Modern economic POTENTIAL OF UKRAINE

Transportation

Ukraine’s well-developed transportation system unites railway, road freight, aircraft, sea, and river transportation, the network of general use highways, as well as municipal electric-powered transport, in particular, subways. This segment covers:

• around 700 state enterprises, institutions, and organizations;
• 32 operating airports;
• 20 state commercial seaports and 10 river ports;
• 6 railways;
• 97 aircraft and some 150 ship navigation companies of various ownership types; and
• more than 58 ths. entrepreneurs involved in road freight.

The gross length of the main lines consists of:

• railway network – 22.1 ths. km;
• navigable rivers – 2.3 ths. km;
• general use highways – 169.7 ths. km (paved – 164.6 ths. km), including – 16.2 ths. km of state highways and 153.5 ths. km of local roads; and
• over 30 ths. km of fiber optic communication lines and 17 ths. km of radio relays.

Railways dominate the transportation network of Ukraine (see Figure 1.1.). More than 76% of all cargo haulage in 2005 was performed by railway transport.

Figure 3.5.1. Percentage of railway enterprises in gross transportation volume

In 2005, Ukrainian railways carried 448.9 mn tons of cargo, which also included transit cargo of 51.9 mn tons, or 11.6% of the gross railway cargo volume. Railway services were provided to 516.4 mn passengers, which was 2% higher than in 2004. Railway transportation of preferential citizens’ categories (i.e. the handicapped) in 2005 was estimated at UAH 226.4 mn, of which UAH 94.6 mn was reimbursed (41.8%). Passenger turnover reached 52.3 bn passenger-km, which is higher than the previous year figure by 3.8 %.

Figure 3.5.2. Growth rates of Ukrainian railway revenues in 2005

The industry is working to upgrade and create domestic rolling stock. The financing of scientific and manufacturing works comes from the railways’ cash flow. Expenses for improving rolling stock account for 30-40% of the total expended on industry’s innovation development. In 2005, around UAH 2,414.8 mn was invested in the development of railway transportation.

Road transport in 2005 carried almost 22% of cargo and 88% passengers transported by all enterprises in the sector. Competition is keen in this market segment and the supply of cargo transportation services and interregional passenger carriage is higher than the demand volume, which improves the quality of transportation services. The number of registered transport vehicles doing international road haulage keeps rising. The available capacity of motor transportation meeting Euro-2 standards (16 ths. modern trucks, of which 10 ths. correspond to Euro-3 standards) ensures the further growth of international road cargo carriage.

Throughout 2005, the volumes of general use road transportation grew steadily. Cargo freightage was 127.4 mn tons – a 1.8% increase versus 2004 (see Figure 2.1). The volumes of passenger transportation totaled 3.8 bn people, an increase of 3.5% over the volumes in 2004.

Figure 3.5.3. Development dynamics of the passenger route network by all bus communications over 2000-2005

Regarding international transport, the amount of cargo freightage by motor vehicles grew 13.7% over 2004. Transportation dynamics in the course of 1994-2005 are shown in Figure 2.3.

Figure 3.5.4. Dynamics of international cargo freightage by motor transport, 1994-2005

For carriers, (especially those working in international routes), one of the top priority tasks is the availability of the rolling stock that meets international requirements – standards keep rising and are related mostly to environmental problems and the safety of the transportation process. Almost 30% of the rolling stock of Ukrainian international carriers – members of the Association of international motor carriers of Ukraine – does not meet the criteria for transportation vehicles; and 9% meet Euro-1 standards, 47% – to Euro-2, and 14.2% – to Euro-3.

Thanks to steps implemented in 2005 aimed at securing road movement, the accident rate for licensed motor vehicles became stable. As a result, the number of accidents dropped by 6%, the death toll fell by 6%, and the number of injuries was down 2%.

Marine and river transportation. Marine and river transportation in Ukraine are traditionally important carriage services, especially related to cargo transit. Freightage performed by commercial seaports in Ukraine is dominated by the Odessa, Ilyichevsk, and Yuzhnyi ports, which combined account for 60% of the total cargo turnover by Ukrainian ports. All seaports in Ukraine are completely owned by the state.

The State Vessel Registry of Ukraine lists over 3.4 ths. vessels of various ownership forms. The most powerful ship navigation companies in Ukraine, which claim Ukrainian National Carrier status, are JSC UkrRechFlot (Ukrainian River Fleet) Ship Navigation Company, OJSC Ukrainian Danube Navigation Company, and UkrFerry Ship Navigation Company, which own a combined total of 819 vessels. These fleets are mostly involved in bulk cargo transportation over international routes.

In 2005, commercial seaports processed 109 mn tons of cargo, including 39.04 mn tons of transit cargo.

The largest share of cargo processing in 2005 belongs to Odessa port – 27.4% of the gross volume by Ukrainian ports. Out of 18 commercial seaports, 12 ports increased cargo processing in 2005 as compared to 2004.

Table 3.5.1. – Volumes of cargo transshipment by Ukrainian ports (ths. tons)

Investment activity was mostly focused on implementing investment projects in reconstructing and building transshipping complexes in commercial seaports.

Aircraft transportation. Passenger transportation by Ukrainian aircraft in 2005 totaled some 4 mn people, which was a 17.9% upturn compared to 2004. Thirteen Ukrainian airlines performed passenger regular flights to 45 countries worldwide. The stable expansion of passenger carriage volumes in international and domestic routes was shown by the leading airlines of the country – Aerosvit, Ukrainian International Airlines, and Donbass-Aero. Their activities in 2005 included high performance figures, the opening of new routes, more flights along established routes, higher efficiency of the airlines’ services, as well as greater volumes of passenger transit. According to recent data, 39 local airlines made 81.5 ths. commercial flights in 2005. The dramatic increase of demand in the air transportation market most of all points to the recent positive changes in the country’s economy, growing purchasing power of the population, and the further development of business and cultural relations.

Around 1.8 mn passengers were carried by Ukrainian airlines on international routes. 48 foreign airlines from 25 countries maintained regular flights to Ukraine. The largest volumes of passenger transportation were recorded between Ukraine and Russia, Germany, the Czech Republic, the United Kingdom, Hungary, Austria, Israel, Turkey, France, Poland, and the Netherlands.

Passenger volumes on domestic regular routes added 15.1% compared to 2004 and totaled 0.8 mn passengers. Internal regular passenger flights accounted for almost 21% of the total volume. Regular flights within the borders of Ukraine were performed by 13 local airlines.

Passenger flow through Ukraine’s airports grew by 17.2% in 2005. Some 6.4 mn passengers were served within the year – an increase by 0.9 mn versus 2004. Almost a half (49.1%) of all passengers in 2005 were transported from Borispol airport. Compared to 2004, the number of passengers carried rose by 25% and reached 1.97 mn people.

Road management. As an important component of the country’s transportation network, highways have a significant impact on the social and economic development of the country. Throughout 2005, road management received UAH 3,871.9 mn in financial support from all sources, which was a 27.4% rise versus 2004. State budget expenses made UAH 3,547.1 mn, local budget and other sources provided UAH 324.8 mn. This was 28.3% and 18% higher correspondingly than the 2004 figures.

There were 304.4 km of paved highways commissioned in 2005, including 182.7 km of state highways and 121.7 km of local roads. Compared to 2004, the length of highways commissioned grew by 133.9 km (+78.5%). 22 sidings to rural settlements in Volyn, Dnepropetrovsk, Lvov, Nikolaev, Odessa, Sumy, Kharkov, Cherkassy, Chernovtsy, and Chernigov regions have been improved – their total length was 53.3 km and gross costs are estimated at UAH 42 mn. Building and reconstructing highways combined with the national network of transportation corridors consumed UAH 738.8 mn, which was applied to 169.1 km of roads.

Subway. The economic growth in Ukraine is likely to cause a sizable increase in demand for subway services in large cities. This brings up the burning necessity for a state-coordinated policy and the development of effective programs and plans which would launch the proper development of this mode of transportation. Although the Laws of Ukraine “On transport” and “On municipal electrical transportation” ensure State Budget financial support for the constructing, developing, and maintaining of subways, for a long time subway financing in Ukraine was made under the “remaining sum” principle. With low transportation tariffs and the chronic shortage in compensation for passenger transportation, this led to non-fulfillment of subway development plan in Ukraine, which was drafted back in 1994. Thus, the Ministry of Transportation and Communications of Ukraine has recently become more active in solving the problem of servicing, constructing, and developing of subways, which are administered by the ministry.

Outlook. The dramatic increase in demand on the passenger transportation market in 2005 first of all points to recent positive changes in the country’s economy, growing purchasing power of the population, and the further development of business and cultural relations.

Real competition on the domestic motor services market encouraged higher quality of transportation services. The competitiveness of Ukrainian carriers in international road carriage markets in particular went up.

Stable performance in the sector in 2005 created the conditions to accomplish strategic plans in reforming of railway, aircraft, and marine industries, and increase electronic communications.

The development and launch of the new strategy for the industry as a whole and its segments created the conditions for further institutional changes, especially in managing the transportation sector. Other goals pursued are the delimitation of functions of state and business management, reforming of ownership forms and the development of a competitive environment on the market of transportation services, as well as more liberal price formation.

The integration of Ukraine’s transportation and road complex into European and world transportation systems is be based on the principles of European transportation policy, the harmonizing of national legislation with international transportation and customs law and approaching international standards, as well as the technical and environmental requirements in transportation segment have become the top priority tasks for the activities of the Ministry of Transportation and Communications of Ukraine for 2006.