The new roadmap presented by the Ministry of Infrastructure and the Office of the National Investment Council of Ukraine and developed together with the business provides the complex of measures:
— to adapt Ukrainian legislation to the European Union;
— to enable Ukraine implement new infrastructure projects;
— to have common transport strategy between the EU and Ukraine; and,
— to attract more foreign investors.
The measures listed in the document will contribute to the rapid modernization and reform of Ukrainian transport infrastructure. In addition to the priority measures, the document includes a list of institutions responsible for their implementation, as well as changes at the level of legislation and by-laws. This is the effective path for increase of investment and adaptation of national legislation to EU norms and standards. Promoting the adoption of necessary transport laws (that have been problematic and have hampered the flow of investment in the transport sector for a while) has to reinforce the implementation of EU requirements in the field of transport security and management, environmental standards and economic competition.
The economic situation in Ukraine is still complicated because of the Russian aggression and the occupation of Crimea and Donbass. We shall work hard to create favorable conditions for the development of the Ukrainian economy and increase capital investments in railway, roads, ports and airports. National transport strategy estimates 50 billions euro of investment till 2030, half of the amount shall be provided by the private sector.
Foreign investors are interested to enter our market, which has a huge potential for the development, such as river infrastructure, concession roads etc. However, the state shall provide clear legal mechanisms to mitigate risks and transparent and predictable guarantees of investment return.
Development of inland waterway transport
The sector of inland water transport currently lacks proper regulation, capital renovation, competitive operators, etc. We urgently need to invest 50 millions euro for repair of the Dnipro locks, dredging and river port infrastructure. European investment bank will approve the loan project after Parliament adopts the Draft law “On inland waterway transport”.
The draft law will clearly structure the system of relations on inland waterway transport, establish financing mechanisms, simplify procedure for registering ships and providing an administrative service. These mechanisms will create the necessary conditions for increasing volumes of freight river transport to approximately 20 million tons of cargo per year. It will actually push the exporting agro and steel industry to be more competitive in the field of domestic and foreign investment.
In addition, the draft law will establish an adequate amount of the river fee, cancel other fees to make the river transport efficient and sustainable. Moreover, we will receive a reliable economic mechanism to transfer cargo from the roads and railway to the river. It is implemented in the the USA and EU, which has positive effect in protection of environment and savings on the road maintenance.
Modernization of railway transport
Insufficient budget financing of programs for modernization and construction of infrastructure, together with minor private investments, resulted in a significant depreciation of fixed assets (which is 85% in rail transport sector). In addition, Ukraine loses its transit potential of the country, since the transit bans of the Russian Federation (the flow of traffic between Europe and Asia through Belarus is significantly higher than through Ukraine).
It is necessary to provide investment for the maintenance and development of transport infrastructure, increase competition in cargo transportation and subsidize the passenger one. Draft law “On railway transport” is designed to create better conditions for attracting private investment and improve management of rail transport.
Ukrzaliznytsya has already started updating the locomotive park by signing a contract with General Electric for the supply and joint production of diesel locomotives. Now it is necessary to decide on investments in the renewal of electric locomotives. The adoption of the law will facilitate the structural transformation in rail transport, division to operators of cargo, passenger and infrastructure.
Concessions mechanism
Draft law “On concessions” provides the technology for improvement of the legal regulation of concession activity. That means that Ukraine has a clear mechanism for choosing the investor and preparing for the quality projects implementation under concession conditions in line with international practice.
Concession equals more opportunities for private companies and will enable large-scale investment in infrastructure. This is the most efficient form of cooperation between the state and private busyness for hard infrastructure investment. The draft law was developped jointly with EBRD in order to improve the legal regulation of concession activities.
Concession envisages simplified land allocation procedure, format of concession agreements and monitoring mechanism. For the road projects it important to have state guarantee of investment return in case of decreased traffic. Ministry of Infrastructure plans to have pilot tenders for ports and concession roads this autumn after Parliament adopts the Law “On Concessions” in the second reading.
Transport infrastructure invesment
The experience of countries in Central and Eastern Europe confirms the need to attract foreign direct investment into the Ukrainian economy, mainly to the transport infrastructure as «bloodstream system». Government needs to establish internal processes and regulatory mechanisms to attract foreign investment.
Cooperation between Ukraine and the EU (both at the state and private levels) in the field of transport depends on the reconstruction and modernization of transport systems and road networks in Ukraine, the development and maintenance of compatibility of transport systems of Ukraine and the EU. The focus is the modernization of the roads and railways management, ports and airports, the general development of the potential of the railways, waterways, highways, air navigation infrastructure, and the development of multimodal transport.
The roadmap will become the trigger for the adoption and implementation of the draft laws that will introduce transparent state regulation and implementation of a single economic, investment and social policy in the transport sector. This, in turn, will increase the competitiveness and attractiveness of Ukrainian infrastructure for domestic and foreign investment.
Viktor Dovhan is deputy minister of infrastructure in Ukraine.
