• Українською
  • Infrastructure Reform

    The transport sector is among Ukraine's basic sectors of economy. The transport infrastructure has an extensive railway network, a well-developed highway network, sea and river ports (terminals), airports and a wide network of air destinations, freight and customs terminals. The future of the Ukrainian state and the well-being of its people depend on the operational performance and development of these services.

    Why change anything?

    It is important to reform Ukraine's transport infrastructure given its economic and geographic position on a strategic junction of transport routes between Europe and Asia and between the Baltic/Nordic countries and the Black Sea. Infrastructure is also critical for Ukraine's domestic development because it needs an effective, efficient, and continuous transport link among all of its regions. Infrastructure further plays a vital role for successful development of the country's economy.

    The Ukrainian transport sector needs good modernization, better effectiveness and competitiveness, and adaptation to European standards. In its current condition, it only meets basic individual and corporate transport needs in terms of scope rather than quality.

    The reform is ultimately aiming to create an effective transport system in Ukraine, meet people's need for safe and affordable transportation, improve conditions for doing business in the sector, full integration of the Ukrainian transport network in the Trans-European Transport Network.

    Key achievements

    What does the reform involve?

    The reform of the transport infrastructure is to create a safely operating and effective transport complex in Ukraine integrated in the global transport network, enable Ukraine to gain the status of a regional transport hub, meet people's transport needs and improve conditions for doing business so that the national economy can become competitive and effective.

    The infrastructure sector will be reformed on the basis of global trends inherent to the development of this sector:

    • using state-of-the-art ergonomic vehicles, the principles of multimodality, and «intelligent» transport systems;
    • using alternative fuels and green types of transport, prioritizing environmental protection;
    • increasing the percentage of container transportation, interoperability of transport systems within delivery chains;
    • accelerating passenger and freight delivery by using high-speed transport and improving logistics;
    • a growing role of low-cost air transport for direct interregional flights;
    • developing public transport;
    • encouraging the development of latest transport technologies and systems in Ukraine in partnership with global leaders;
    • engaging strategic investors and partners in the development of public–private partnership.

    1. Aviation industry

    Developing passenger and cargo airlines is among the Government's priorities given Ukraine's strategic geographic position and prospects as a regional and international logistic center and transport hub. Aviation reform aims to improve management, modernize the aviation infrastructure, increase its safety and harmonize it with EU standards. In their current condition, many Ukrainian airports are technically outdated, terminal facilities have low throughput, are unfit for the introduction of advanced technology and unaffordable for low-mobility categories of people.

    Another aspect is deregulation and liberalization of the aviation market. The Government strives to create conditions for an unhindered development of the sector, a wider market access for private operators (primarily, low-cost airlines), introduction of concession of airport terminals. Such steps are designed to improve the quality of transport services and create conditions for encouraging private investment in the development of terminal and airfield infrastructure.

    The national network of regional airports is to be renovated and developed by expanding terminal passenger and freight facilities with multi-modal technologies at the cost of their owners and through public–private partnership. The aim is to make air transport services affordable for people and Ukrainians more mobile both within and outside the country.

    Aviation reform is ultimately designed for Ukraine to gain the status of a transit country. This will be promoted by the signing and implementation of the Common Aviation Area Agreement with the EU. The introduction of a common aviation area is expected to have a qualitative and positive effect on the industry, increase passenger and freight flows between Ukraine and the EU, facilitate the realization of the country's transfer potential, and attract more budget airlines to the Ukrainian market.

    2. Railway industry

    The railroad remains one of the most popular modes of passenger and freight transport in Ukraine. However, the sector is afflicted with increased wear and tear of rolling stock, while JSC Ukrzaliznytsia, the state-owned rail company, is in need of qualitative change. So, the Government's effort in reforming the rail transport is focused on four key areas such as:

    • improving and harmonizing national laws with the rules of European laws;
    • conducting a structural reform of JSC Ukrzaliznytsia;
    • modernizing the rolling stock and developing rail routes;
    • introducing private traction.

    Regulatory changes made by the Government in the rail industry aim to make the market of rail transportation more transparent and open, enhance the governance of rail transport, clearly allocate the functions of regulation, management, and operations to government agencies and enterprises, support competition, and simplify administrative procedures.

    The structural reform of JSC Ukrzaliznytsia is to harmonize the company's structure with European rules, primarily by introducing an organizational and financial division into an infrastructure operator and a carrier inside the company. This division will improve transparency of financial flows inside the company, enhance governance, implement a foundational European principle in the rail industry — open access to infrastructure — and create conditions for the development of private rail carriers.

    Government investment should be increased and proper conditions created for private investments, which is impossible without adequate financial transparency in the industry, in order to modernize the rolling stock of the rail industry and develop rail routes. It is also important to introduce European rail safety standards.

    3. Sphere of automobile transport and road industry

    Ukrainian roads need large-scale major and minor repairs, modern mechanisms for monitoring the planning and quality of repair, and the use of funds allocated for these needs. To meet these challenges, the Government is implementing advanced management, monitoring, and control systems.

    Critical elements of the road industry reform include decentralizing motor roads management, transferring the management of local roads to local government agencies, introducing independent quality control of construction, renovation, repair, and operation of roads, creating a legal regulation of audit and safety assessment of roads through independent detailed systemic technical evaluation of design engineering solutions in respect of road components.

    Practiced in the EU, a clear allocation of areas of responsibility to central and local government agencies helps to use funds effectively, maintain and repair roads efficiently. Сlear allocation of areas of responsibility between central and local government agencies corresponds to European practices and helps to use funds effectively, as well as maintain and repair roads efficiently.

    The newly implemented electronic service Carrier eCabinet supports receiving important administrative services electronically round the clock and checking online whether carriers have licenses. An automated fare payment system (eTicket) has been introduced in Ternopil, Ivano-Frankivsk, Zhytomyr, Bila Tserkva and other cities. As an important element of encouraging the development of road transport, the Government also pursues a policy of liberalizing the transport market, promoting free and fair competition of its players, and introducing modern compliance methods and systems.

    The funding of repair, construction, and maintenance of the road network is increasingly decentralized. The State Road Fund, which started to work in 2018, will support steady funding of the road system and road traffic safety. The the National Transport Strategy of Ukraine 2030 (Drive Ukraine 2030) involves a consistent development of roads, construction of a national network of 10 highways on concession terms, and the development of international transport corridors (e.g. the international infrastructure project GО Highway).

    Unscrupulous and irresponsible freight transport market players are another specific issue of this industry. The movement of overloaded vehicles with weights exceeding established standards ruins road surfaces, especially in summer. This burning issue will be handled by increasing the number of mobile weight measurement facilities and introduction of modern Weight-in-Motion systems.

    These transformations are ultimately designed to increase road traffic safety, reduce death and injury rates on the road, gradually restore and improve operational characteristics of the road network, make vehicles more environmentally friendly, develop the electric car market, implement EU rules and standards, and integrate the Ukrainian transport system in the international European transport system.

    4. Maritime and inland waterways sectors

    Performance of sea and river ports, existing technology and facilities, correspondence of the management system and infrastructural development to contemporary international requirements underlie competitiveness of domestic transport globally. Demand for inland water transport services in Ukraine has been steadily increasing, and the Ukrainian maritime transport is a promising industry that boasts potential comparable to that of great maritime powers.

    However, there are obstacles to the development of Ukraine's river and maritime transport, including an imperfect regulatory framework, obsolete port infrastructure, and lack of modern fleet. Equipment available at Ukrainian ports is too energy-intensive, often with a high degree of wear and tear. Depths in some sea ports do not meet their official specifications, which prevents realization of the full potential of the existing coastal infrastructure. Meanwhile port charges are higher than in other Black Sea countries' ports, which makes them less appealing and slows down the growth in carriage volumes, including in transit. State-owned stevedoring companies are losing competition to private ones due to inflexible pricing, obsolete port facilities, and ineffective management.

    The effort to reform Ukraine's maritime and inland waterways industries is intended primarily to improve the regulatory framework, design a new tariff evaluation procedure based on the actual structure of expenses, and encourage massive private investment in sea and river port terminals (among other things, through public-private partnership).

    An important component of reform in this industry is the Government's gradual abandonment from the state stevedoring activity and concession of state-owned stevedoring companies in sea ports. This step will help to modernize port infrastructure and achieve better performance.

    It is equally important to draft and approve a methodology for calculating and revising port charge rates based on the structure and destinations of freight flows. This will make commercial sea ports more appealing to users of transport services and create a guaranteed source of compensation of the cost of renovation and development of port infrastructure. The policy of sustainable funding of the infrastructure of inland waterways is to be revised in order to encourage the development of inland water transport.

    The Government's priorities also include modernizing port facilities, ensuring that actual depths in Ukraine's sea ports meet established standards, repairing and upgrading Ukraine's water navigation locks. Regulatory and technical changes are also necessary to boost freight and passenger transport on Ukraine's navigable rivers, primarily the Dnipro.

    What has the reform changed already?

    The Government has approved the National Transport Strategy of Ukraine (Drive Ukraine 2030). Its implementation should help Ukraine to turn into a developed, high-technology, and innovative country by developing its transport and infrastructure and using advanced technologies.

    • The air transport market has been liberalized and leading global airlines attracted, including Ryanair, Europe's largest low-cost airline. The Ukrainian air transport market has grown 25–30% annually for the past three years in a row. The aviation industry is gradually integrating into the EU internal market and Common Aviation Area. Passenger flows of Ukrainian airports exceeded 20 mln people in 2018. 28 new international destinations were introduced for foreign airlines, and 20 international and domestic destinations for Ukrainian airlines. Development of regional airports has started, where those in Mykolaiv and Uzhhorod have already resumed operations, and a new runway is about to be completed in Odesa Airport. The creation of the international multimodal transport hub in Bila Tserkva Airport has been initiated.
    • A number of large national projects have been carried out on the rail infrastructure. Beskydy Tunnel has been completed and commissioned, substantially increasing the throughput of Pan-European International Transport Corridor No. 5 and shortening rail travel time between Ukraine and the EU. Kyiv Boryspil Express, a rail link between Kyiv and Boryspil International Airport, has also been completed and commissioned. The Government is actively developing rail links between Ukraine and the EU: new rail destinations were opened in 2018 joining Ukraine and Poland, Hungary, and the Baltic countries. European destinations enjoy the greatest popularity among Ukrainians.
    • Rolling stock and the rail system in general are undergoing intensive modernization. In 2018, for the first time in 25 years, 3.4 thousand freight cars were purchased and manufactured by domestic production facilities, 118 passenger cars upgraded, and 115 locomotives fitted out. In addition, 15 modern engines were delivered and 15 more arrived in early 2019 under a contract with General Electric (USA). It is for the first time in 10 years that the Ukrainian Railways got new locomotives.
    • Professional members have been appointed to independent supervisory boards of JSC Ukrzaliznytsia, JSC Ukrposhta [Ukrainian Postal Service], and SOE Ukrainian Sea Ports Authority. These state-owned enterprises are in the process of liberalization and turnaround.
    • A number of large national projects have been carried out on the road infrastructure. The State Road Fund started to work. UAH 23.8 bn was allocated in 2018 to renovate national roads. A record 3,800 km of roads were repaired. A total of 7,000 roads has been renovated since 2016. The length of repaired and built common roads has been largest in the past 14 years owing to growing government investment.
    • Ukravtodor, the State Agency of Automobile Roads of Ukraine, has been decentralized. Regions got a record-high funding of over UAH 11.5 bn for automobile roads and responsibility for them.
    • The approach to quality control of roadworks has changed. All contracts require a guarantee of at least 5 years for medium minor repair and 10 years for major repair starting from 2018. In the event of any defects, the contractor has to remove them at his own cost.
    • The Special-Purpose Government Program for the Development of Principal Public Motor Roads 2018–2022 and the Government Program for Improved Road Safety 2020 have been approved.
    • The implementation of GО Highway, a large international infrastructure project designed to link the ports of the Black and Baltic Seas and become part of the Trans-European Transport Network, has started. This project involves large-scale repair of road infrastructure and the creation of an international transport corridor linking Ukraine's western border through the country's central regions to Odesa and Mykolaiv ports. The key stage is scheduled for 2019, and the project is to be completed in 2020.
    • A study and implementation of a fifth generation high-speed transport and Hyperloop project in Ukraine and the creation of the Transport Innovation Center have been initiated. The Ministry of Infrastructure of Ukraine and Hyperloop Transportation Technologies signed a Memorandum of Cooperation in the area of Hyperloop vacuum train technologies. The National Academy of Sciences of Ukraine confirms that implementation of the Hyperloop technology has good prospects in Ukraine.
    • Port charges were reduced by 20% with effect from January 1, 2018, offering a positive multiplier effect of making logistics cheaper, increasing freight transshipment at Ukrainian ports, and improving their competitiveness.
    • The State Service of Maritime and River Transport of Ukraine (the Maritime Administration) has been created and started functioning. MarAd’s main objective is to implement public policy in the area of maritime and river transport safety.
    • The audit by the International Maritime Organization was successfully completed.
    • Ukraine has been integrated into the Trans-European Transport Network (TEN-T) and became an important participant in the building of a strategic Europe–Asia transport corridor.
    • 39 Ukrainian infrastructure projects covered by Drive Ukraine 2030 were included in the Indicative Investment Action Plan for the Trans-European Transport Network (TEN-T). The Plan was drafted by the European Commission and World Bank to develop the transport link in the Eastern Partnership countries.

    Goals and objectives for the current year

    • The Government's 2019 priorities for infrastructure reform include:
    • funding UAH 55 bn towards road renovation;
    • continuing the renovation and electrification of the railroad and rolling stock.
    • continuing action to improve traffic safety, including strong implementation of the 500-500-1000 Program (the government program for construction of 500 ring roads, 500 refuge islands, and 1,000 pedestrian crossings) as part of development of the road system;
    • setting up lighting facilities for pedestrian crossings;
    • carrying out a pilot project of construction of weigh-in-motion sites;
    • continuing the implementation of pilot projects for concession of state stevedoring companies, conducting tenders and awarding the first concession contracts for Olvia and Kherson ports, drafting a concept memo and a feasibility study for the concession of Yuzhnyi port;
    • corporatization of SOE Ukrainian Sea Ports Authority — the strategic and largest enterprise in the maritime sector;
    • drafting the Methodology for calculation of port fees rates and the Procedure for Compensation of Investment in Strategic Facilities of Port Infrastructure.
    • increasing the percentage of regional airports in overall air transport figures by expanding the presence of low-cost airlines in Ukraine;
    • developing an international multimodal transport hub on the basis of Bila Tserkva Airport by opening an international checkpoint at the Airport and starting international air freight transportation;
    • launching Terminal F at Boryspil Airport and commencing construction of a bus station;
    • computerizing rural offices of PJSC Ukrposhta (40% offices to be computerized by end of the year) and increasing international deliveries.

    The reform is implemented by

    the Ministry of Infrastructure of Ukraine, the Ministry of Economic Development and Trade of Ukraine, the Ministry of Finance of Ukraine, the Ministry of Regional Development, Construction, Housing, and Utilities of Ukraine, the Ministry of Ecology and Natural Resources of Ukraine, the State Aviation Administration, the State Service of Ukraine for Transport Safety, the State Agency of Automobile Roads of Ukraine (Ukravtodor), the State Agency for Infrastructure Projects of Ukraine, the VRU [Verkhovna Rada of Ukraine] Transport Committee, the VRU Information and Communications Committee, PJSC Ukrzaliznytsia, PJSC Ukrposhta, SOE Ukrainian Sea Ports Authority.

    Key documents and useful links