Ukraine has 4,000km of potential inland waterways, but actually uses less than 10% of its river freight transport capacity, with inland waterways accounting for less than 1% of total freight traffic, compared to an average of 7% in the EU, according to a review of the sector carried out by the Better Regulation Delivery Office (BRDO), set up under EU4Business FORBIZ project.
Representatives from government, the private sector, experts and members of the public examined the issue during a round table on the ‘Development of the market of freight transport in Ukraine’, held on 12 September in the framework of the BRDO’s Public Dialogue # PRODialog.
BRDO conducted a systematic review of the quality of market regulation in terms of reasonability, corruption risks, and business benefits, which highlighted the inadequacy of the current regulatory framework. "As a result, the river infrastructure is collapsing, the investment attractiveness of the industry is falling, the country's economy loses huge potential," said Taras Slobodyanyuk, Head of the Transport sector at the BRDO.
Constraints to market development
The main constraints for potential market operators and market growth are:
• high cost of transportation to the river and transshipment,
• uncompetitive price of inland waterway transportation compared to railways
• high capital costs for the acquisition or construction of the fleet
• low potential number of voyages
• low speed of rotation of ships due to lack of guaranteed depths
• high risk of accidents on locks.
The development of inland waterways would help to free up roads, save money on road repairs, compensate for the lack of railway rolling stock, and give a powerful incentive for the development of agriculture and metal industries that are the main drivers of the market. Currently, the market for river freight transport is 6.5 million tons/year, but there is a potential to triple growth by 2020.
Infrastructure Minister Volodymyr Omelyan acknowledged the problem: "The lack of a basic law for river transport and logistics strategy has led to the fact that in Ukraine transportation by waterways is 13 times less than in European countries. Thanks to the adoption of the law [on inland water transport], we have a real opportunity to triple the freight traffic, attract investors and access European waterways."
Regulations also need to be aligned to the requirements of the Association Agreement between Ukraine and the EU. "Harmonisation will unlock the potential of river transport in Ukraine, attract investments and integrate Ukrainian waterways into international transport corridors," said Berend De Groot, Programme Manager at the EU Delegation in Ukraine.
The FORBIZ project supports Ukraine’s reform agenda and its economic recovery by proposing a systemic change to a more business-friendly environment with a particular focus on SMEs. The project seeks to steer a shift in policy towards greater recognition of SMEs and the vital role they play in economic recovery, while addressing the challenge of reducing regulatory burden and lessening risk for businesses.
