RESOURCES/FEATURED STORIES

Strengthening Ukraine’s Ports to Boost the Economy

30 January 2021
Strengthening Ukraine’s Ports to Boost the Economy
Ports are a critical part of Ukraine’s export infrastructure. The country’s economy depends on the export of bulk commodities in global markets—especially agricultural products and metals—which are mainly transported by sea. However, Ukrainian ports are inefficient and operating far below their capacity. A large part of the problem is  the fragmented nature of port lands that are owned by various stakeholders such as municipalities, oblasts, and the private sector. This means that consolidating control of port lands under the Ukraine Sea Ports Authority (USPA) and improving the

Ports are a critical part of Ukraine’s export infrastructure. The country’s economy depends on the export of bulk commodities in global markets—especially agricultural products and metals—which are mainly transported by sea. However, Ukrainian ports are inefficient and operating far below their capacity. A large part of the problem is  the fragmented nature of port lands that are owned by various stakeholders such as municipalities, oblasts, and the private sector. This means that consolidating control of port lands under the Ukraine Sea Ports Authority (USPA) and improving the infrastructure and operational efficiency of ports could significantly improve the country’s export potential and competitiveness.

Achieving this goal is challenging. Key reforms must be implemented to attract investment to the port sector and improve governance and management. Rather than functioning as a state service, ports will need to shift to a landlord model with greater private sector engagement in ports and the maritime sector—including investment. In order to shift to a modern landlord model, however, the USPA must consolidate control of port lands, which would allow for more predictable port masterplanning. Given the complexities of Ukraine’s port land ownership structure, a contexualized landlord port model is seen as a better fit. Under this model, the Ministry of Infrastructure would serve as the key sector regulator, carrying out key reforms in partnership with the USPA, which would consolidate control of port lands without necessarily taking direct ownership.

PPIAF developed a Port Reform Toolkit that will allow USPA to analyze Ukraine’s existing port management approach and compare it to models used in other countries (including the European Union, neighborhood countries, and the larger countries of the former Soviet Union). This placed Ukraine’s port sector governance in its proper national and international context and articulated the case for reform. 

The activity also assessed Ukraine’s legal and regulatory policies and identified key constraints impeding port sector reform. Feasible paths for reform within the country’s existing legal and institutional context were mapped out. The analyses were used to develop an action plan for adopting the landlord port model. This work was complemented by training and workshops to build the capacity of Ukrainian officials from USPA and the Ministry of Infrastructure. 

The Cabinet of Ministers of Ukraine and other stakeholders are receptive to the reform agenda  and proposed changes to regulations and legislation are on track for adoption. The Verkhovna Rada (parliament) is expected to initiate at least some of the proposed regulatory reforms within 18 months.

PPIAF support for port sector reform in Ukraine contributed to the success of two PPPs for Ukrainian ports—Olvia and Kherson—implemented by IFC, the Global Infrastructure Facility, and EBRD. The successful commercial close of the two port concessions demonstrates that the private sector is receptive to reforms. Importantly, these were the first PPPs in Ukraine’s port sector.

Building on the experience of these pilot projects, the Ministry of Infrastructure and USPA are now moving forward with concessions of larger, more strategic ports in the Odessa region.