Infrastructure industry: what was 2023 like and what to expect next
On November 17, the EBA held its annual Infrastructure Day event for the eighth year in a row. The event brought together representatives of the transport business, the Government and Parliament, relevant government agencies, and market participants. What was 2023 like for the transport industry, how will Ukrainian infrastructure develop, what projects and initiatives are planned for the near future, and what will happen to the recovery and investment in the industry – here are the main points of the participants’ speeches.
Yurii Vaskov, Deputy Minister for Communities, Territories and Infrastructure Development of Ukraine, emphasized that the Government and businesses have a common vision of overcoming the challenges of the war. Over the next few months, the Ministry of Infrastructure plans to implement several initiatives to improve the state of the infrastructure sector and, as a reflection of it, Ukraine’s position in the Logistics Performance Index ranking. The development of alternative routes and infrastructure is also a priority, and the Ministry is making significant efforts to achieve this.
In 2023, the scope of the Ministry’s tasks has significantly expanded, in particular in the areas of energy protection, housing and utilities, and various infrastructure sectors. Mr. Vaskov confirmed the problem of staff shortage, explaining it by the priority of providing the Armed Forces and the need for enterprises to function for economic recovery.
The Deputy Minister also touched upon the crisis related to the blocking of the border crossing points with Poland, emphasizing that this is not a bilateral issue but also a matter of the European Commission. He expressed concern about the Slovak border, emphasizing the authorities’ ongoing efforts to reduce tensions. Regarding the protection of port infrastructure, Mr. Vaskov emphasized the existing experience of cooperation with the private sector. He also announced the acceleration of work on the draft law on railway transport, as it is on the list of priority legislative initiatives in 2024.
According to Yulia Klymenko, First Deputy Head of the VRU Committee on Transport and Infrastructure, infrastructure is one of the industries most affected by the hostilities. In the coming years, there is no need to count on public funds for the development of infrastructure projects, given the priority of spending on security and defense. This means that in 2024 and 2025, infrastructure will be financed through loans, guarantees, and private investment. Accordingly, every dollar should be used as efficiently as possible.
The task of the relevant parliamentary committee is to adopt the necessary European integration laws over the next two years. In this context, it is very important to involve business in the development and adaptation of all sectoral documents and in the formation of a strong negotiating position. The full-scale war has forced a review of many approaches and reforms from the perspective of national security. Given this, some of the decisions taken may come into force after the end of hostilities.
Vyacheslav Yeryomin, Member of the Board of JSC “Ukrzaliznytsia,” spoke about the plans of Ukrzaliznytsia for 2024, in the context of cooperation with European and American partners and financial institutions, in particular in the development of ports and western crossings. The plans include new infrastructure projects on the borders with Poland, Slovakia, and Romania and intensive development of the container business. Ukrzaliznytsia’s financial plan for 2024 does not provide for tariff increases, but it plans to unify them as a first step toward the European model.
Yuriy Lytvyn, Head of the SE “Ukrainian Sea Ports Authority” (USPA), spoke about the work of the Danube Region ports and their role as the main transportation artery for critical imports and exports after the restriction of the Black Sea ports. Every effort has been made to ensure that the Danube ports operate at full capacity. In particular, for the first time, dredging was carried out, the number of pilots was increased, and 20 new cargo transshipment points were opened. This helped the Danube ports achieve record-breaking performance, including a 600% increase in cargo turnover. Grain, ore, oil, and petroleum products prevail among the cargoes.
Since August 10, 2023, the Ukrainian grain corridor has been operating with the security of the Ukrainian Armed Forces in charge. During this time, 148 vessels entered the ports of Greater Odesa, and 115 vessels left. Cargo turnover through this corridor reached 4.4 million tons. The USPA plans for the next year include infrastructure restoration, repair work, dredging, technical support for pilots and ship monitoring systems, digitalization, and deepening international cooperation.
Dmytro Moskalenko, Head of PJSC “Ukrainian Danube Shipping,” shared his experience of fighting corruption and modernizing the state-owned enterprise during the war, and Taras Boychuk, Head of the SPILNO Project Office, spoke about the progress of public-private partnership reform in Ukraine.
Olena Voloshyna, Head of the International Finance Corporation (IFC) in Ukraine, presented a study by IFC and the World Bank on private sector involvement in Ukraine’s sustainable and green recovery. The report addresses key topics such as transportation and logistics and predicts that the private sector could finance about $130 billion in investment in the Ukrainian economy if key reforms are implemented and integration with the EU is achieved. However, without reforms, the ability of the private sector to contribute to infrastructure development is limited. Ms. Voloshyna emphasized the importance of implementing reforms and using public-private partnership mechanisms to attract private investment and accelerate technology initiatives. She also mentioned specific projects, including port concessions and cooperation with the Danube Shipping Company, expressing IFC’s commitment to working with the Government and improving the legislation for public-private partnerships in Ukraine.
Anna Yurchenko, Deputy Minister for Communities, Territories and Infrastructure Development of Ukraine for European Integration, spoke in more detail about the Ukraine Facility, a program being developed by the Ukrainian government and the European Commission that outlines a plan for investment and reform of the transport sector in Ukraine. The plan is aimed at attracting donor and government funding for infrastructure reconstruction and promoting private investment. Ms. Yurchenko emphasized the importance of increasing Ukraine’s export potential through transport infrastructure, as it has a positive impact on the economy. This refers to ongoing projects aimed at developing checkpoints, the Danube cluster, and railway infrastructure with the participation of international organizations and the US government. The Deputy Minister also recalled the creation of the Centre for Advancement in Restoration and Modernisation Capacity, which aims to increase the efficiency of project implementation by meeting the needs for qualified human capital. In general, the speaker emphasized the importance of the transportation sector in Ukraine’s economic development and the efforts made to attract investment and improve infrastructure.
Andrii Pidhainyi, Partner at Arzinger, spoke in more detail about the amendments to the Law “On State Support of Investment Projects with Significant Investments in Ukraine.” First of all, the legislator has reduced the threshold for the value of projects with significant investments from EUR 20 million to EUR 12 million, which significantly expands the scope of the law. In addition to the four existing forms of support, three additional forms of support have been introduced: construction or compensation from the budget for related engineering and transport infrastructure, as well as exemption from reimbursement of forestry production costs. In addition, unlike the previous procedure, in which the project implementation started only after the conclusion of a special investment agreement, it is now allowed to invest no later than 18 months before applying for state support. This approach allows investors to simultaneously invest and agree with the state on the forms and conditions of support, which reduces the project implementation period to 1 year. Andrii also announced a webinar for potential investors interested in obtaining state support.
Tymur Enkhbaiar, Senior Associate at Sayenko Kharenko, emphasized the importance of implementing international standards in road construction, especially in the context of FIDIC contract forms. He noted that these standards are especially relevant for foreign investors and donors, as they help to create a favorable environment for large investments. He also noted positive changes in the legislation, in particular, in terms of the possibility of using FIDIC contracts and the introduction of the profession of consulting engineers. Mr. Enkhbaiar believes that despite the significant progress, some important issues remain to be resolved. In particular, the intellectual property rights of the FIDIC organization to the general terms and conditions of contracts make it difficult to publish them in public procurement. He called for further positive changes and implementation of the best international practices to improve the quality and safety of road works in the country.
The full broadcast of the event is available here: https://youtu.be/bWaUld68b5o
We are sincerely grateful to all the speakers and participants of the event for substantive discussions, exchange of ideas and plans, as well as a willingness to cooperate to improve the regulatory and investment environment in the transport and infrastructure sectors! We are grateful to our partners from Arzinger and Sayenko Kharenko for their strong support!
