Business and high officials discussed the state and prospects of Ukrainian transport infrastructure

03/ 12/ 2022

Listen to online Stop   On November 29, the European Business Association held the annual Infrastructure Day with the participation of business and high-ranking officials to discuss the current problems of Ukrainian infrastructure in wartime, as well as ways to solve them and opportunities for further development.   During the event, the EBA Logistics Committee presented the results of the expert study Infrastructure Index 2022, which was conducted in partnership with the law firms Arzinger and Sayenko Kharenko. Detailed results of the study are available on the EBA website. The participants of the first panel Transport industry in 2022 discussed the general state of companies in the field of transport, as well as the challenges of wartime for the state and business. Infrastructure is one of the main targets of russian criminal attacks, some of which have already been destroyed, and attacks on infrastructure are likely to continue in the future. Therefore, at this stage, we should try to reduce losses, but at the same time plan for recovery. Currently, the relevant Committee of the Verkhovna Rada is considering eurointegration draft laws to start negotiations on accession to the EU in spring. In particular, the law on postal service has already been adopted, the work on harmonization of road traffic legislation continues, and a large block on railway transport is ahead. Despite the almost complete stoppage of maritime logistics, work continues on unblocking traffic and developing a further maritime strategy to ensure Ukraines competitiveness in the Black Sea. During the full-scale war, the Ministry of Infrastructure was focused on the change in the export and logistics structure and regulatory scope (issuance of licenses, permits, approval of routes). The structure of transportation has changed significantly – if earlier the ratio was 20% to 80% (international to domestic), now the situation is the opposite – 70% is international and 30% is domestic. This creates new challenges but also opportunities for Ukrainian carriers. Besides, the Ministry continues important work to ensure passenger transportation, even in the most difficult areas. The panelists appealed to businesses to document the losses. Thus, the KSE Institute estimates the current damage to Ukraine at $130 billion, excluding the recent major attacks on the Ukrainian energy infrastructure. However, this includes $36 billion in infrastructure losses. We are grateful to the speakers of the first panel for their insights and direct dialogue with business – Mustafa Nayem, Deputy Minister of Infrastructure of Ukraine, Taras Vysotskyi, First Deputy Minister of Agrarian Policy and Food of Ukraine, Yulia Klymenko, Deputy Head of the Verkhovna Rada Committee on Transport and Infrastructure, Maryna Sharapa, Partner at Arzinger, and Natalia Shapoval, Head of the KSE Institute. The second-panel Logistics under martial law was dedicated to rail freight transportation, the potential of Ukraine and its Eastern European neighbors to ensure the transportation of Ukrainian exports, and the prospects for expanding the grain corridor. The work of the Ukrainian railway has become extremely flexible since the beginning of the full-scale invasion. Besides, the structure of transportation has changed significantly, in which the share of grain has increased – almost one million tons of grain is transported by rail to the west. To increase the throughput capacity, land corridors are currently being developed, routes are being restructured, and deficit services are provided through the Prozorro system. Also, manufacturers of MMC products have partially reoriented to rail transport while previously they occupied most of the sea exports. Postal transportation also relies heavily on rail transportation today. Besides, Ukrposhta continues to work and support the logistics of Ukrainian SMEs that actively use postal services to export goods. In addition, Ukrposhta has provided UAH 100 million of free services for business. The new European integration law on postal services significantly liberalized the postal sphere, leaving only four regulated services. We would like to thank the panelists for interesting and useful information for business, particularly Yuriy Vaskov, Deputy Minister of Infrastructure of Ukraine, Oleksandr Kamyshyn, Chairman of the Board of JSC Ukrzaliznytsia, Igor Smelyansky, General Director of JSC Ukrposhta, Oleksiy Vostrikov, Acting Head of SE USPA, Stanislav Zinchenko, Director of GMK Center, Volodymyr Demenko, CEO of Levada Cargo. The Danube cluster, the development of the TEN-T network, multimodal terminals in the western and southern regions of Ukraine, the state of affairs and prospects for the recovery of the aviation industry were discussed during the third panel Future threats to the transport industry and Strategic solutions. The Danube is a major artery that has become a new pillar for Ukrainian exports, as the cluster includes three powerful seaports. The liberation of Zmiinyi significantly contributed to the revival of cargo turnover in the Danube cluster. For this period, the Danube fleet underwent significant restoration and returned to work – about 150 units of the fleet were repaired. However, the main challenge of the Danube fleet is its outdated and unecological nature, and with restrictions on CO2 emissions in the near future, Ukrainian ships may be restricted from entering EU ports. Therefore, a business model for the modernization of the traction fleet and a plan for the construction of new vessels are currently being developed to overcome this challenge. About 140 infrastructure rehabilitation projects are planned for 2022-23, aimed at building infrastructure and integration with the EU. To monitor the development process, it is planned to create a unified digital management system for the reconstruction process – a digital tool that will allow donors to comprehensively and transparently track their investments. According to experts, an important role in the further development of infrastructure will be played by the mechanism of public-private partnership and the development of a network of industrial parks. The situation with air transport is expected to be the most difficult, given its complete shutdown in Ukraine. Despite this, aviation companies do not lose optimism about the future, temporarily working in other markets, but are ready to resume work on the same day as soon as possible. To do this, according to air carriers, it is important to carry out preparatory work in three areas – airports (personnel and certification), international standards for assessing losses and attracting investment (PPP), and sources of financing.  We are grateful to Anatolii Amelin, Member of the Supervisory Board of JSC Ukrzaliznytsia, Dmytro Moskalenko, General Director of PJSC Ukrainian Danube Shipping Company, Andrii Pidhainyi, Attorney at Law, Partner at Arzinger, Taras Boichuk, Head of the Project Office of the Ministry of Infrastructure of Ukraine, Oleksandr Lazarev, Director of Lamarin, Liudmyla Slobodianiuk, Commercial Director of SkyUp Airlines, Yevhen Smurygin, Senior Project Manager of the ВВТ RST Reform of the Ministry of Infrastructure for participation in this expert panel.

On November 29, the European Business Association held the annual Infrastructure Day with the participation of business and high-ranking officials to discuss the current problems of Ukrainian infrastructure in wartime, as well as ways to solve them and opportunities for further development.

During the event, the EBA Logistics Committee presented the results of the expert study “Infrastructure Index 2022”, which was conducted in partnership with the law firms Arzinger and Sayenko Kharenko. Detailed results of the study are available on the EBA website.

The participants of the first panel “Transport industry in 2022” discussed the general state of companies in the field of transport, as well as the challenges of wartime for the state and business.

Infrastructure is one of the main targets of russian criminal attacks, some of which have already been destroyed, and attacks on infrastructure are likely to continue in the future. Therefore, at this stage, we should try to reduce losses, but at the same time plan for recovery.

Currently, the relevant Committee of the Verkhovna Rada is considering eurointegration draft laws to start negotiations on accession to the EU in spring. In particular, the law on postal service has already been adopted, the work on harmonization of road traffic legislation continues, and a large block on railway transport is ahead. Despite the almost complete stoppage of maritime logistics, work continues on unblocking traffic and developing a further maritime strategy to ensure Ukraine’s competitiveness in the Black Sea.

During the full-scale war, the Ministry of Infrastructure was focused on the change in the export and logistics structure and regulatory scope (issuance of licenses, permits, approval of routes). The structure of transportation has changed significantly – if earlier the ratio was 20% to 80% (international to domestic), now the situation is the opposite – 70% is international and 30% is domestic. This creates new challenges but also opportunities for Ukrainian carriers. Besides, the Ministry continues important work to ensure passenger transportation, even in the most difficult areas.

The panelists appealed to businesses to document the losses. Thus, the KSE Institute estimates the current damage to Ukraine at $130 billion, excluding the recent major attacks on the Ukrainian energy infrastructure. However, this includes $36 billion in infrastructure losses.

We are grateful to the speakers of the first panel for their insights and direct dialogue with business – Mustafa Nayem, Deputy Minister of Infrastructure of Ukraine, Taras Vysotskyi, First Deputy Minister of Agrarian Policy and Food of Ukraine, Yulia Klymenko, Deputy Head of the Verkhovna Rada Committee on Transport and Infrastructure, Maryna Sharapa, Partner at Arzinger, and Natalia Shapoval, Head of the KSE Institute.

The second-panel “Logistics under martial law” was dedicated to rail freight transportation, the potential of Ukraine and its Eastern European neighbors to ensure the transportation of Ukrainian exports, and the prospects for expanding the grain corridor.

The work of the Ukrainian railway has become extremely flexible since the beginning of the full-scale invasion. Besides, the structure of transportation has changed significantly, in which the share of grain has increased – almost one million tons of grain is transported by rail to the west. To increase the throughput capacity, land corridors are currently being developed, routes are being restructured, and deficit services are provided through the Prozorro system. Also, manufacturers of MMC products have partially reoriented to rail transport while previously they occupied most of the sea exports.

Postal transportation also relies heavily on rail transportation today. Besides, Ukrposhta continues to work and support the logistics of Ukrainian SMEs that actively use postal services to export goods. In addition, Ukrposhta has provided UAH 100 million of free services for business. The new European integration law on postal services significantly liberalized the postal sphere, leaving only four regulated services.

We would like to thank the panelists for interesting and useful information for business, particularly Yuriy Vaskov, Deputy Minister of Infrastructure of Ukraine, Oleksandr Kamyshyn, Chairman of the Board of JSC “Ukrzaliznytsia”, Igor Smelyansky, General Director of JSC “Ukrposhta”, Oleksiy Vostrikov, Acting Head of SE “USPA”, Stanislav Zinchenko, Director of GMK Center, Volodymyr Demenko, CEO of Levada Cargo.

The Danube cluster, the development of the TEN-T network, multimodal terminals in the western and southern regions of Ukraine, the state of affairs and prospects for the recovery of the aviation industry were discussed during the third panel ” Future threats to the transport industry and Strategic solutions”.

The Danube is a major artery that has become a new pillar for Ukrainian exports, as the cluster includes three powerful seaports. The liberation of Zmiinyi significantly contributed to the revival of cargo turnover in the Danube cluster. For this period, the Danube fleet underwent significant restoration and returned to work – about 150 units of the fleet were repaired.

However, the main challenge of the Danube fleet is its outdated and unecological nature, and with restrictions on CO2 emissions in the near future, Ukrainian ships may be restricted from entering EU ports. Therefore, a business model for the modernization of the traction fleet and a plan for the construction of new vessels are currently being developed to overcome this challenge.

About 140 infrastructure rehabilitation projects are planned for 2022-23, aimed at building infrastructure and integration with the EU. To monitor the development process, it is planned to create a unified digital management system for the reconstruction process – a digital tool that will allow donors to comprehensively and transparently track their investments.

According to experts, an important role in the further development of infrastructure will be played by the mechanism of public-private partnership and the development of a network of industrial parks.

The situation with air transport is expected to be the most difficult, given its complete shutdown in Ukraine. Despite this, aviation companies do not lose optimism about the future, temporarily working in other markets, but are ready to resume work on the same day as soon as possible. To do this, according to air carriers, it is important to carry out preparatory work in three areas – airports (personnel and certification), international standards for assessing losses and attracting investment (PPP), and sources of financing. 

We are grateful to Anatolii Amelin, Member of the Supervisory Board of JSC “Ukrzaliznytsia”, Dmytro Moskalenko, General Director of PJSC “Ukrainian Danube Shipping Company”, Andrii Pidhainyi, Attorney at Law, Partner at Arzinger, Taras Boichuk, Head of the Project Office of the Ministry of Infrastructure of Ukraine, Oleksandr Lazarev, Director of Lamarin, Liudmyla Slobodianiuk, Commercial Director of SkyUp Airlines, Yevhen Smurygin, Senior Project Manager of the ВВТ RST Reform of the Ministry of Infrastructure for participation in this expert panel.