The market of cargo river transportation has a potential to triple its volume by 2020

12-09-2017

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Ukraine has 4 thousand kilometers of potentially navigable waterways, but uses less than 10% of own capacity to transport cargo by river. The share of transportation by inland waterways (IWW) is less than 1% of the total transportation volume in the country, while the average rate in the EU countries is 7%. The Better Regulation Delivery Office (BRDO) found out that the development of the cheapest and most environmentally friendly type of cargo transportation in Ukraine was hampered by the lack of effective regulation in the sector.

The state, business and public representatives as well as expert circles worked out the ways to solve the market problems during the roundtable “Development of the market of cargo river transportation in Ukraine” as part of the Public Dialogue # PRODialogue on September 12.

The BRDO Office conducted a rolling review of the quality of market regulation in terms of the efficiency, corruption risks and the business-friendliness, the results of which showed that almost half of 45 regulatory acts on the market are illegal (16 acts) or ineffective (5 acts). “It is impossible to determine the achievement of goals for 10 of 14 river regulation tools, there are simply no mechanisms for determining the efficiency. As a result, the river infrastructure is collapsing, the investment attractiveness of the sector is falling, the country’s economy loses the huge potential,” the Head of Transport Sector at the BRDO Taras Slobodyanyuk said when presenting the results of this review.

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The main constraints for potential market operators and the market growth are the high cost of transportation to the river and transshipment, the non-competitive price of IWW transportation compared to the railways, high capital costs to purchase or construct the fleet, low potential number of services and the low speed of rotation of ships due to the lack of guaranteed depths and a high risk of accidents on lock gate facilities.

At the same time, the development of inland waterways and the reorientation of some cargo transportation towards this sector would help to free up roads, save money on road repairs, compensate for the lack of railway vehicles and give a powerful incentive for the development of agrarian and metallurgical industries, which are the main drivers of the market. Today, the market of cargo river transportation is 6.5 million tons per year and has a potential to triple its volume by 2020.

Volodymyr Omelyan, the Minister of Infrastructure of Ukraine, also emphasized this fact: “A lack of a basic law for river transport along with a logistics strategy has led to the situation when in Ukraine, there are 13 times less transportation volumes by water ways, than in European countries. The adoption of the law provides us with a real opportunity to triple the transportation volumes, attract investors and have access to European waterways.”

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The basic law “On Inland Water Transport” is designed to systematically reform the market of cargo river transportation with the aim to increase its efficiency, ensure sufficient financing, eliminate unjustified barriers and costs for business and create a competitive market. Market participants should jointly find solutions to a number of key points:

  • which sources will provide funding for the river infrastructure;
  • who and how will control it;
  • how to stimulate the competition in river transportations, etc.

A separate aspect is the harmonization of the regulation of the IWW cargo transportation market with requirements of the Association Agreement between Ukraine and the EU, which provides for the implementation of 6 IWW directives by Ukraine. In particular, the Directive 2008/68 /EC on the inland transportation of dangerous goods in its implementation should be finished by 01/09/2018 that will require making amendments to the Law of Ukraine “On Transportation of Dangerous Goods”.

“The harmonization of Ukrainian legislation with European rules in accordance with provisions of the Association Agreement with the EU will stimulate the development of river transportation in Ukraine, attract investments into the economy and integrate Ukrainian waterways into international transport corridors,” the Head of EU Cooperation programs Berend de Groot said.

The event was attended by international experts, business and public representatives and expert circles. The results of the discussion will be used as the basis to develop particular legislative initiatives in the market.

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