Ukraine - InfrastructureUkraine-Infrastructure
Overview
Ukraine’s strategic location can be a powerful catalyst for the development of the country as well as for the West. Historically, Ukraine has been at the crossroads of world trade routes and a major stronghold on the way from Europe to Asia. Ukraine’s transit potential is 200 million metric tons per year, while its utilization is only 25-30 percent. In 2017, the Ukrainian Government prepared a package of planned reforms to bring to changes to Ukraine’s infrastructure. The scale of the package is comparable only with the integration of Eastern European countries into the European Union’s infrastructure in the 1990’s and 2000’s.
Ukraine is essential for the European Union as one of the key countries for the transportation of goods to and from the EU, especially since the European Parliament approved the new concept of transportation infrastructure development and turning the national transportation systems of European countries into a unified trans-European network (the TEN-N program) in 2013. The cost of the first phase of the project is expected to reach 250 billion euros by the year 2020. Within the framework of the work completed on integrating Ukrainian and European transport networks and following the results of the Brussels Eastern Partnership Summit, Ukraine was included in the maps of the European transport network TEN-T.
For the successful implementation of reforms, Ukrainian infrastructure needs to secure an additional $20-25 billion of investment by 2030. Infrastructure development will require $8-10 billion of private investments annually over the next 12-15 years. On its own Ukraine is only able to finance about $1.5 billion of infrastructure projects annually.
The primary segments of Ukraine's infrastructure industry are sea and river, airports, roads, railway, and postal services.
Sea and River
Thirteen ports operate in the Azov and the Black Sea basins and the Danube River Delta, with a total cargo capacity exceeding 230 million tons per year. Reform of the maritime transport industry has been launched, with the establishment of the State Service for Marine and River Transport. In addition, the special Maritime Doctrine has been developed to ensure the entire fulfillment of Ukraine’s maritime potential. Port fees and charges have been reduced by 20 percent, and a new method of calculating port fees has been developed. Port fees will be based on two components: a prime rate and investment component. Work with the leading port investors including BUNGE, DP World and Hutchison Ports towards port development in Ukraine has begun. BUNGE and Louis Dreyfus plan to launch logistic facilities and a new car park this year. The inland water transport system, typically the most cost-effective way to ship cargo, runs at only eight percent of capacity due to neglected locks, drawbridges, and navigation channels. The potential inland waterways transport capacity is estimated at up to 35 million tons per year.
Airports
Ukraine has a differentiated network of direct and transit air traffic. Ukrainian airlines performed 92.2 thousand commercial flights in 2017, a 16 percent increase over 2016. In particular, international flights amounted to 77.7 thousand, a 14 percent increase over 2016. The Boryspil air hub generally manages air transit via Ukraine. In 2017, Boryspil Airport had the largest number of flights in the airport’s history. The number of serviced passengers increased by 2 million, to 10.55 million, which is 23 percent more than in 2016. In 2017, the Lviv Danylo Halytsky International Airport served over a million passengers a year, a 36 percent increase over 2016. The Ministry of Infrastructure of Ukraine will focus on the development of regional air traffic and expansion of budget airlines in Ukraine in coming years. This initiative will include deregulation of procedures to open ground handling services to private operators, withdrawal of restrictions based on parity regarding the number of airlines and their flights between Ukraine and EU states, and approval by the Cabinet of Ministers of Ukraine of the Aviation Transport Strategy of Ukraine for the period through 2030. Almost all of Ukraine’s 22 airports need modernization or reconstruction.
Roads
The national network of public automobile roads is 169,652 km long, including 47,000 km of state roads and 122,000 km of local roads. In 2017 major road restoration projects took place in Ukraine with 2,177 km of public roads repaired. The State Road Fund was established and began operations on January 1, 2018. For the first time in the country’s history, Ukraine has a dedicated source of revenues for road repair and construction. Approximately 120,459 km of local public roads were transferred to local governments with appropriate funding. An open infrastructure data portal has been developed, which contained about 400 road repair projects in 2017, monitored according to CoST standards. The work on the introduction of weight control on roads was intensified. The development strategy for the electric transport market in Ukraine has been implemented. The objectives of the strategy include a full cycle production of electric vehicles in the country and provision of opportunities to Ukrainians to purchase affordable cars in the future.
Railway
Ukraine’s operational railway network is one of the largest in Europe, stretching over 20,952 km, of which 9,926 km (47 percent) were electrified. The rail system, which moves 60 percent of the country’s total exports, is nearly completely outdated. The Ministry of Infrastructure estimates that 97 percent of the rolling stock required modernization or replacement. In 2018, GE Transportation, Ukrainian Railways, and UkrExIm Bank signed the final contract for the purchase of 30 new U.S.-made locomotives and officially announce the agreement to the public. Under this ten-year agreement modernization and service of additional 150 locomotives and supply of another 195 locomotives are planned. Also, certain work will be localized in Ukraine to further bolster job creation and economic development in the country. The deregulation of the freight wagon tariff component for the transport of goods by Ukrainian Railways’ owned rail cars has been carried out, creating a more equitable playing field for all enterprises. The draft law “On Railway Transport of Ukraine” introduces a new regulatory framework for the functioning of the industry (tariffs, rules for access to infrastructure, new market access procedures – licensing, security certification, locomotive driver access, etc.).
Postal Services
The corporatization of the Ukrainian state postal company “Ukrposhta” was completed on March 1, 2017, along with the state registration of the public joint stock company “Ukrposhta.” The tariffs for general services have been revised and the range of services has been expanded. The service of express delivery has been restarted, and new services “Ukrposhta Standard” and “Ukrposhta SmartBox” were launched. The work with corporate clients in the e-commerce segment has been intensified, and the efficiency of the post office has increased. “Ukrposhta” is actively implementing an investment program, for which in 2017 $26.7 million was allocated.
On May 30, 2018, the Cabinet of Ministers of Ukraine approved the National Transport Strategy “Drive Ukraine 2030". Minister of Infrastructure of Ukraine Volodymyr Omelyan called the plan a document that envisages the development of transport and infrastructure industries for the coming 12 years. The goal is to create a safe and efficient transport complex in Ukraine, which would be integrated into the world transport network, meeting people’s needs in transportation services, and improving conditions of doing business to ensure competitiveness and efficiency of the national economy.
Leading Sub-Sectors
- Sea and river
- Airports
- Roads
- Railway
- Postal services
Opportunities
- Sea and river: concession of three sea ports and state-owned stevedoring company “Olvia”, and privatization of Ukrainian Danube shipping company; reconstruction of Dnipro locks ($57 million)
- Airports: renovation of five regional airports (up to $500 million) and modernization of the air navigation system ($136 million)
- Roads: upgrade of five regional roads ($2.5 billion)
- Railway: construction of European 1435 mm guage rail track high speed connection with EU and Odessa-Kyiv-Lviv route ($8.5 billion), Electrification of the railway line Dolinska - Nikolaev – Kolosovka ($416 million), electrification of the railway section Berdychiv-Korosten-Berezhest ($162 millino), and construction of Kyiv Boryspil train connection
- Postal Services: construction of new mail sorting centers ($150 million), track fleet renovation ($100 million), and computerization of the network ($15 million)
Web Resources
Trade Events- Central and Easter Europe Infrastructure Week, Warsaw, Poland, May 20-21, 2020
- Ministry of Infrastructure of Ukraine
- Ukrainian Sea Ports Authority
- State Aviation Administration of Ukraine
- State Agency of Automobile Roads of Ukraine
- Ukrainian Railways
- Ukrainian Postal Service
- Centre for Transport Strategies