Infrastructure Reform | Cabinet of Ministers of Ukraine

Infrastructure Reform

The reform is aimed to create and ensure the safe operation of an efficient transport complex in Ukraine integrated into the global transport network, to make Ukraine a regional transport hub, to meet public transportation needs and to improve business conditions for maintaining competitiveness and efficiency of the national economy.

Transportation is one of the key sectors of Ukraine’s economy. The transport infrastructure includes a widespread railway network, a well-developed road system, sea and river ports (terminals), airports and an extensive air service, freight and customs terminals. The future of the Ukrainian state and the well-being of its people depend on the operation and development of this sector.

Key Results

Implementation of large-scale infrastructure projects:

The GO Highway project (launched in 2017) is an international project aimed at building a modern highway connecting the ports of the Baltic Sea and the Black Sea. The total length of the road corridor is 1,746 km. With planned UAH 4 bln and 99.9 km, works worth UAH 3 bln 901.1 mln were performed in 2019, in particular 99% in Vinnytsia Region, 98% in Kyiv Region, 100% in Lviv Region, 93% in Odesa Region, 70% in Ternopil Region, 79% in Khmelnytskyi Region, and 100% in Cherkasy Region, due to cost saving in the course of work. 106.4 km of roads have been put into operation.
The Volnovakha—Komysh—Zoria railway section reconstruction project has considerable enhanced cargo transportation in the strategic Mariupol direction: the capacity of the Volnovakha—Komysh—Zoria section has increased from 20 pairs of trains per day in 2016 to 49 pairs of trains in 2019, including 42 freight trains, 5 passenger trains and 2 suburban trains.

Railways

In its Resolution No. 1043 of 04 December 2019, the Cabinet of Ministers of Ukraine approved the implementation of a pilot project opening access to certain public railway routes for private locomotives. Once implemented this project will enable testing the future railway carrier market on small sections of public railways with minimal passenger flow thus reducing the traffic safety risks.
The Cabinet of Ministers of Ukraine approved the Railway Transport Reform Action Plan in its Order No. 1411 dated 27 December 2019.

Aviation

In 2019, the passenger throughput of Ukrainian airports was 24 mln persons.
The low-cost carrier share in the international service has increased by 30%.
In terms of new international routes, 29 have been opened by foreign airlines and 4 by Ukrainian air carriers.

Road infrastructure and traffic

UAH 34.8 bln has been allocated from the state budget for the reconstruction of public roads.
Smart transport systems have been introduced, including automatic in-motion vehicle weighing systems WIM 1 (M06), WIM 2 (M-06), WIM 3 (M-03), WIM 6 (M-07) which have been put into operation in the configuration and initial data collection mode; and the data processing centre was created and has been working in the test mode since 22 November 2019 processing data sent from these systems.

Marine and river sector

Draft law “On Inland Water Transport” (No. 1182-1-d) has been developed and the Verkhovna Rada of Ukraine passed it in a first reading on 24 April 2020.

Why change anything?

The reform of Ukraine’s transport infrastructure is vital in the context of the country’s economic and geographical situation, strategic position at the intersection of Europe/Asia transport routes and between Baltic/Scandinavian and the Black Sea regions. The infrastructure is also extremely important for Ukraine’s internal development to meet the need for efficient, high-quality, regular transport links between all its regions. The infrastructure is key for the successful development of the country’s economy.

The Ukrainian transport industry requires proper modernisation, upgrading, enhancing competitiveness and adapting to European standards.

The ultimate goal of the reform is to create an efficient transport system in Ukraine, to meet the public need for safe and affordable transportation, to improve the environment for doing business in the transport sector, and to integrate the Ukrainian national transport network into the Trans-European Transport Network.

What does the reform include?

The infrastructure sector reform will be implemented with due regard to the global industry’s development trends:

using high-tech, ergonomic vehicles, multimodality principles and smart transport systems;
using of alternative fuels, green vehicles, partial refocusing of carriage service from road to inland waterway and rail transport, prioritising environmental protection;
increasing container traffic, achieving transport system interoperability in supply chains;
faster passenger and cargo transportation by using high-speed means of transport and improving logistics;
raising the profile of cheap air transportation for direct interregional connection;
developing the public transport system;
promoting the development of high-end transport technology and systems in Ukraine in partnership with the world’s leading companies;
attracting strategic investors and partners for the development of public-private partnership.

1. Aviation sector

The development of passenger and cargo aviation is one of the Government’s priorities in the context of Ukraine’s strategic geographical position and opportunities as a regional and international logistics centre and transport hub.

The aviation industry reform is aimed at enhancing of management, updating the airport infrastructure, improving security and aligning the sector with the international and European standards.

Many of Ukrainian airports are currently obsolete, with low-capacity terminal systems not suitable for new technology and inaccessible to low-mobility groups.

Another goal of the reform is to deregulate and liberalise the aviation market — the Government seeks to create conditions for the industry’s free development, better market access for private operators (primarily low-cost carriers), and the implementation of airport terminal concession process. Such measures are aimed at improving the quality of transport service, attracting private investments for the development of terminal and airfield infrastructure.

Regional airports will be renovated and upgraded by the construction of multimodal passenger and cargo terminal systems at the expense of their owners on the terms of public-private partnership to offer affordable aviation services for people and increase mobility of Ukrainians both inside the country and beyond.

The ultimate goal of the aviation industry reform is to make Ukraine a transit country. This will be facilitated by the signature and implementation of the European Common Aviation Area (ECAA) agreement with the EU. The common aviation area is expected to have positive effects on the industry, increase passenger and freight traffic between Ukraine and the EU, unlock the country’s transfer potential, attract low-cost carriers to the Ukrainian market.

2. Railway sector

The railway system remains one of the most popular means of passenger and cargo transportation in Ukraine. However, much of the rolling stock is worn down and the operational processes of Ukrzaliznytsia JSC, a state-owned railway company, require meaningful changes.

For these reasons, the Government’s efforts to reform the railway sector are focused on four main areas:

improving and harmonising Ukrainian legislation with the EU norms, allowing the use of private locomotives;
restructuring of Ukrzaliznytsia JSC;
upgrading the rolling stock and developing railway routes;
implementing the European railway safety standards.

Implementing the regulatory changes in the railway sector the Government seeks to build modern market relations in the railway transport area and strengthen its competitiveness, improve governance and regulation of the industry, increase the quality of railway services. The railway industry reform virtually introduces a new railway market model similar to those existing in the EU.

The purpose of restructuring of Ukrzaliznytsia JSC is to bring the company’s structure in line with EU standards primarily by separating both organisationally and financially its functions of an infrastructure operator from those of a carrier. This separation will ensure the transparency of cash flow in the company, improve the quality of management, implement one of the key EU railway transport principles, i.e. fair access to infrastructure, and create conditions for the development of private railway undertakings.

Upgraded railway rolling stock and better development of railway routes should ensure an increase in public investment and suitable environment for private investment, the situation which is impossible without adequate financial transparency. Another important goal is the implementation of the EU railway safety standards.

The reform includes the formation of the railway safety governance system in accordance with the provisions of the EU legislation to be implemented under the Association Agreement, which will help improve transport safety in a highly competitive railway market.

3. Road infrastructure and traffic sector

Ukrainian roads require full-scale major and current repairs, and modern planning, renovation quality and related expenditure control mechanisms. The Government is implementing the latest management, monitoring and control systems to address these issues.

The road reform includes vital elements such as decentralisation of road management, transfer of local roads under the control of local executive bodies, independent quality control of road construction, reconstruction, repair and operation, legal audit and road safety audits by way of detailed, independent, systemic technical assessments of engineering solutions related to highway components.

The EU practices a clear division of central and local authorities’ functions to ensure efficient management of funds and proper maintenance and repair of roads.

Electronic services for road carriers enable to obtain important administrative services in electronic form 24 hours a day, and to check carrier licences online. A number of cities have already implemented an automated fare payment system (e-ticket). There are some other important elements of stimulating the development of road transport, including the implementation by the Government of its transport service market liberalisation policy, ensuring free and fair competition between market players and introducing best practices for control of compliance.

Funding of repairs and construction works and maintenance of the road network is being decentralised. In 2018, a state road fund was created to ensure steady funding of the road infrastructure and safety. Drive Ukraine 2030, the national transport strategy to 2030, includes the integrated development of roads, construction of a national network of highways with 10 high-speed concession highways, and expansion of international transport corridors (such as GO Highway international infrastructure project).

Unscrupulous and irresponsible trucking market actors is the industry’s pressing issue. Motor vehicles exceeding the permissible maximum laden mass cause the destruction of pavement surfacing, particularly in summer. This grave problem is expected to be solved by increasing the number of mobile mass-size evaluation units and introducing the latest weight-in-motion (WiM) systems.

The ultimate goals of these transformations are to improve traffic safety, reduce road mortality and injuries, gradually restore and enhance the performance of the road network, promote vehicle sustainability, develop the electric vehicle market, implement the EU norms and standards, and integrate Ukrainian transport system into the international transport system.

4. Sea and river transport sector

The competitiveness of the Ukrainian transport system in the global market is conditioned upon the efficiency of the sea and river ports, their technologies and equipment, and consistency of the management system and the infrastructure development with current international requirements. Demand for inland waterway transport in Ukraine is growing steadily, and the Ukrainian maritime transport system is a promising industry with some of the widest opportunities among maritime countries.

At the same time, the river and sea transport development in Ukraine is hampered by the deficient legal framework, outdated port infrastructure and the lack of a modern fleet. The existing equipment of Ukrainian ports is highly energy-intensive, often with a significant degree of wear. Actual depth parameters for some seaports are inconsistent with those recorded in the specifications preventing from using the full potential of the existing coastal infrastructure. However, fees are higher than those charged in the ports of other Black Sea countries which means significantly lower appeal of Ukrainian ports and slower increase in traffic, including through transportation. State-owned stevedoring companies cannot compete with private businesses due to rigid tariffs setting, obsolete port facilities and poor management.

The efforts taken as part of the Ukrainian river and maritime sector reform are primarily aimed at improving the regulatory framework, developing a new tariff setting process based on actual cost structure, ensuring active private investments in the development of sea and river port terminals (in particular, public-private partnership).

An important goal of the industry reform is to gradually refuse from stevedoring activities and to grant concessions for operating state-run stevedoring companies in seaports. This step will help update the port infrastructure and increase performance.

It is also important to develop and approve the methodology for calculating and reviewing port duties with regard to cargo flow structure and routes enhancing the appeal of sea trade ports for transport service users and creating a warranted source of recovery of port infrastructure renovation and development costs. It is also planned to review the inland waterway infrastructure sustainable funding policy to promote the development of inland water transport.

The Government’s priorities include technological upgrading of port facilities, recording actual Ukrainian seaport depth parameters, repairing and updating shipping locks in Ukraine. Regulatory and technological changes are also required to help revive freight and passenger traffic on Ukrainian navigable rivers, particularly the Dnipro.

What are the reform achievements to date?

The Government has approved Drive Ukraine 2030, the National Transport Strategy to 2030. This Strategy should contribute to Ukraine’s transformation into a developed, technologically advanced and innovative country through the enhancement of transport and infrastructure, and the use of high-end technology.

Key accomplishments

The air transportation market has been liberalised by allowing the world’s leading airlines, including Ryanair, Europe’s largest low-cost carrier. The Ukrainian air transportation market has been showing growth by 25—30% for four consecutive years. The aviation industry is being gradually integrated into the EU internal market and the common aviation area. The passenger traffic of Ukrainian airports was more than 24 mln persons in 2019. 29 new international routes have been opened by foreign airlines and 4 by Ukrainian air carriers. Regional airports continue to develop: a new runway is being completed at Odessa Airport, reconstruction has been commenced at Dnipro Airport, and design and construction of a new Mukachevo Airport have been started.
A large national railway infrastructure project has been implemented. The reconstruction of the Volnovakha—Komysh—Zoria section has been completed and significantly increased the capacity in the strategic Mariupol direction. The Government is actively promoting railway connection between Ukraine and the EU. In 2016—2019, state control process was tested in moving Intercity+ trains on Kyiv—Lviv—Przemyśl route in the railway section between Lviv and Mostyska-2 stations. The test was successful, so in its Order No. 1319 dated 18 December 2019 the Cabinet of Ministers of Ukraine opened a border checkpoint at Lviv Station thereby implementing the border and customs control processes previously tested and reducing travelling time for passengers by two hours. The European destinations have become much more popular among Ukrainians.
Professional members have been appointed to independent supervisory boards of Ukrzaliznytsia JSC, Ukrposhta JSC and State-owned Enterprise “Seaport Administration of Ukraine”. These state-owned companies are being liberalised and restructured.
A number of large national road infrastructure projects have been completed. The state road fund has been established. The following allocations were made for the renovation of national roads: UAH 23.8 bln in 2018, UAH 34.8 bln in 2019, and UAH 38,01 bln in 2020. The length of repaired and newly constructed public roads is the highest over the past 14 years due to increased public investments.
Ukravtodor has been decentralised. Unprecedented funding has been provided to regional communities: more than UAH 11.5 bln in 2018; more than UAH 14.6 bln in 2019, and more than UAH 22.1 bln in 2020, all for highways and responsibility for their maintenance.
The approach to inspecting the quality of road works has been changed. Starting from 2018, all contracts include a 5-year warranty for medium repairs and a 10-year warranty for major repairs. Any deficiencies must be cured by contractors at their own expense.
The Government has approved the Target Economic Programme for the Development of Public Roads of National Importance to 2018—2022 and the State Road Safety Improvement Plan to 2020.
GO Highway, a large international infrastructure project designed to connect the Black Sea and the Baltic Sea ports and integrate Ukraine into the Trans-European Transport Network (TEN-T), is currently ongoing. The project includes large-scale repairs of road infrastructure and building an international transport corridor from the western border of Ukraine through the country’s central regions to the ports of Odesa and Mykolaiv.
The State Maritime and River Transport Service of Ukraine (Maritime Administration) has been established and is properly operating. The main task of the Maritime Administration is to implement the maritime and river transport safety policy.
Ukraine has been successfully audited by the International Maritime Organization.
The pilot concession bidding has been held in the seaport of Kherson and the Specialised Sea Port “Olvia”.
Ukraine has been included in the Trans-European Transport Network (TEN-T) and is becoming an important actor in the development of a strategic transport corridor between Europe and Asia.
A number of Ukrainian infrastructure projects within Drive Ukraine 2030 are included in the Indicative TEN-T Investment Action Plan. The plan was prepared by the European Commission and the World Bank to develop transport links in the Eastern Partnership countries.

Goals and Objectives

The Government’s infrastructure reform priorities for 2020:

To implement an experimental project opening access for private locomotives to certain public railway routes.
To restructure Ukrzaliznytsia JSC, in particular to separate infrastructure management from freight and passenger transportation.
To design and introduce a geographic information system (GIS) for allocation of railway infrastructure capacity.
To continue upgrading railway rolling stock and reduce the deficit of traction vehicles.
To promote the development of air transportation within Ukraine.
To draw up the State Flight Safety Programme to minimise human, material, financial, environmental and social loss.
To ensure consistency of Ukrainian aviation safety standards with the international norms.
To continue upgrading the existing airports and the construction of new airports.
To perform major repairs of shipping locks of the Dnipro River System of Dams, including Kyiv, Kaniv, Dniprodzerzhynsk and Kakhovka shipping locks.
To improve the Ukrainian Seaport Register Maintaining Procedure by streamlining verification of the data and documents required for entering a business entity in the Ukrainian Seaport Register.
To implement the highest international labour standards in Ukraine, including in human rights, sailor career development, social security, sailor working conditions, occupational safety, etc.
To implement processes common for Ukraine and the EU to facilitate access of sailors to the Member States for shore leave, transit, transfer to another vessel or repatriation purposes.
To implement the international norms into the national laws regulating merchant marine, sea and river transport and shipping safety, and to ensure control and management by Ukraine, as a port state and flag state, of ships’ ballast water and sediments to prevent, reduce or eliminate the transfer of harmful aquatic organisms and pathogens.
To improve the quality of road freight services, reduce the number of accidents involving trucks, enhance road transport safety by licensing freight services and setting licensing terms in line with European best practices.
To regulate the provision of socially significant services related to passenger transportation by road, urban electric transport and suburban railway transport.
To deregulate and unshadow the taxi market and to ensure the provision of quality and safe services for the transportation of passengers by taxi and vehicles for hire.
To improve the transport and operational condition of nearly 1.5 thousand km of public roads of national importance towards the international and national transport corridors, at the approaches to large cities and on high-density traffic roads.
To improve the road tolling scheme for vehicles and other self-propelled machines and mechanisms with mass or dimensions exceeding the maximum permissible limits.
To ensure proper preparation and conduct of road safety auditor and road safety inspector certification.
To set the legal grounds for defining the scope of administrative and criminal liability of a road safety auditor and a person inspecting road safety during audits/road safety inspections.
To promote the development of urban electric transport with, the purpose of improving the quality of public services in cities by upgrading trams, trolleybuses, subway cars and city infrastructure.
To achieve significant reduction in road traffic death rates, enhance road safety and road users’ discipline, lower accident risks in the state road network, reduce the number and severity of road accidents.
To launch automatic WIM (Weigh-in-Motion) systems.
To run an automatic authorisation process for travelling in foreign countries during the international carriage of goods by road.
To expand the network of mobile postal operator offices which provide a full range of postal services.
To ensuring the use of the national postal operator infrastructure to provide rural and remote communities with access to financial services.
To promote competition in the postal service industry.