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Ukraine – Transport Infrastructure Reform – The Next Steps

Ukraine – Transport Infrastructure Reform – the next steps

Ukraine – Transport Infrastructure Reform – The Next StepsSource: Ukrainian Sea Ports Authority

Odessa, Ukraine (PortSEurope) May 9, 2019 – The Ukrainian government has published its infrastructure reform plans for the countries transport sector – railway network, road network, sea and river ports (terminals), airports and a wide network of air destinations, freight and customs terminals.

The government says that it is important to reform transport infrastructure given its economic and geographic position on a strategic junction of transport routes between Europe and Asia and between the Baltic/Nordic countries and the Black Sea. Infrastructure is also critical for domestic development because it needs an effective, efficient, and continuous transport link among all of its regions. Infrastructure further plays a vital role for successful development of the country’s economy.

It adds that transport sector needs modernisation, better effectiveness and competitiveness, and adaptation to European standards. In its current condition, it only meets basic individual and corporate transport needs in terms of scope rather than quality.

The reform is ultimately aiming to create an effective transport system in Ukraine, meet people’s need for safe and affordable transportation, improve conditions for doing business in the sector, full integration of the Ukrainian transport network in the Trans-European Transport Network.

The reform of the transport infrastructure is designed to create a safely operating and effective transport complex, integrated with the global transport network, to enable Ukraine to gain the status of a regional transport hub, meet people’s transport needs and improve conditions for doing business so that the national economy can become competitive and effective.

Plans for the maritime and inland waterways sectors are as follows:

Performance of sea and river ports, existing technology and facilities, correspondence of the management system and infrastructural development to contemporary international requirements underlie competitiveness of domestic transport globally. Demand for inland water transport services in Ukraine has been steadily increasing, and the Ukrainian maritime transport is a promising industry that boasts potential comparable to that of great maritime powers.

However, there are obstacles to the development of Ukraine’s river and maritime transport, including an imperfect regulatory framework, obsolete port infrastructure, and lack of modern fleet. Equipment available at Ukrainian ports is too energy-intensive, often with a high degree of wear and tear. Depths in some sea ports do not meet their official specifications, which prevents realization of the full potential of the existing coastal infrastructure. Meanwhile port charges are higher than in other Black Sea countries’ ports, which makes them less appealing and slows down the growth in carriage volumes, including in transit. State-owned stevedoring companies are losing competition to private ones due to inflexible pricing, obsolete port facilities, and ineffective management.

The effort to reform Ukraine’s maritime and inland waterways industries is intended primarily to improve the regulatory framework, design a new tariff evaluation procedure based on the actual structure of expenses, and encourage massive private investment in sea and river port terminals (among other things, through public-private partnership).

An important component of reform in this industry is the Government’s gradual abandonment from the state stevedoring activity and concession of state-owned stevedoring companies in sea ports. This step will help to modernise port infrastructure and achieve better performance.

It is equally important to draft and approve a methodology for calculating and revising port charge rates based on the structure and destinations of freight flows. This will make commercial sea ports more appealing to users of transport services and create a guaranteed source of compensation of the cost of renovation and development of port infrastructure. The policy of sustainable funding of the infrastructure of inland waterways is to be revised in order to encourage the development of inland water transport.

The Government’s priorities also include modernizing port facilities, ensuring that actual depths in Ukraine’s sea ports meet established standards, repairing and upgrading Ukraine’s water navigation locks. Regulatory and technical changes are also necessary to boost freight and passenger transport on Ukraine’s navigable rivers, primarily the Dnipro.

Reforms have so far achieved the following:

  • Port charges were reduced by 20% with effect from January 1, 2018, offering a positive multiplier effect of making logistics cheaper, increasing freight transshipment at Ukrainian ports, and improving their competitiveness.
  • The State Service of Maritime and River Transport of Ukraine (the Maritime Administration) has been created and started functioning. MarAd’s main objective is to implement public policy in the area of maritime and river transport safety.
  • The audit by the International Maritime Organization was successfully completed.
  • Ukraine has been integrated into the Trans-European Transport Network (TEN-T) and became an important participant in the building of a strategic Europe–Asia transport corridor.
  • 39 Ukrainian infrastructure projects covered by Drive Ukraine 2030 were included in the Indicative Investment Action Plan for the Trans-European Transport Network (TEN-T). The Plan was drafted by the European Commission and World Bank to develop the transport link in the Eastern Partnership countries.

Goals and objectives for the current year:

  • continuing the implementation of pilot projects for concession of state stevedoring companies, conducting tenders and awarding the first concession contracts for Olvia and Kherson ports, drafting a concept memo and a feasibility study for the concession of Yuzhny port;
  • corporatization of SOE Ukrainian Sea Ports Authority — the strategic and largest enterprise in the maritime sector;
  • drafting the Methodology for calculation of port fees rates and the Procedure for Compensation of Investment in Strategic Facilities of Port Infrastructure.

Full details including all transport sectors can be accessed here.

Source: Government of Ukraine

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