Jobs, investments and cargo handling boost – what was said by MIU, USPA, SPFU and IFI on the Azov region port sector prospects.
Last week a scaly and token event took place in Mariupol – the first investment forum initiated by President of Ukraine Volodymyr Zelensky RE: think. Invest in Ukraine.in the course of the forum having gathered virtually all the country’s leadership, major business stakeholders, investors and representatives of IFIs, the item No. 1 sounded investments in the East of Ukraine development. The venue was not a random choice: Mariupol is not only the largest city in the part of Donbass controlled by Ukraine, but also am important industrial, agrarian, and transport centre. At the same time, there’s bitter irony that the city is rather isolated due to the war to the east and periodical blockade of the Azov Sea. Therefore, solution of infrastructure issues took the place far from the bottom during the forum.
There was a lot of documents signed in the course of RE: think: Memorandum between Cabinet of Ministers of Ukraine (CMU) and EBRD on regional roads development; between Ukrzaliznytsia (Ukrainian Railways), Ministry of Infrastructure of Ukraine (MIU), and EBRD on the former’s IPO preparation; and between Ukrainian sea ports authority (USPA) and COFCO Agri Ukraine on Mariupol port development.
Port as the region’s ‘defrosting’ indicator
According to Minister of Infrastructure Vladyslav Kryklii, the Memorandum about Mariupol Port signed at the forum envisages realisation of an infrastructure project to ensure attraction of more than 1.3M UAH of investments and enlarge the cargo flows by 2.3M t, on account of the new COFCO’s capacities. The document provides for both parties cooperation on berths reconstruction and final establishment of an integrated handling complex for bulk dry and liquid food cargoes.
“By our evaluations, Mariupol port is going to end this year with +8% of cargo handled in comparison with the last year. This thought encourages us to keep on investing. There are two issues to please: the first is of course the cargo flows growing, and the second is their diversification we have managed to achieve”, says the manager of USPA Raivis Veckagans. So we see now the port’s share in the market and are finishing the Berth 4 construction designed as a grain terminal, which is going to enlarge cargo throughput in future and add grains to traditional metals.
Mr Veckagans believes the sea port is capable of reaching up to 7M t of annual cargo handled. He has also reminded that by 01 December USPA planned to restore the designed depths in the port i.e. 8 m (maximum for the Kerch Strait navigable channel) which would enable to lift all limitations regarding ships calls.
Another important news for the port had come on the forum’s eve, namely Government has defined the boundaries of Mariupol Sea Trade Port, which is vital for further investments. Moreover, this decision is crucial for the adjacent Azov Shiprepair Yard, the waterfront of which shall be transferred to the port, so that the former has no obstacles toward its privatisation or any form of PPP.
Shipyard as the region’s must
“Our stance is that a ships building-repair yard ought to be in this region. The pattern of ownership is of no significance since the state-business relationship may always be regulated on contract base. We have to commit the first step i.e. transfer it to the State Property Fund (SPF)”, noted Raivis Veckagans.
Azov Shiprepair Yard is the only end-to-end Ukrainian shipyard at the Azov Sea coast. The plant had been rented for several years by a LLC being a part of the local Mariupol Investment Group (MIG), the term passed in June 2016 but SPF failed to decide the yard’s further form of management, and the process of its transfer back to SPF is delayed so far, though in October Ukrainian Parliament allowed the yard’s privatisation without the quays and harbourage. Accordingly, the latter assets will be owned by the state and disponently by USPA which will be able to transfer them on PPP contract base, while the yard itself should face either concession or privatisation, as Mr Veckagans is dead set, of course keeping all the jobs and so on.
Investors look closely
The next phase upon solution of the red tape problems will be funds search. MIG has an investment project elaborated which can give return in 8 years, or even 5-6 in case of the hostilities fading.
According to the research presented by MIG, investing in the asset may result in the machine construction tripled, ships complete overhauling may enlarge 1.5 to 2 times, and cargo handling twice, as well as the funds laid out may resuscitate the shipbuilding that is next to zero level now. In fact Azov Shipyard has every technical possibility of constructing small vessels for the region like port auxiliaries and coast guard launches, as well as repair medium size commercial ships operating in the region. Nevertheless, large IFIs like EBRD, EIB, WB, IFC can play a key part for the business development in the political conditions of Mariupol.
IFC regional manager Jason Pellmar has assured they consider plans of involving private investors both in the port infrastructure of the region and shipyard development, while IFC Vice President Georgina Baker presented municipal infrastructure development plans, at the same time confirming that the corporation’s participation in the region’s maritime sector development projects. On his part, Vice Director of the Ukrainian office of EBRD Mark Magaletsky noted that shipbuilding is a promising industry for Ukraine, reminding the bank’s cooperation with Ukrainian company Nibulon building its own fleet. Vice President of EBRD Alain Pilloux also mentioned their cooperation with Ukrainian port operator TIS and preparation of port concession pilot projects in Olvia and Kherson funded by the bank.