Business assessed the transport infrastructure development and identified its priorities – EBA survey
For the second year in a row, the European Business Association has conducted the Infrastructure Index – a study of the general state of transport infrastructure development in Ukraine – together with Agreca and Sayenko Kharenko. This year the integrated index amounted to 2.76 points out of 5 possible and showed a slight increase but still remained in the negative plane. Last year, it was 2.58 points.
We analyzed the level of development of rail, road, sea, river, and air transport according to four criteria – legislation and public policy, investment activities, transport monopoly, and transport logistics.
The EBA member companies assessed the work of air transport the best as it received 3.15 points out of 5 possible, which is a neutral plane. All other modes of transport received negative scores: road transport took 2nd place with 2.96 points, inland water transport – 3rd place with 2.75 points, maritime transport – the 4th place with 2.47 points and rail transport is in 5th place with 2,45 points.
The most prevalent mode of transport used by the respondents is the railway followed by road transport, while the least prevalent is river transport.
As the same as last year, the railway transport scored the lowest with 2.45 points this year but still compared to last year (2.36 points) there was a slight increase. If we talk about each criterion separately, then businesses assessed Ukrzaliznytsia as a transport monopolist the worst – 2.3 points, then transport logistics – 2.47 points, the state of legislation and public policy – 2.49 points. And the relatively high score was given to investment activities in the industry – 2.55 points.
Priority reforms needed for railway development have remained virtually unchanged since last year. The TOP expected reforms are the reorganization of Ukrzaliznytsia, a change in tariff policy and increased responsibility for interference in the railway transport activities, and the cessation of the practice of cross-subsidizing passenger transportation at the expense of freight.
The business considers that the adoption of the following normative acts will most benefit the development of railway transport – the Law on the National Commission on Transport Regulation (for 81% respondents), the new Law on Railway Transport (72%), and regulations on the private traction market (49%).
The assessment of maritime transport this year decreased slightly compared to last year – 2.47 points against the previous 2.85. The worst scores were given to such criteria as the legislation and state policy and activities of transport monopolies (USPA efficiency) – 2.4 points out of 5 possible, transport logistics was rated at 2.52 points, and investment activity – at 2.56 points.
The most anticipated reforms in the sector remain to be the reduction of port dues and the deduction of USPA net profit to the state budget, streamlining of USPA services, and the establishment of an independent transport regulator (NCTR).
According to 68% of the Index respondents, the methodology of calculating port dues and the procedure for compensating investments in strategic objects of port infrastructure are the normative acts that businesses are most eager to adopt for the development of the maritime transport industry.
Inland water transport
The least prevalent mode of transport for the EBA member companies today is river transportation. Its score has increased slightly compared to last year – from 2.67 to 2.75 on a 5-point scale.
Legislation and state policy and transport infrastructure received the highest scores among the criteria for the industry development – 2.82 points out of 5 possible, the activity of Ukrvodshlyakh was estimated at 2.73 points, and the lowest score was given to investment activities – 2.64 points.
For accelerated development of the industry (which is considered as an alternative to railway), the business proposes to establish a State Inland Waterways Fund, modernize, and increase the capacity of shipping locks, and ensure proper legal regulation of IWT. The most anticipated regulations are the draft laws on the establishment of the above-mentioned State Fund (82% of respondents) and the rules of transportation of goods, passengers, and luggage with IWT (55%).
The assessment of the state of road infrastructure has slightly increased compared to the previous period – to 2.96 points (2.6 last year). Among the evaluation criteria, the lowest was Ukravtodor as a transport monopolist – 2.9 points out of 5 possible, legislation and state policy and transport logistics received 2.95 points each, and the survey participants rated investment activity in the industry at 3.05. points, which is a neutral value.
The most expected changes for the development of road transport in Ukraine are the increase of permit quotas for international freight transport, the development of infrastructure to improve traffic safety and attract private investment in the road industry.
Among the most anticipated regulations, respondents included new legislation on road transport and the Law on NCTR (60% of respondents), and the Law on Multimodal Transportation (48%).
For the second year in a row, EBA experts grant the highest and almost unchanged score to the development of air transport – 3.15 points against the previous 3.17. Respondents rated the level of investment activity in the industry on the TOP-3, all other criteria received 3.2 points out of 5 possible.
According to business, the further aviation industry development in Ukraine requires a program of development and modernization of regional airports, the creation of the State Fund for financing airport development, and the implementation of the Common Aviation Area Agreement with the EU. To do this, first of all, the business expects to adopt changes to the State Target Program for Airport Development 2023 and legislation that should address critical aspects that hinder the development of airports (respectively 60% of respondents,).
This year’s survey provides for the first time an opportunity for a comparison with the 2020 results. No significant changes have taken place in the field of rail and water transport: the scores remain negative. This is due to the fact that respondents did not see significant changes in those areas that were assessed in 2020. Lack of investment and policy-making activity (except for IWTs), dissatisfaction with the quality and cost of services, as well as the reshuffle in the top management of transport monopolies, played their role. So, the results seem quite expected.
We can notice the growing attention of public authorities to infrastructure issues. Thus, it comes naturally that the results of 2021 show a slight improvement in the overall business assessment of Ukraine’s infrastructure compared to the previous year. This is especially true of road transport, which has been one of the priorities of state development programs for several years in a row. Despite the general global decline in demand for air transportation and the reduction of commercial traffic congestion, air transport has received a consistently neutral assessment from market participants. This can be seen as an indicator of the relatively effective policy of the state in the aviation industry and market interest in its active development in Ukraine. At the end of this year, the Ministry of Infrastructure also announced ambitious plans for investment projects in rail and air transport. Such initiatives cannot but be of interest to business, although next year they will be assessed depending on the concrete results achieved, as, for example, was the case this year with road transport.
The EBA Infrastructure Index has been conducted since 2020.
The Index is calculated as an average assessment of the overall development level of 5 transport sectors. Each sector is evaluated based on four criteria – legislation and public policy, investment activities, transport monopoly, and transport logistics.
The index is measured once a year. To calculate the index, we use the Likert scale which has 5 gradations where 1 is extremely negative, 3 is satisfactory, 5 is extremely positive.
Altogether, 94 transport and logistics specialists of the EBA member companies took part in the survey. The main partners of the study are the law firms Agreca and Sayenko Kharenko.