Port potential in Ukraine

29 Авг

Статья посвящена проблемам, связанным с развитием портового хозяйства в Украине. В частности, рассматривается отношение органов государственной власти к вопросам, связанным с развитием портов

The government in Kiev has promised a “new start” for the ports industry, but its words still have to be translated into action

In recent years many countries have projects оpened their ports to inward foreign investment, as part of general economic liberalisation, or more specifically to helpgenerate the new capacity needed to handlegrowing foreign trade resulting fromthat economic liberalisation. One big country that has thus farstruggled to establish a stable legal andadministrative framework to encourageinward investment is the Ukraine, eventhough its ports have great potential. Its18 seaports and various river ports are stilllargely “waiting” for infrastructure developmentand inward foreign investmenthas lagged far behind what might otherwisebe expected for a country of thissize and geographical location.
Hard to define
One local expert, Arthur Nitsevych, a partner in International Law Offices (ILO) in Kiev, says that the main barrieris that in the Ukraine “a port is somethingthat is very hard to understand.” Accordingto Article 73 of the MerchantShipping Code, a port is a state-ownedunitary enterprise (ie a public sector company), even though huge private terminalsand even private ports exist and function. This “legislative nonsense” is probablya “relic” of the USSR, but so far effortsto adopt a new wording or evendevelop a new law on ports have floundered. Today a special working group istrying to satisfy the requirements of bothpublic ports and private investors. A Ukraine port development feasibilitystudy financed by the EU to the tuneof €1.715M and carried out in 2008-2010by an international consulting firm “hasnot helped,” says Nitsevych. Last October 2010 the Cabinet of Ministers of theUkraine adopted a long-term transportstrategy, but it was long on declarationsof intent and short on real policy.“What do we have?,” Nitsevych askedrhetorically when speaking at the recent Port Finance International conference in Istanbul. “If we look into a manual forport development, it’s reasonable to lookfor investors among port operators, cargoowners and shipping lines.
Absent friends
“Among port operators in the Ukrainewe don’t see PSA, Hutchison or any othersignificant international players. OnlyHPC Ukraina (a subsidiary of the GermanHHLA), operating the container terminalin the Port of Odessa, and TIS inYuzhny can be considered as independentinternational players.“Cargo traders are more active.Ukraine is a big exporter of grain, so inrecent years commodity traders such asBunge, Cargill, Glencore and others werequite active in investing in terminal facilities,mainly elevators, in ports. As forshipping lines, only CMA CGM managedto launch a container terminal inthe Port of Odessa a couple of years ago,together with a local partner.”Nitsevych noted that the new law ofPublic Private Partnership (2010) is “declarativeand does not contain real toolsfor implementing projects in the port sector.”Among possible PPP structures arejoint ventures and concessions, but thesehave never been launched. De facto a PPParrangement in the ports is either a leaseor a “joint agreement,” or a mix of them.
Very complex
In any case the legal system is very complicated. ILO in Kiev reckons there areno less than 500,000 main documents derivingfrom Acts. Inevitably the system isvery bureaucratic, court process are ambiguousand much of the law is open tointerpretation and then reinterpretation.But business needs clarity and stability. A 2009 Cabinet Resolution is supposedto regulate how investment projectsare implemented in the public sector. Itprovides that the Ministry of Infrastructure,before bringing a project to tender(or auction), has to have it approved bythe State Property Fund, the Ministry ofEconomy, the Ministry of Finance, theMinistry of Justice and the nationalprojects agency. Hardly surprisingly, not many projects have gone forward and the procedure is being challenged in the courts. “So we face an interesting situation,” said Nitsevych. “On the one hand, the government needs to assess its capability to attract foreign direct investment to the ports. On the other hand, private investors willing to invest in Ukraine are very critical and cautious in their relations with public bodies.” The “stand-out” performer in the container handling sector is HPC Ukraina in Odessa Port potential in the Ukraine. In February the new President of the Ukraine, Viktor Yanukovich, visited Odessa and declared that 2011 will be “the year of reforms…our waterfronts will attract investment and our ports and infrastructure will be financed internationally.” If this happens, says Nitsevych, some very interesting projects may be realised
and they could alter the dynamics of the Black Sea region where Turkey, Georgia, Bulgaria and Romania have been very active during recent years.
ILO advises investors to look for local partners, first of all, among port professional companies and traders, as they can deal with all the legal and administrative
aspects. An alternative approach is to apply to an international financial institution or transaction adviser. These are active in the region and understand local requirements. As far the container handling sector is concerned, the stand-out performer is HPC Ukraina, the HHLA affiliate based in Odessa. Last year it was reported (WorldCargo News, October 2010, p4) that the company is to invest €70M at its concession in Odessa, having won the port’s tender to develop the Quarantine Mole site as an extension of the existing terminal. HPC Ukraina has operated in Odessa for 10 years and traffic built up to 0.5M TEU/year before the economic crisis of 2008-9. Its management and services contract with the port was recently extended by another 20 years to 2044, providing it with the confidence to invest more. It is almost as if HPC is the “exception that proves the rule.” In Nitsevych’s opinion, HPC has a sound and very thorough risk management policy and it has also had the advantage of being associated with the Port of Odessa, a pioneer of port development in the Ukraine, which is prepared to accommodate the needs of investors and customers and deal with all the “red tape” itself.
Bitter row
In contrast, Russia’s TransInvest Service had problems in Yuzhny as far as container handling is concerned (but not on the bulk side). The most serious problems have concerned Uktranscontainer (UTC), the affiliate of Russia’s National Container Company (NCC), and the Port of Ilyichevsk. Last June the government in Kiev set up a working group to try and resolve this long-running and very bitter dispute. In October it was announced that the Odessa Regional Court of Appeal had ruled in favour of UTC and instructed Ilyichevsk port authority to reinstate its joint activity agreement with the company. This decision overturned a previous judgement from the Supreme Court in Kiev in favour of the port authority. However, on December 29, the Supreme Commercial Court of Ukraine declared the joint activity agreement dissolved. After a couple of years of court battles, the Court satisfied the cassational appeals of the Prosecutor’s Office, the Ministry of Transport, the port authority and its trade unions. In effect, the Court refused to hear the case again. Instead it took into account “newly disclosed circumstances,” leaving the previous decision with no changes. The decision became effective immediately. For obvious reasons, Nitsevych cannot go into the legal details of the case, but he does say that it is probably another bad sign as far as attracting investment goes. NCC has said before that it will take the case to the International Court, and that could deliver serious “moral damage” to the general climate for investing in the Ukraine, whatever the outcome. The port accused UTC of violating many clauses in their joint activity agreement, including the timing and currency of fee payments, financing of non-joint activity assets and the allocation of nonjoint activity operational expenses. “Disputes such as these make private investors think twice before entering into such arrangements, let alone committing to significant investment,” said Nitsevych. Some of UTC’s former customers, such as Maersk and ZIM, are now calling at the sea fisheries port in Ilyichevsk, where two Liebherr LHM 500 cranes have been installed. It has been reported locally that two STS cranes and five RTGs are on order from Liebherr, but this could not be confirmed by WorldCargo News.
Источник: WorldCargo News. – May 2011.