2.6. UKRAINE AS A TRANSIT STATE

The message of the President of Ukraine to the Supreme Council of Ukraine titled the Strategy of Economic and Social Policy for 2000-2005 emphasized that a ranking place in economic policy of the state should be assigned to development and implementation of the Complex program for affirmation of Ukraine as a transit state (further the Program).

It was drafted by the Ministry of Economy of Ukraine with assistance of different ministries, agencies, scientific (OJSC IKTP-Center managed scientific part of the Program) and other interested organizations. Chief guidelines in creation of the Program were intensification of efforts to create national network of international transport corridors in compliance with international standards; its integration in transport systems of Europe, Asia, and Baltic-Black Sea region; development of cooperation with international transport organizations; Ukraine’s accession to international conventions and treaties in the field of international conveyance; as well as friendliness of procedures when crossing the state border of Ukraine.

Strategic task of the Program also includes fulfillment of projects, which establish Ukraine as a participant in forming of transport-communication network to supply Caspian energy carriers to domestic and international markets.

Special geographic location of Ukraine pre-determines its high transit capacities as belonging to the state, which is objectively assigned to become a geopolitical bridge in transport systems that are formed on fundamental directions of international trade Europe – Asia, Northern Europe – Middle East, as well as African countries.

Upgrade of transport system and improved quality of transit cargo delivery may foster considerable increase of transit freightage, which is essential source of transportation service export. Nonetheless, transit should be regarded not only from this side. Provision of free transit via country’s territory is one of the requirements for countries – the WTO members. Transit brings effective utilization of carrying capacities of national transport systems, stimulates their recovery and improvement, and quickens development of wide range of accompanying technical services for foreign vehicles, their provision with fuel, and full service of car crews, etc.

Further development of international transit in Ukraine is concerned with improvement of activity of carriers in all transportation types, sea and inland ports, customs and frontier services, forwarding, broking, and agent freight organizations, respective sub-departments of the Ministries for Domestic Affairs, Agro-industrial Policy, Health Care, Nuclear Safety and Emergency Situations, Foreign Affairs, and others. Development may only take place if a unified transit policy would be implemented in this field. The policy may be executed at both national and regional levels, as Ukraine has 19 border regions out of 25 present ones.

All of this requires scientific systematic approach to development of the Program, which should bring to natural harmony issues of legal background (including adjustment of national legislation with European laws), state economic regulation, technical and technological upgrade, road and transport complex, as well as tariff, tax, investment, environment, and staff policies.

Development of international conveyance via territory of Ukraine

Modern trends in development of world economy are expressed in expansion of business relations and international economic cooperation. This fosters continuous growth of transnational flows and international cargo freightage.

Sound geographical location of Ukraine in the way between Europe and Asia, presence of ice-free ports at the Black Sea, as well as well developed transport system in latitude and longitude directions creates all pre-requisites to drive serious amounts of transit cargo and pass them in the shortest directions.

Presently, exports of transport services, of which transit services account for 80-90%, makes weighty contribution to the budget of Ukraine. According to the National Bank of Ukraine (in particular, Balance of payments over 1999), within total exports of goods and service worth a total of USD 16.2 bln., shipments of transportation services yielded USD 3.7 bln. or 19.1%. At this, export supplies of transport services outran their imports by USD 2.7 bln., which made a substantial compensation for negative balance of trade in goods and other types of services.

Over 2000, export of transportation services totaled USD 3.1 bln. or 85% of total export turnover of services. Export of transport services was by USD 2.8 bln. above their imports.

However, export potential of Ukraine’s transportation system is not fully utilized. Hence, as compared to exports of transportation services worldwide, which account for USD 318.3 bln., Ukraine contributes as low as 1% only.

To compare: exports of transportation service from France make USD 19.3 bln.; from Germany USD 18.9 bln.; from the Netherlands USD 19.9 bln.; and from Denmark USD 6.8 bln.

Transit conveyance by transportation types is displayed in Table 1.

Table 1.Transit shipments via Ukraine, ths. tons

Operation facilities of national transport infrastructure may annually handle over 60-70 mln. tons by railways, inland water transportation, and motor carriers, as well as supply up to 200 mln. tons of goods via pipelines. Yet, actual transit turnover yields only 200 mln. tons suggesting that present transit capacities of Ukraine are only used by 70%, whereas utilization factor for public transport (pipelines excluded) is even more coming to 50%.

Trends have been recently observed toward certain growth of transit freightage. Yet, separate types of transportation by several directions and cargo groups are allowed reduction of freightage turnover.

Article structure and main directions of cargo flows in international transit via Ukraine

Major transit cargo flows via the territory of Ukraine involve transportation of gas (105 mln. tons), oil and products (54 mln.tons) through gas- and oil-mains from Russia, which contributes as much as some 80% to total transit turnover to European countries.

As regards public transportation, main directions of transit flows are:

between stations at northeastern and western borders in direct railway and motor communication – 19 mln. tons or 54.3%;

between stations at northern, eastern, and partially at western borders, and seaports of Ukraine – 17 mln. tons or 45.7%.

Almost 95% of transit flows arrive to Ukraine via railway crossings. By and large, these are export cargo from Russia, Belarus, Kazakhstan (iron ore – 36%, coal – 16%, oil products – 10%), which are heading for Slovakia, Hungary, Austria, Czechia, and Romania, as well as to other countries worldwide via ports.

Motor transit conveyance is mainly performed by highways, which run at the following directions: Northeastern Europe – West of Ukraine – Russia, Belarus; seaports of Ukraine – Russia, Belarus, the Caucasus, Moldova, and other countries. The range of freighted cargo features foodstuffs, clothing, footwear, furniture, pharmaceuticals, and container cargo, including those that arrived via seaports.

Commodity structure of transit conveyance in railways is revealed in Figure 1.

Fig. 1. Railway transit of cargo in 1999, %

Seaports of Ukraine annually handle (1999) some 35 mln. tons of transit cargo, of which 17.6 mln. tons are transferred from/to railways. Out of this figure, over 16 mln. tons are exports to Russia and other countries, and 1 mln. tons are import supplies to countries via Ukrainian seaports. Almost 15 mln. tons of transit oil products, which are handled by the ports, are directed by pipelines.

Distribution of transit cargo handled by the Commodity Nomenclature and by countries of shipments is represented in Figures 2 and 3.

Fig. 2. Transit cargo handled in Ukrainian seaports in 1999, %

Fig. 3. Cargo transit by countries of shipments in 1999, %

The mentioned data evidence that base of transit cargo via Ukraine’s territory embraces raw materials and articles of primary processing. Specific share of high-tariff, in particular, container cargo remains rather low. Transit flows are chiefly formed in the CIS countries.

Cargo transit through the territory of Ukraine

Ukraine has its own niche in world transit business. Our countries is crossed with the shortest directions from Northern Europe to southern seas, from Southeastern and Central Europe to Russia, other CIS countries, as well as to countries of Middle East, Iran, India, and China.

All of these determine high transit capacities of Ukraine and their further development. Scenario of global development till 2004 foresees permanent growth of global GDP with outpacing growth rates in international trade (see Table 2).

Forecast evaluations of global economy development prove that essential cash and commodity flows will be concentrated in Europe-Asia and Europe-America directions.

Table 2. Rates of development of GDP and world trade turnover (% against the previous period/year)

Analysis of foreign trade relations between countries located at the direction “West – East”, which are adjacent with the area of international transport corridors (further on ITC) and run through the territory of Ukraine, evidence possible growth of cargo transit freightage at this direction.

In the long-term outlook till 2010, all possible commodity flow into the area of ITS in Ukraine between the CIS countries and countries of Western and Central Europe is assessed at USD 158 bln. At the same time, the direction “countries of Western Europe – countries of Asia” and opposite direction – in the outlook till 2010 in the area of ITC in Ukraine – may reach 44.5% of turnover expected at the direction “Western Europe – the CIS countries ”.

Medium-term prospect will mostly maintain the already present structure of transit flows with priority in western directions. Hence, these will be the flows, which start in Russia and other CIS countries and are directed to Europe via border railway stations, through seaports, and by gas- and oil-mains.

These shipments, which already add over 90% to total transits via Ukraine, may increase under favorable conditions. However, trends evolving on markets for transit services within a period till 2010 at this direction are rather contradictive. On the one hand, the forecasted growth of the CIS economies as well as development of oil deposits at the Caspian Sea foster growing freightage. On the other hand, Russia’s construction of new gas-main across Belarus, construction and reconstruction of Russian seaports in the Black Sea and the Sea of Azov may cut transit via Ukraine substantially.

Common economic interests of the CIS countries require consolidated transit policy, which would spell development of transportation systems not as rivals, but rather as complementary systems. Should the policy be implemented in practice, then till 2010 transit flow might advance by some 25-35%. If not – than the rise will not exceed 15%.

After construction and commissioning of oil-main Odessa-Brody as terminal, the opposite transit cargo flows at this direction may add some 50-60%.

Based on this, major outlook for development of international transit in Ukraine is to increase transit at the direction Europe – Asia (toward ITC “TRACEKA”), North – South (the corridor Baltic Sea – Black Sea), as well as to expand Moldova and Belarus transit.

There are real cargo flows for transit motor freightage between countries of Southern and Southeastern Europe and Russia, as well as for development of inland water transit (the Dnieper river, water transportation system Volga – Don) and transit conveyance in mixed communication with assistance of various transportation means.

According to expert evaluation (Council for distribution of production facilities under the National Academy of Sciences of Ukraine, IKTP-Center, and foreign experts), the expected turnover of international transit in Ukraine till 2005 and 2010 should be as follows:

- till 2005:

- optimistic option – 240-250 mln. tons;

- pessimistic option – 210-220 mln. tons;

- till 2010:

- optimistic option – 270-280 mln. tons;

- pessimistic option – 230-240 mln. tons.

At present, main reasons that stiffen development of international transit in Ukraine are:

- unconformity of Ukrainian legislation with laws of Western European countries (out of eight conventions on simplification of procedures in management, trade, and transportation, Ukraine as an independent state has only joined the Customs convention on international cargo transportation using the book MDP published in 1975 (EEC UNO);

- inconsistency of national legislation with international transportation law, including issues of crossing of border, organization of shipments and handling of cargo in terminals;

- absence of unified state transit policy;

- insufficient number of transit shipments (low speed, organization and technical barriers on borders, no cargo safety, poor service);

- back-log of development of modern structure of motor ways, terminals, and rolling stock, their inconsistency with technical parameters and operating requirements for international transport communication, rolling stock, and other objects;

- insufficient development of informatization;

- technological back-log, particularly, in implementation of logistic systems of international shipments, mixed transportation;

- poorly deliberate tariff policy, absence of integrated approach in order to provide general economic effect;

- unfavorable criminal situation, exaction from transit participants when crossing the border and on their march lines.

To make Ukraine appealing to foreign carriers, having created legal, economic, technical, organization and technological, as well as environmental conditions, which are the most similar to European ones, the Complex Program for affirmation of Ukraine as a transit state stipulates for implementation of a set of measures, which are aimed at legislation support of transit via Ukraine; adjustment of national legislation to the EU requirements, to international transportation law, to technical and technological upgrade of international transport infrastructure and cargo check points at the state border; improvement of tariff-charge and tax policy in the field of international transit; introduction of logistic technologies to organization of transit cargo flows as well as information and financial flows accompanying them; and state stimulation of driving of additional transit cargo to proceed via the territory of Ukraine.

Considering the importance of development of the Complex program and urgent implementation of its priority clauses, under the National Committee of International Chamber of Commerce there was created the Commission on simplification of customs procedures. The Commission includes representatives from the State Customs Service of Ukraine, Ministry of Economy, Ministry of Transportation, International Association of autoports, Association of custom customhouse brokers of Ukraine, Association of international carriers of Ukraine, as well as Association of international forwarding agents of Ukraine. It should be noted that the aforementioned representatives also comprised the working group, which drafted the Complex Program for affirmation of Ukraine as a transit state.