector GDP

Industrial Sector GDP

Exports

Non-ferrous Metals

Industrial Sector GDP

Industrial Sector GDP

Exports

Cement

Construction Sector GDP

None

No Growth

Other

Overall GDP

Overall GDP

Exports

Passenger

Overall GDP

Overall GDP

Overall GDP



Open Borders Case


The open borders case is the scenario hwtsl considered to be less likely to occur. The Open Borders scenario assumes that an opening of borders, beginning in January 2002, will drive an expanding economy and grow rail freight business. It is based on the following forecast for economic growth in Armenia.
Open Borders Case: Forecast of Economic Growth





2000

%


2001 %

2002

%


2003

%


2004 %

2005 %

Overall GDP

-5.4

7.7

5.1

5.8

5.9

5.9

Industrial Sector GDP

3.4

4.0

5.8

6.4

7.0

7.0

Construction Sector GDP

7.1

10.0

9.3

9.3

8.8

8.8

Personal Consumption

-5.0

3.8

1.4

2.5

3.0

3.0

Exports

17.1

15.0

14.6

14.3

13.4

13.4

Source: Based on PlanEcon, Review and Outlook for the Former Soviet Republics (October 2000), adapted for open borders.
The forecasts for domestic, export and import traffic are based on the same traffic forecast factors as the base case, but the higher levels of those factors shown in the table above.
If Armenia’s borders with Turkey and Azerbaijan are reopened, five potential transit corridors could result. Each corridor is indicated on the map on the next page. The number on the map is keyed to the discussion of the corridor’s traffic potential below.
  1. Kars, Turkey - Tbilisi, Georgia corridor (via Ayrum-Gyumri-Akhuryan)


This is likely to be the first corridor to develop traffic, because the affected lines are operational, segments requiring immediate rehabilitation are relatively short, and reopening of traffic flows need not involve direct cooperation between Armenia and Azerbaijan. While the Turkish border could be reopened without an Armenia-Azerbaijan settlement, it is more likely if an Armenia-Azerbaijan border reopening is also accomplished.
Assuming border reopening in January 2002, small volumes of transit traffic are expected to move immediately over the Armenia-Turkey border. The composition of this traffic is very difficult to predict, but is likely to be dominated by petroleum products moving westbound into Turkey and containerized products moving eastbound. (This implies a substantial movement of empty wagons in each direction.) Transit levels are forecast at 25,000 tons in each direction in 2002, 50,000 tons in 2003, 75,000 tons in 2004, and 100,000 tons in 2005.18


  1. Mindjevan, Azerbaijan - Iran (via Megri)


This route, for traffic to and from Iran via Baku, Azerbaijan and points beyond crosses 47 kilometers in southern Armenia. The section in Nakhichevan leading to the Iranian border (where a gauge change occurs) is also short. For traffic to revive on this route following and Armenia-Azerbaijan border reopening agreement, efforts would need to be made to minimize border delays and equipment changes. The scenario assumed for this projection is that Azeri crew, motive power and rolling stock would be allowed to pass through Armenian territory, with customs and security personnel providing border checks and possibly accompanying the sealed Azeri train. There would be no involvement of Armenian Transport JSC personnel or equipment, while the Infrastructure JSC would provide track access for an appropriate fee.
Azerbaijan and Iran are major trading partners, but the great majority of traffic, largely petrochemicals, is likely to continue to move via existing Caspian Sea and eastern Azerbaijan rail and highway routes. Assuming border reopening in January 2002, small volumes of transit traffic could nonetheless be expected to move between Azerbaijan and Iran over the Armenian crossing by 2003. As a working figure for start up operations, we estimate 10,000 tons in each direction in 2003, 15,000 tons each way in 2004, and 20,000 each way in 2005.

3. Azerbaijan - Turkey corridor via Nakhichevan (via Megri, Yeraskh-Gyumri-Akhuryan)


This route is competitive with the Tbilisi-Kars corridor. Because of the extensive rehabilitation required for southern Azeri and Nakhichevan lines and the availability of the northern routing for traffic from eastern Azerbaijan, it is expected that transit traffic here would develop very slowly (beginning in 2004) and would initially consist of traffic to/from Nakhichevan-from/to Turkey. By 2005, a small amount of traffic to/from Azerbaijan proper-from/to Turkey is projected to move in this direction. For most of the transit, corridor #3 passes over the same Nakhichevan-Armenia line segments as corridor #4, below. We estimate 10,000 tons in each direction in 2004 and 15,000 tons each way in 2005.

4. Azerbaijan/Iran-Georgia corridor via Nakhichevan (via Megri, Yeraskh-Gyumri-Ayrum)


This corridor would develop slowly due to rehabilitation requirements and the long hiatus in traffic flows. In the long term, however, border reopenings could convert this route into a substantial traffic corridor. Movements would be principally linked to commerce to/from Iran and/or Nakhichevan, on the one hand, and Georgia and points beyond, on the other. While freight traffic in the past moved from Baku via this southern route, in order to avoid passenger movements, current traffic levels do not merit diversion of freight traffic to longer southern routings, so no traffic moving via eastern Azerbaijan is anticipated to move through Armenia through 2005. North of Gyumri, Corridor #4 passes over the same Armenian Railway line segments as Corridor #1. Traffic on this corridor is forecast at 25,000 tons in each direction in 2004 and 50,000 tons in 2005.19
  1. Akstafa, Azerbaijan-Idzhevan, Armenia corridor (via: Idzhevan-Gyumri-Akhuryan)


This corridor, an alternative routing for reaching Turkey, has been out of service for years between Idzhevan and Azerbaijan. It would require major rehabilitation to reopen. Prospective traffic levels following an Armenia-Azeri border reopening are expected to be insufficient to merit reopening the line. Therefore no traffic is projected to develop on this route during the forecast period.
The table below summarizes the traffic forecast for these corridors.
Open Borders Case: Forecast of Traffic Growth (Tonnes)





2002

2003

2004

2005

Turkey – Georgia

50,000

100,000

150,000

200,000

Azerbaijan – Iran

-0-

20,000

30,000

40,000

Azerbaijan – Turkey

-0-

-0-

20,000

30,000

Azerbaijan/Iran - Georgia

-0-

-0-

50,000

100,000

Akstafa – Idzhevan

-0-

-0-

-0-

-0-





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