The Twinning project of the European Union, providing for support to the Infrastructure Ministry of Ukraine in the reform of the railway sector, was launched at the beginning of November. The overall objective is to enhance efficiency of public administration in the environment of railway transport reforms and development of competition in line with the provisions of relevant EU acquis stipulated in the EU-Ukraine Association Agreement. The project is to contribute in strengthening the capacity of the Ministry of Infrastructure of Ukraine in the development of policies for creation of competitive railway market, establishment of safety requirements in the rail sector in line with the European norms and standards, integration of Ukrainian railway system into the Trans-European transport network.
In addition, the project will help implement European approach to security and communications, a joint system of accreditation of train drivers and develop a strategy for creating an open rail market. The Twinning projects bring together the public authorities of Ukraine and EU member states to exchange experiences and best practices in the implementation of agreed reforms.
Ukraine is one of the priority partners for the EU and it has been mutually agreed to move from cooperation towards gradual economic integration and deeper political association. The integration into the EU is surely to be one of the major priorities of the Ukrainian state policy. The Ukrainian transport system has not met the EU standards and requirements yet. The state bodies are aware of all gaps in terms of infrastructure, equipment and regulations. Having signed international conventions on harmonizing the national standards and regulations with the common requirements of the European Union, Ukraine declared its readiness to take actions required for modernizing the national transport system.
In addition, “Transport Strategy of Ukraine for the period up to 2020” was adopted and has been implemented in order to support the sustainable and efficient transport sector operation with a view to creating conditions for social and economic development of the country and to improve the competitiveness of the national economy.
Ukrainian rail transport is a leading player in the transport system of Ukraine, with its 82% coverage of freight and almost 50% passenger transport out of all transport modes.
Ukraine’s railway network covers nearly 22.000 kilometres with 45% of those being electric. With its freight volumes transported, Ukraine is the 4th busiest railway on the Eurasian continent, outrun only by China, Russia and India.
The territory of Ukraine is crossed over by three Rail Transport Corridors No. 3, 5 and 9. Pan-European Transit Corridor No. 7 following the Danube River is linked to Ukraine through the Ukrainian ports of Ismail and Reni. At present, the length of national rail transit corridors of Ukraine is 3162 km. Moreover, transport along with the international transit TRACECA corridor continues to be developed.
The main legal framework for the development of railway industry in Ukraine is the Transport Strategy of Ukraine for the period up to 2020 and the State Target Programme for Railways Reform for 2010-20193. The National Transport Strategy of Ukraine till 2020 states quite clearly the development plan for the rail transport as it may remain one of the leading freight- and passenger carriers in Ukraine for the next decades. The rail transport development policy is mainly focused on the rail sector governance, including the infrastructure, provision of open access to the rail track national network, creation of competitive conditions for the freight carriers that are crucial factors for rail transport development.
„Without government’s support I will not be able to modernize and change the Ukrainian State railways “Ukrzaliznytsia,” . If we manage to convince financial institutions to restructure the company’s debt, which is a giant burden on the current result and significantly restricts its investment possibilities, and launch financing of new investments, then it will suddenly turn out that we have something good to offer. I think there are many financial institutions that are interested in financing the restructuring of the Ukrainian railways – modernization of the rolling stock and an improvement of service and quality” says its CEO Wojciech Balczun in an interview for Financial Obsever.
The date for implementation of the reform process has subsequently slipped to 2019. The programme’s purpose is to create a new institutional, legal, and economic model for rail transport management, to develop a competitive environment at the rail services market, to improve its operation performance, to meet the needs of national economy and the population in transport services. It foresees three phases:
Phase I: the separation of the government’s regulatory function from the operational function of Ukrzaliznytsia (UZ), the national state-owned railway company and transformation of UZ into a joint-stock company. The former administration of Railways (Ukrzaliznytsia), which managed six regional integrated railways entities from both corporate and state governance points of view, has become a Joint Stock Company “Ukrainian Railways”, allowing the separation between State and Corporate Governance. Ukrainian Railways will be organized in vertical business units, which will be financially separated to allow the opening of the market for competition in the future.
Phase II: the formation of a vertically integrated rail system, structured by business/ activity with automated accounting systems and controls; improving the tariff policy and providing a free pricing system in the competitive sectors of transport services market.
Phase III: the elimination of cross-subsidy between freight and passenger services through the introduction of a financial support mechanism, the establishment of a long distance passenger service operator and an increase in passenger vehicles on private lease.
Ukraine’s modest 2016 recovery likely continued in Q3, after GDP growth hit an over two-year high in Q2. Hard data for the quarter suggests the recovery is on an even footing as industrial production posted growth for the second consecutive month in September and international reserves rose to a two-year high. However, economic reforms remain critical to improving the country’s growth potential and receiving funds from the International Monetary Fund (IMF), but the political willpower to follow through with the required measures is uncertain. A lasting resolution to the crisis remains key to improving Ukraine’s outlook.
by Elena Ilie
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