Ukraine: How international partnerships are contributing to the development of transportation infrastructure

Photo: Roberto Maldeno | Flickr Creative Commons

Infrastructure in Ukraine, Europe’s largest country, is extremely underdeveloped. Without significant investment, it cannot support the existing or future needs of our economy or population. The reasons are many: decades of mismanagement under Soviet rule, economic crisis, and more recently, the conflict in the Donbass. Given that these constraints go beyond a simple lack of funding, our government is partnering with the Global Infrastructure Facility (GIF), as well as other international partners such as the European Bank for Reconstruction and Development (EBRD) and the World Bank.

Ukraine’s 2020 Transportation Strategy outlines our vision: we aim for nothing less than European-level infrastructure in our country.  A lot is at stake. Ukraine is strategically located on important transportation routes. We are nestled between the European Union, Russia, and the Black Sea; the latter serving as a critical gateway to international sea trade. As part of this corridor, the Dnipro River links the interior of our country to regional and global trade routes, essentially forming a bridge between Europe and Asia. The corridor is critical to Ukraine’s export of agricultural production and import of fuel and energy.

To start, we need to demonstrate our commitment to infrastructure development and our ability to see projects through. Central to this is becoming successful at attracting private sector investment and expertise. To this end, the Ministry of Infrastructure is currently working with the GIF, EBRD and World Bank as well as the Ukrainian Institute for the Future to develop three pilot projects. These projects focus on well-planned public-private partnerships (PPPs) to develop several important ports and terminals :

• Olvia Port (formerly Oktyabrsk Port). Located on the northern part of the Dnipro-Bug estuary outside of Mykolayiv, Olvia serves a key agricultural region of Ukraine. Its cargo turnover in 2016 was 2.2 million tons, including mainly grains, ferrous metals, and building materials. Revenue in 2016 was US$15.4 million. EBRD is currently concluding a GIF-funded preliminary feasibility study for the port.
• Kherson River Port and the Lower Dnipro Waterway. This port on the mouth of the Dnipro river will benefit from modernization as a multimodal cargo hub. Cargo turnover in 2016 was 1.2 million tons, including mainly fertilizer and grain, with revenues of nearly US$8 million. The World Bank is currently concluding a GIF-funded preliminary feasibility study for the port and waterway.
• Chernomorsk Ferry Terminal. This is the only railway-ferry complex in Ukraine and is one of the biggest in the Black Sea region. Located southwest of Odesa, it has an annual capacity of 4.5 million tons and revenue, in 2016, of US$3.7 million. The Ukrainian Institute for the Future is currently funding the prefeasibility study.

These three examples show the importance of our partnerships with both international and national institutions as a route to attracting the private sector participation needed to develop such projects. In these early stages, long-term commercial viability is not easy to establish, particularly given Ukraine’s difficult current situation. In this context, the GIF provided the scarce capital and technical expertise necessary to develop a pipeline of projects , facilitating the participation of other international players, such as EBRD and the World Bank.

This collaboration among multilateral development banks to support the modernization of Ukraine’s transportation infrastructure is of vital importance. In the near future, the prefeasibility work on these pilots will be completed. These studies will demonstrate the potential of these infrastructure assets and what would be needed for them to operate in a sustainable and productive manner for Ukraine’s economy.

The next step for these projects will be to work further with our international partners, including the GIF, to conduct full feasibility studies that will put both Ukrainian ports and the wider investment environment on the map for both national and international investors. We look forward to continuing our work with our international partners to achieve these goals.