As the largest country in Europe, Ukraine’s infrastructure and connectivity present major challenges and huge opportunities. While its infrastructure has long been neglected by past governments, the 2014 revolution triggered a series of changes that seek to enhance the country’s infrastructure to the tune of around €43 billion. International partners are invited to help bring these goals to fruition, with opportunities available in areas from railway operation, seaport concessions, aviation and road construction. In this interview, Infrastructure Minister Volodymyr Omelyan gives an overview of what’s been done so far, what’s yet to come, and how it will all lead to Ukraine establishing itself as a major European transport hub
You have been Ukraine’s minister of infrastructure since April 2016. What have been your most significant challenges in this post so far?
When I joined the office in 2016, everyone was telling me that Ukraine’s future was bleak, there was no hope. I never believed those statements and I did very controversial things, but I’m happy we did it right. The challenges, first of all, were oligarchs that monopolized the economy and infrastructure. We changed that practice. We showed everyone that the best way out of the situation was through competition. If Ukrainian companies are competing all over the world, it’s much better for them to make a really good profit and to progress as companies. We started with aviation. In 2016, it was not a very promising industry. All the airports were about to close, there was only one company on the market and tickets were extremely expensive. We simplified the rules. We made it very transparent for any company from anywhere in the world to apply for international routes to and from Ukraine. From there, companies began to believe in Ukraine and we have doubled the passenger flow since 2016. We managed to open another six airports and increase the number of operational airports in Ukraine by 12 in 2018. Over the next five years, we expect that the number will reach 25. Our strategy has worked very well and since 2018, we have seen the entrance of the biggest low-cost carrier in Europe – Ryanair. Not every EU member government is happy with Ryanair, but we are happy and the Ukrainian government was the biggest supporter because it changes the picture totally as airline tickets become very cheap. Let’s say in 2016, a flight from Berlin to Kiev cost $500-$600, but now it can cost around $20. This is a change we present to Ukrainians and also to foreigners, tourists and businesses. Our goal is to open Ukraine for everybody. A Brussels Airlines direct flight has also just opened, which was a personal goal of mine to get a direct flight to the capital of United Europe. Ukrainians used to fly to Moscow frequently before the revolution, but I think the big European cities are now more important. Returning the trust of foreign investors was another challenge. Companies that were present at that time in Ukraine believed in the potential and understood the market is booming, especially in the agriculture and IT industries. But how to tackle our infrastructure issues was a big question mark. So, we did the same as we did with aviation, we made it straightforward and simple, ensuring that all new investments are protected. There are no bribes or corruption, and the government will take your hand to lead you through the bureaucratic barriers which are still present in Ukraine.
What about the country’s roads and railways?
We also understood very quickly that we should focus on our road network. Ukrainian road capacity and shape was always neglected by the government. It was another inheritance of our Soviet past that there were no roads and it was OK. So, we established our road state fund and allocated more than $2 billion each year for road reconstruction. Another huge challenge we are still facing is Ukrainian Railways. It’s one of the biggest railways in the world. It covers the whole of Ukraine and the queue of clients to get their goods transported is huge. We would like to have good cooperation with Deutsche Bank here as we believe it is one of the best strategic partners we could have. In 2018 we signed the biggest contract in Eastern Europe with General Electric – $1 billion to supply and produce diesel locomotives in Ukraine. It’s only the beginning of the story. Right now, we are looking for a new partner in electric locomotive production. Another big issue is our seaports. We are very much focused on concession all of our ports in Ukraine and the one in Vietnam. We believe that the best option is to keep them as state property but to concession them to global companies for 25 years or more.
In September you traveled to Germany, where you met with the German minister and state secretary for economic affairs and energy, as well as the state secretary at the Federal Ministry of Transport and Digital Infrastructure. What were the main topics of discussion during those meetings?
We talked about geopolitical subjects, which I’m not ready to comment on, but it was a very open and frank discussion. We do consider our German friends as reliable partners. We also discussed the opportunity to expand German businesses in Ukraine, and we see huge potential in Ukrainian Railways, seaports and aviation. We also talked seriously about increasing Ukrainian exports to Germany, which is already happening. We do believe that Ukraine should be incorporated into the European Union. Maybe today it’s not the right time to say that we will be an EU member in 2019, but we should have Ukraine cooperating at least economically at the full scale. We are very happy with the free trade zone with the European Union and it’s only the beginning of the story. I also raised the issue of the development of the electric vehicle (EV) market in Ukraine. Each German car produced in Europe has some spare parts coming from Ukraine. It’s a great eye-opening story for all my German colleagues. Right now, we are establishing the best legislation in the world for EV production; we have the largest reserves of lithium in Europe, and I do believe that German carmakers should be here in Ukraine to benefit from the full cycle of production. We also discussed the possibility of enlarging Germany’s financial support of Ukraine, but the key issue is to successfully implement Chancellor Merkel’s loan, which was granted to Ukraine in 2014.
How would you evaluate German-Ukraine-EU cooperation in terms of Ukraine infrastructure development since the 2014 revolution?
Whenever I travel to a new EU member state, such as Poland, Hungary and so on, I’m always fascinated by the quality of new highways, railway stations and airports. I always see a small plaque on each building saying it was thanks to the European Commission. We are focusing all of our efforts on getting the best mobility with the European Union. I believe that 80 percent of all problems we face today are due to the fact that Ukraine was blocked by Russia for decades and centuries and torn away from the European world. Right now, we are coming back to our origins. I always say that the first train and flights should go to the EU, and our priority highways should be connected to the EU. It was really exciting for everyone last year when we launched a new railway connection to Poland. It’s a great story because we had more than 92 percent of all tickets sold beforehand and it runs full. This year we launched another one to Budapest and next year to Slovakia and the Czech Republic. This year we also launched a new train connecting Kyiv with the Baltic States. So there are many things to do, but we would like to have a European Commission that is much more active in this endeavor because we cannot do it only with our own money or loans. In terms of a better Trans-European Transport Networks (TEN-T) projects for the whole of Europe, we are very grateful that the European Commission recently said that their foreign investment plan is also open to Ukraine. We believe that having a high mobility of citizens and business will boost the economy. Right now, the main obstacle is logistics.
How could modernized and enhanced transport infrastructure in Ukraine benefit the EU and Germany in particular?
We see that economic cooperation between the EU and China is booming. Especially with the recent signs of a trade war between the US and China. We have seen an exponential increase in the number of trains coming from China to the EU. I just talked to an Austrian railways colleague who believes that the number of containers coming from China will double by 2020. There are many routes, but if you talk about trains, there is only one route coming from China: through Kazakhstan to Russia, then Belarus, and the EU. We are convinced that that could cause some problems, as we saw when Russia decided to stop the supply of gas. Our Chinese colleagues understood that and since 2018, we have had an increasing number of trains coming through Ukraine to the EU. We do foresee that Ukraine will become a hub between Asia and the European Union. This would be about connecting different areas in Asia; not only China’s Silk Road but also linking with the Baltic States, Turkey and Persian Gulf States. So there are a lot of new upcoming opportunities, and we should be ready for that in terms of logistics. We made a transport strategy for Ukraine by 2030 called Drive Ukraine 2030. It’s another clear signal for investors and for big and midsized businesses that we are very much committed to our goals. We will make this happen regardless of elections and political changes, which is natural because politicians come and go, but the policy will remain the same.
Speaking to potential German investors or companies, what opportunities exist to take part in Ukraine’s infrastructure development?
There are many incentives and opportunities. It’s not only passenger traffic but also cargo. If we talk about aviation, right now we are calling on EU investors to come and help us build a cargo terminal. We evaluate its capacity at more than 100,000 tonnes per year. If we’re talking about Ukrainian Railways, I’m a strong supporter of private and state competition. I think we should keep the infrastructure as state-owned but locomotives, passenger trains and freight trains should be operated by both the state and private companies. It will make it cheaper, more reliable and more transparent. Seaports are another huge opportunity. I was really impressed when we only started concessioning our two midsized seaports, whose tenders will be announced soon. We have had more than 20 bids already from world known companies around the world – a sign they’re ready to come and invest. We can offer the same as regards building concessional toll roads in Ukraine, but I would also welcome German companies entering the road construction market in Ukraine. Next year, we will have more than $2 billion in spending for road construction and it will be more than $4 billion up to 2020. Come here, win the tender and show German quality in Ukraine. I will also mention that we recently agreed with the European Commission that Ukraine will become a testing ground for transport innovations for the European Union. So any new modes of transport and innovations will be physically tested here in Ukraine; and if they’re successful, they’ll be spread all over Europe. I think it’s a good idea for German companies to come to Ukraine and be one step ahead of the game.
Please tell me more about the ProZorro procurement system and other anti-corruption measures around infrastructure?
One of the legends about Ukraine is that everything is very complicated. If you enter the Ukrainian market, you will face problems, complications and business will be bad. We changed the picture with the implementation of the ProZorro system. Before the money was going into the pockets of dishonest people, and I’ve very proud to say we’ve saved more than €300 million with new, transparent IT solutions. Fighting corruption is not the only goal; we also wanted to make it simple – but if you make it simple, you avoid corruption. We’ve also developed a new law on concessions. This law does not only fully correspond with best European practices, but it also secures all investments under international courts. If you enter the Ukrainian market to produce electric vehicles, for example, and have a problem, you will be able to choose not to go to a Ukrainian court, but to a German court, a British court or any court in the world. Concerning other systems right now, we pay special attention to IT solutions and IT services. In 2017, we established a digital infrastructure department, and we would like to put everything online. So, any kind of investor or business wouldn’t have to interact with bureaucrats in person; they can simply fill out the application from their office, send it by email and get a reply within 24 hours. “One click” approach will make life and business much more comfortable.
Earlier this year, you announced that the EU will help finance the €2 billion Go Highway project, which will connect four Black Sea ports in southern Ukraine and two Baltic Sea ports in northern Poland. What are the benefits of this plan?
It’s a great opportunity. We believe that since the war with Russia, transport routes in Ukraine have changed. Before it was a direct East-West connection, and now there is more of an emphasis on South-North. We hope to have this highway fully operational by 2021. For access of goods and passengers, it’s a great choice because you don’t have another opportunity to get from the Baltic to the Black Sea even through EU member states. I believe it will become one of the main routes for the European continent very soon. From a political, business, cultural and military point of view, it’s very important to have both seas connected within hours, and not days.
What final message would you like to send to readers of Die Welt?
Ukraine was always considered a high-risk but high-return country. But right now, risk is much lower but the return is still very high. Therefore, I would simply urge big foreign companies to think seriously about Ukraine. It’s not a black spot on the map anymore. Major companies from the United States and Europe are already here, and there is not a single big company which has left the market. If you’re in Ukraine, you have a huge opportunity to feed your business profits and help Ukraine change.