The new government of Ukraine is channeling significant resources into improving its infrastructure, aware that good road, sea and air connections are key to economic growth. On September 12, the Ministry of Infrastructure announced the beginning of competitive and transparent concession tenders for the seaports of Olvia and Kherson, and in the future this practice will be extended to roads, airports and more. Meanwhile, Ryanair will open a new route and more airlines are expected to follow. Minister Kryklii explains why now is a crucial moment to invest in a European country that is poised to grow at 3.7% in 2020
Which projects are you going to carry over from the previous administration, and what are your new initiatives?
We are focusing heavily on improving the road network. Existing legislation was changed two years ago, and a new fuel tax is going into a road fund that supports the construction of new infrastructure. Next year this budget will be about 70 billion hryvna, and most will be invested in road building. We want to continue with this process, as one of this government’s main targets is to have high-quality roads connecting all the cities of Ukraine. We also have to improve and repair 24,000 km of roads, many of which have bumpy surfaces. Having good infrastructure will help businesses that make a living exporting goods. In Ukraine, transportation by road is more important than river transportation, so we really need to invest in roads and start concession projects so that we can work faster. We are hoping to attract investment through good opportunities to build high-quality roads. We already have a few projects for bypasses around Kiev, which will attract trucks and other heavy vehicles and make traffic easier for local residents. According to a feasibility study, there are between 30,000 and 40,000 vehicles each day in the roads around Kiev, and a new road will be a good opportunity for investors.
The government is investing $20 billion in infrastructure, not all of it on roads. Which other projects do you consider key to economic development?
Roads are essentially a big problem for citizens, but investors are also interested in other projects like seaports, because these are the main connections for import-export operations. We have already started two pilot concession projects in early October at the ports of Olvia and Kherson, and we’ll be ready to launch up to four new concession seaports next year: Odessa, Mariupol, Mykolaiv and a fourth that is still under discussion. We are doing this for several reasons: to attract new investment and to develop critical infrastructure in the country. We also want to develop regional airports through a concession system. We want to increase the air mobility of passengers inside Ukraine, and we’ve had a good meeting with Ryanair, which has decided to open a new route at Kherson International Airport. Earlier, it only flew from there to Turkey and Egypt, and seasonally at that. Now there will be two weekly flights to Kharkiv. We want to continue to attract air operators to open new domestic and international routes in Ukraine. Each tourist that comes to Ukraine spends up to $350 on hotels, food, cultural attractions, gifts and so on, and we are working to ensure that every region has a specific “magnet” to attract tourists.
In what ways are you going to make these projects attractive to investors?
At the government level, we are ready to provide support with the paperwork, so there will be no barriers when it comes to putting all the necessary documents together. We will speed up the bureaucratic procedures as much as possible to do things like register the company, open a bank account, invest money and so on. We are an agricultural country and every year we are seeing an increase in the export of grains and other goods, and this is a good investment opportunity, because in tandem with the opening of the land market it will yield great growth, and whoever invests now can expect to see much better results that they expected in two, three years. Take seaports: the current picture will be much more attractive in two to three years, although they are attractive enough already. Our two pilot projects attracted over 30 participants from all over the world, including some very well known companies.
How do investors weigh the risks of investing in seaports with a lot of volume and a lot of potential but which are located in a part of Ukraine where there is a conflict with Russia?
Ukraine’s GDP in 2020 is expected to grow at a rate of 3.7%, and this at a time when every other country is expecting a new wave of economic crisis. Part of our strategy involves relaunching the legislation; we are working with members of parliament who voted for three new bills and we expect to make further progress on this. Some of the new legislation will help concessionaires work better through government guarantees. We also want to react on the wishes of investors, and we are open to any opportunity: as long as it is not a strategic infrastructure, anything can be discussed with a view to privatization. In the future we will be prepared to launch IPOs for the railway company and the national postal operator in the world’s best stock markets. We are ready to show the world that we are not keeping these assets for local investors, but are open to international ones as well. We could imagine e-commerce companies being interested in the postal service, for instance. As for the railway company, we want to find development companies to manage railway stations. We have good passenger traffic and we are conducting a profitability study on seven stations. We expect to attract operators who will make extra investments in these stations to make them multimodal spaces with additional services.
Ukraine has a huge landmass, and it sits in the middle of Europe and Central Asia. Becoming a logistics hub should be a priority, some people say while others see it as impossible. What is your own view?
It is definitely one of our targets. It is not so much a problem of investment. We need to relaunch the transportation model through initiatives like a single travel ticket that will be good for all modes of transportation – bus, train, airplane travel, and which will allow passengers to drop off their luggage at the first point and pick it up at their destination. We want to create a logistic platform connecting the different types of transportation, and all the data will be gathered in one place. There is a very short list of countries that have started to implement this.
How would you like the country to be perceived by investors and policymakers alike, in the US and elsewhere?
There is a unique opportunity for investors right now because the President’s Office, the Cabinet of Ministers and the Parliament are all working together towards the same goals, whereas previously these bodies were working separately or against each other. These new supportive circumstances are all we need to produce new legislation and develop new approaches. There are posters at Ukrainian airports for an exhibition called “Ukraine WOW” aimed at familiarizing travelers with the top sights in the country. We could borrow this phrase to describe the investment climate right now, because we are working on creating something truly amazing and attractive for investors.