Investors ready to support Dnipro river development

The EBRD and EIB intend to invest up to 50 million euro in the development of the Dnipro river as transport route. The institutions announced this yesterday at the conference ‘Dnipro as European Waterway’, hosted by the Netherlands embassy in Kyiv and the Ministry of Infrastructure of Ukraine. During the conference, taking its participants to the river on the boat ‘Silver Wave’, Ukrainian government representatives, members of parliament, international water experts, business and the International Financial Institutions (IFI) discussed the potential of the Dnipro river for transport.

‘With a booming agricultural industry, there is great challenge for the Ukrainian transport and logistics network to facilitate its potential. Ukraine has a unique asset which could allow it to become a strategic part of the European economy: the mighty Dnipro river,’ the Dutch Ambassador Kees Klompenhouwer said opening the conference. To which Mrs. Ivanna Klympush-Tsintsadze, Deputy Prime Minister of Ukraine for European and Euro-Atlantic Integration, added: “In addition to unloading roads and railways, the development of inland water transport will promote the ecologization of transportation by reducing road transport emissions. It is also one of the priorities of the Association Agreement between Ukraine and the EU.”

In order to identify the prerequisites to develop the river Dnipro for transport, the Ministry and Dutch Embassy started the ‘Dnipro Development Initiative’ in September 2016, after the US Army Corps of Engineers did a study of the locks. The EIB, EBRD and EU delegation were quick to join, doing different prefeasibility studies that potential investors will need in order to consider investments. Also the World Bank’s transport program for Ukraine is contributing.

Deputy Minister of Infrastructure of Ukraine Nadya Kaznacheeva, explained: “One of the projects was the study of the feasibility of implementing a public-private partnership in the port of Kherson and the development of the lower part of the Dnieper. The development of a pre-feasibility study, completed in late March 2017, was undertaken by international companies Royal Haskoning, Rebel Group and others with the support of the World Bank Group. Any development plan begins with an ambitious goal. Therefore, the Ministry of Infrastructure and the Government of Ukraine have the goal: to create as soon as possible all necessary conditions for attracting private investors to the river and implementing the Dnipro River Development and other Inland Waterways Initiative “.

These studies are the stepping stone for investments in the river, that will boost the economy. In order to benefit in full and attract real investments, Ukraine needs to embrace the development of the river and make the necessary adjustments to the governance structure on the river.

“The priority tasks facing the Ministry of Infrastructure of Ukraine are the adoption of the Law on Inland Water Transport, the introduction of norms and standards of the European Union on the rivers of Ukraine, dredging of rivers and sustainable financing for the maintenance of river infrastructure. These successive steps will allow Ukraine to increase the volume of freight, attract world investors to the development of the river infrastructure of Ukraine, which in turn will strengthen the country’s economy, “said Victor Dovhan, Deputy Minister of Infrastructure of Ukraine.

According to the experts from The Netherlands and the European Union, the river is indispensable in a healthy multimodal transport network for Ukraine. To keep in pace with the agribusiness and facilitate economic growth, infrastructure and logistics need to be modernized. This is recognized by businesses that are already investing in the river, but also by the IFI’s. Both are ready to invest in the river, as soon as the government develops the right river management structure.

The way to get there rests on a very simple principle: freedom of navigation and creating a level playing field between modes of transport. By setting the governance conditions right, Ukraine can unleash the market forces that will enable the technical improvements of the river infrastructure that are long overdue. This does mean however, that Ukraine first needs to invest in the river itself,’ Dutch experts point out.

Eventually the Dnipro river can even become part of the Trans European Transport system, E40 Rhine-Danube-Black Sea, A7 Dnipro, Pripyat, Baltic Sea. This idea was supported by Mr. Daniel Jacques, of the European Commission in Brussels. With support of the EU’s neighborhood policy and the implementation of the Association Agreement, Ukraine’s biggest river can meet the international standards of navigation. The Dnipro as part of the European infrastructure, is then more than an idea. It is a dot on the horizon.


Why Investors Are Giving Ukraine a Second Chance

Ukraine today is open and transparent, but foreign investors are often taken aback by its challenges. While corruption and property rights are issues, any objective assessment must recognize the monumental strides the country has taken on these issues.

After three years of reforms, society is fatigued, and the mood is pessimistic. The current media narrative—that while some changes have taken place, reforms in the country have stalled—disregards the scale of achievements since 2014. Ukraine began building a truly democratic state only three years ago, after twenty-three years of failed kleptocratic leadership by its Soviet-era elites. The regime of former President Viktor Yanukovych’s industrial-scale plunder of the state treasury put Ukraine’s very survival in question after the Revolution of Dignity. Ukraine lost almost 30 percent of its GDP, 60 percent of the value of its currency, and 7 percent of its territory to an invading aggressor, with the treasury holding less than $15,000 in the country’s current account and barely enough gold reserves to cover one month’s worth of imports.

A Japanese business delegation explores an Antonov An-225 Mriya, the largest cargo aircraft in the world, in Kyiv, Ukraine, on March 15. Led by the Japan External Trade Organization, the delegation met with Minister of Economic Development and Trade Stepan Kubiv and representatives from the Ministries of Agrarian Policy and Food, Energy and Coal Industry, and Infrastructure, among others. Credit: UkraineInvest

But Ukraine turned things around. Within two years, the country had achieved macroeconomic, currency, and public debt stability; signed a free trade and Association Agreement with the European Union; decentralized power and funding to local governments; reformed its notoriously corrupt police force, public procurement system, and gas sector; and embarked on an overhaul of the financial and tax systems. And it continues to improve the business environment by scrapping outdated and job-killing regulations.

More has been done to reform the country in the past three years than in the previous twenty-three, resulting in 4.7 percent year-over-year economic growth in the fourth quarter of 2016. The International Monetary Fund recognized these achievements and signaled its confidence in the government’s course by releasing on April 3 the fourth installment of $1 billion under its four-year, $17.5 billion lending program.

Also on April 3, Prime Minister Volodymyr Groisman announced the next wave of far-reaching structural social and economic changes that will finally be felt by ordinary Ukrainians. They include the reform of the pension, health, and education systems, the creation of a market for agricultural land, and a new approach to privatizing state-owned enterprises.

Unfortunately, most Ukrainians have not yet felt the results of the initial changes, but investors have taken note. Ukraine’s western and central regions are now integrated into the European automobile supply chain through a large cluster of major international manufacturers profitably exporting auto parts to the EU, creating tens of thousands of jobs and investing hundreds of millions of euros into Ukraine’s economy. The country’s largest investor, ArcelorMittal, has announced a $400 million modernization of its steel works in eastern Ukraine this year, creating about 25,000 new jobs. UkraineInvest is currently supporting a number of global players in the agribusiness, infrastructure, innovation technology, energy, and energy efficiency sectors with planned investments this year.

While investors recognize the opportunities, they are also aware of the risks. The unprecedented social and economic transformation underway in Ukraine inevitably involves significant transaction costs. Although the EU’s Association Agreement assessment mission recently gave the government high marks for addressing the challenges of corruption, the country’s greatest challenge remains to strengthen the rule of law and transform the relics of the Soviet system that hinder business: the courts, the prokuratura, various security and law enforcement agencies, and numerous administrative bodies. While much remains to be done, a recent high-profile arrest shows that Ukraine’s new Western-backed anti-corruption institutions are beginning to succeed, and the current reform of the Supreme Court, involving civil society oversight, may facilitate the reform of the country’s judiciary as a whole.

The Groisman government understands that making transparency a permanent part of public administration is the key to eventually defeating corruption. The government’s earlier success with ProZorro, Ukraine’s internationally-acclaimed public procurement process, has been followed by the establishment of an online registration system for businesses and property, an e-declaration system outlining the assets of all public officials, and an automatic online VAT-refund registry.

Ukraine has a remarkable story to tell, but it needs more investment now. Experts have urged Ukraine’s international partners—the European Bank for Reconstruction and Development, the World Bank group, OPIC, and the European Investment Bank—to pledge $25 billion for a five-year infrastructure fund to spur investment in the public and private sectors. If these were buttressed by export credits from bilateral export credit and insurance agencies, such as the US Export-Import Bank and Hermes from Germany, the Ukrainian government could offer its citizens a brighter future faster. The Ukrainian people deserve nothing less.

Daniel Bilak is director of UkraineInvest and serves as the chief investment adviser to the Prime Minister of Ukraine.


EBRD Intends to Invest € 1 Billion in Ukraine in 2017

Şevki Acuner, Director of the European Bank for Reconstruction and Development (EBRD) for Ukraine, hopes that the bank will expand its investments in projects in Ukraine up to EUR 1 billion this year.

“Over the previous two years, we invested EUR 2.2 billion in total, which is about EUR 1 billion per year, so I expect that this year we will achieve the same level of investment,” said the Director in his interview with Interfax-Ukraine Agency.

Mr. Acuner reminded that, in 2016, EBRD’s total investment in Ukraine came up to nearly EUR 600 million, which was caused by Ukraine’s political instability in early 2016.

According to the EBRD Director for Ukraine, the Bank has ambitious investment plans for 2017. In his opinion, the security situation in Donbas will not influence the investment volumes. Thus, he informed that the EBRD intended to invest in subway construction in Kharkiv, development of Ukrainian power lines and energy industry, as well as to finance a number of port industry related projects in Ukraine.