Ukraine could become a major player in the transport market of the EU

Украина может стать серьезным игроком на рынке транспортных услуг ЕС

Ukraine, given its special geographical position, could become a serious player in the transport market of the European Union.

Moreover, the potential is there – in Ukraine 170 thousand km of roads of General use. While this opportunity nerealizovannoe, 97% of roads are in an unacceptable condition. And the situation meanwhile, requires not only the restoration of existing roads, but new construction. Of course, this requires money. More important, the overcoming of corruption.

No money, but you hold

This year the Ministry of infrastructure planned to repair 1,700 km of roads. This is exactly one percent of the Ukrainian public roads. All other roads are planned to cover the old-fashioned patching and repair. In the government of Vladimir Groisman, which is known to be an ardent supporter of the idea of decentralization, we hope that after Ukravtodor will give 140 thousand kilometers of roads managed by regional state administrations, the catastrophic situation will begin to change for the better. Now, according to Ukravtodor, capital repairs of roads are maintained through international financial institutions, and current average repair “funds from different sources.”

The Cabinet of Ministers every year increases the appetite of the road sector – if in 2013 year for the construction and repair of roads, the government requested in the budget 28 billion, in 2014 to $ 32 billion last year to 34 this year for roads is planned to spend more than 39 billion. However, in fact, allocated in 10 times less.

This year was provided about 4 mdrn UAH, Ko, Ukraine annually receives from the international financial institutions, which predstavlyaetsya for the construction and repair of roads. Quoted by the official reports of Ukravtodor: “this year, for the current minor repairs of roads and maintenance of roads was provided for 4 billion 330 million hryvnia, of which 4 billion from the state budget, the remainder from local budgets. Already made works for 82% of the planned – for $ 3 mlrd UAH 300 million (from state budget) and by 67% of the planned – on 220 million grn (from local budgets)”.

Such volume of investments is ridiculously small in comparison with the costs of the construction and repair of roads in the European Union. “As the network of roads we are losing not only the neighboring Poland and Hungary, but even Belarus and Moldova. For example, in Poland every year on the road spent about 5 billion euros. We have a sum ten times less – despite the fact that the network of roads of Ukraine is comparable with Polish”, – said the former Deputy Minister of infrastructure, the expert in the field of transport Alexander Kava.

According to experts, 97% of Ukraine’s roads are in unacceptable condition, i.e., operated with overdue repairs.

“With the current funding to avoid patching is impossible – says Kava. To abandon it only on those roads that have passed timely repairs. On other roads, patching is a necessary measure to ensure travel on the roads with several overdue maintenance repairs”.

In such a situation, what international transit routes through Ukraine can be discussed when they are “dead” state, and even loans from international organizations is only enough to bring in proper form separate sections of the route?

“In 2006, the then Deputy Prime Minister Andriy Klyuyev held the meeting of the government of a scandal: he was accused of Ukravtodor is that doing there “mesocricetus” – that is, if repairing the road, it remoteroot not as complex transport corridor, which in Ukraine is seven, and pieces. The scandal was, but nothing has changed,” – says the expert of the public organization “Europetrol” Vyacheslav Konovalov.

According to the expert, now the Minister of infrastructure Vladimir Omelian makes a lot of loud statements, including plans to build new roads, but for the development of transit potential of the country just do not physically have the infrastructure that could be used. “In addition, not enough political will – says Konovalov. – That is now what Omeljan – this is a trivial implementation of grants. This is how a quick Kaskiv [former head of the state Agency for investment and national projects] at the time, produced a huge number of statements which turned out to zilch”.

Untapped potential

Officially on the territory of Ukraine is 7 international road transport corridors, of which five are fully used. Among them – the three pan-European corridor with an impressive mileage of our country: from Finland to Greece (Helsinki – Alexandroupolis through Kiev and Odessa) with a length of 996 km; from Italy to Ukraine (Kiev – Lviv via Chop and Uzhgorod) with a length of 338 miles; and from Germany to Ukraine (Berlin – Kiev via Lviv) with a length of 611 km. are also Important transport corridors, which pass through Ukraine with access to sea ports and connect Europe with Asia – for example, from the Polish Gdansk to Odessa with a length of 1208 km in Ukraine or Reni in Novoazovsk.

To these hundreds of miles of transit routes that pass through our country, began to make a profit, they must be brought into line with international standards. And this is really only significantly increased the funding for road work at the international highways, which account for the largest portion of transit through Ukraine, said Alexander Kava. “We need to ensure the quality of the fare on the route E-95, E-85, E-583, and also on the main corridors East-West – E-40 and E-50, – said the expert. Is the key corridors that pass through the territory of Ukraine, but of these, only E-40 and E-95 are partially in good condition and have four lanes”.

You also need to allocate funds for the construction of new border crossings and good roads to them. Poland raised the issue in 2004 when they joined the Schengen area, says Vyacheslav Konovalov. “If you compare the border between Poland and Ukraine and the border between Poland and Germany, the second in three times more border crossings! Even then the poles said they are ready to allocate hundreds of millions of euros to Ukraine to build border crossings and roads to them. The condition was one: from the state budget of Ukraine was supposed to allocate for these purposes of not less than 15% of the total cost. To Euro-2012 was scheduled to open seven border crossings opened one,” says the expert.

While foreign investment will not save the situation, said Alexander Kava. “The money that allocate foreign creditors, is a flea compared to those amounts that should be spent on roads”, – said the expert. At the expense of that allocated to Ukraine the European Bank for reconstruction and development, the reconstructed highway M-06/E-40 – the Kyiv-Chop. We are now implementing a joint project of the EBRD and the European investment Bank Approaches to Kiev, in which rekonstruiruet roads of international and national importance, leading to the capital. However, the project applies mostly to roads on the territory of Kyiv region. At the expense of funds allocated by the World Bank, is implementing a project on highway M-03/E-40, but only in the area from Boryspil to Poltava. In total, these projects are approximately two thousand miles the roads and the total length of roads in Ukraine, we recall, is 170 thousand kilometers.

Funds allocated to the construction and reconstruction of Ukrainian roads of the World Bank, EBRD and other international organizations, is not foreign investment, and loans, to repay which the Ukrainian state will be using taxpayer dollars, like the former head of the Department of motor transport of Ministry of infrastructure, head of the Board of public organisation “My route” Roman Khmil. “In addition, the poles in this year allocated 100 million Euro loan, which will go towards improving border crossings and roads leading to them, – says the expert. – It – also so-called tied loan, which we will have to return, but to master it will be a Polish company. That is to earn on themselves poles.”

VIA CARPATIA

Added another problem: when the expense of foreign loans reconstructed highway Kyiv-Chop and Kyiv-Kharkiv, the calculation was made that way from chop to Kharkov via Kiev will be part of the transit route from Europe to Asia through the territory of Russia. In addition, in connection with the annexation of the Crimea and the fighting in Donbas became difficult to use the Eurasian transport corridor (Odessa – Kerch through Nikolaev, and Kherson Dzhankoy) and a corridor of black sea economic cooperation (Reni – Novoazovsk in Odessa, Nikolaev, Melitopol and Berdyansk).

“Now, these corridors do not work, since Russia has imposed restrictions on transit. And now, Ukraine needs to build a bypass route from Europe to Asia. This route, which is still being designed, has called Silk road. This corridor already exists, but there is now a two-lane road in poor condition,” – says Roman Khmil. According to him, within the project corridor through the city of Lviv, Nikolaev and Kherson then, with a branch to Odessa, and further via Georgia, Azerbaijan and Kazakhstan – to China and other Asian countries. It will be a six-lane highway, which is from Europe, you will quickly get to Ukrainian sea ports and further by sea to carry cargo to Asia. According to preliminary calculations, the construction of the highway will need five to seven years and about $ 5 billion.

Experts indicate that, typically, these transit routes be repaid within five years after commissioning. That is, according to simple calculations, to profit from its own transit potential of Ukraine will start no earlier than 2026 or even 2028-year. This is assuming that $ 5 billion for the construction of the silk road will be in the budget now.

In addition, the Verkhovna Rada Committee on issues of transport are actively discussing the project of transit corridor Via Carpathia, which will be held in seven European countries – Lithuania, Poland, Slovakia, Hungary, Romania, Bulgaria and Greece and Ukraine to the black sea ports. The cost of this project is not specified, while the poles themselves have also expressed interest in cooperation with Ukraine in this area. In particular, the head of the Commission of infrastructure of the Polish Sejm Bogdan Ionica said: “Ukraine is an important partner, and the project Via Carpathia is extremely important for Europe. The new transport corridor will raise both the Polish and Ukrainian roads to a new level”. Bogdan Ionica also assured the Ukrainian delegation that Poland will do everything possible to convince the European Commission of the need for a new transport system in the EU. From such statements it must be concluded that poles will be able to agree on the allocation by the European Commission for additional funds for the construction including Ukrainian fragments Via Carpathia.

To reverse the situation

In Parliament in terms of dealing with the construction of roads is key in creating the Road Fund. The relevant law adopted recently, the Fund becomes operational in 2018. Experts emphasize, the bill was difficult, moreover, from concept to implementation it took prohibitively long time – almost ten years. The reason for the delay is that the Road Fund exclude management allocated for road repair funds in manual mode, at the discretion of the Cabinet, for example. Or, at least, minimizes this possibility. Allocated for roads will be spent only on roads. In this sense, the adoption of the law, in itself, a breakthrough, especially because it is about big media and big temptation. The road Fund should collect about 40-60 billion a year in road invested 10 times less.

“Thus, according to various estimates, about 40% of excise revenue is in the shade. This suggests that none of the Prime Minister in fact there was no political will to remove corruption schemes out of this industry”, – says Vyacheslav Konovalov.

Moreover, according to experts, persistence, exhibited by the deputies, in particular, the transport Committee, when adopting the law on Road Fund, and several other projects related to infrastructure development and road infrastructure, will need – Alexander kawa believes that the projected income of the Fund will be insufficient for restoration of roads, the Cabinet should allocate substantial sums of the individual line item.

“Those private investments that flow into the road in other countries, make up about 1-2% of the total funding, and a key burden for the development of the road sector assumes in developed countries, the state – says the expert. For example, the German government intends in the next 15 years to spend on transport infrastructure from the state budget 263 billion euros, 17.5 billion euros per year”.

And without such infusions Ukraine will continue to annually lose tens of billions of dollars that could be drawn from their own exceptional geographical situation, which all it requires that to support a quality transit highways.

Eva Ciszewska

The material is published in №47 (739) in the magazine Reporter December 9, 2016

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