Exclusive interview with the head of Administration of seaports of Ukraine of mileage Veckagans the Agency “Interfax-Ukraine”

Immediately with the latest developments. On one of the Odessa resources have the news that you intend to resign and go to work in the “kernel”. Is this true?

Is just someone’s imagination. Fancy someone very far from understanding the real processes in the industry, but apparently close to fulfilling specific orders. In fact, such gossip is expected for this period in Ukraine. Whether still will be!

– Were you able to convey to the President what was planned at problems in the industry?

– Problems in the industry are much more than able to discuss during the presidential visit with him and his team at the main meeting and in other formats. I think now finally move the long-running question of alternative entrance to the port of Odessa, and the city will consider the ability of ASD necessary permits for the initial design phase, which will connect the proposed road hadzhibey 2 overpass the port of Odessa to bypass the city.

Also important to the industry initiative was announced by Vladimir Zelensky a two-month moratorium on environmental inspections in ports. This does not mean that the waters of the ports will be uncontrolled and will be immediately contaminated. First, the division of environmental safety AMPU will continue round the clock monitoring of state waters and to eliminate pollution in case of their identification. Second, the segregated ballast about the checks referred to, is a pure sea water, which vessels are gaining in isolated holds in the open sea, it is not a source of pollution.

I hope that in the near future the Cabinet of Ministers will adopt all the necessary regulations, which are developed with participation of experts from ASD, business and Coregulators. Their adoption will facilitate the introduction of clear and understandable rules for environmental inspections in the ports and eliminate the soil for corruption and abuse.

Prepare for the President’s Office a list of key bills that, in my opinion and in the opinion of the experts of the world Bank, the EBRD and the Supervisory Board of ASD, it is necessary to push through Parliament in the near future to stimulate private investment and the development of public-private partnership in the port industry. Yes, in principle – all of today’s problems in ports are resolved by the establishment of quality legislative rules. And question this system.

– Let’s talk about the sore. How will the new rule on the dismissal of 90% of the dividends to the plans of ASD?

– Negatively, of course! In General, the situation in the Ukraine policy of dividends negatively affects all large public companies. Especially those that invest a lot like ASD. In 2017 the amount of deductions to the budget for ASD was set at 75% in the past year against the background of reduction of port charges by 20%, the dividend was reduced to 50%. This helped to balance the situation and to continue the implementation of infrastructure projects. However, this year the company should pay 90% of the profits! Such “swings” in the first place, make it impossible to conduct long-term planning. This substantially prevents the port industry in Ukraine to work in peace and develop. Meanwhile, all the major infrastructure projects in all the ports of any country that is long-term.

According to my calculations, the rates of dividends to the PORT is at 90% in 2020 would lead to lower investment in the development of port infrastructure 2.6 times. Ukraine will not be able to continue capital dredging to increase the number of deep-water berths in port “Pivdennyi” and “Black” to begin reconstruction of the berth No. 3 at the port “Mariupol” (in the framework of the development of the agricultural cluster handling hostivitova MITI) and berth No. 0 in Nikolaevsk to port the project with COFCO, the largest food Corporation in China. In addition, this volume of its medium size projects which will make impossible the implementation of Ukraine’s commitments to the European Commission for redesigning and carrying out the EIA of a development project, a deep-water ship course “Danube-Black sea”, necessary to improve the competitiveness of the Ukrainian ports on the Danube.

The Ministry of infrastructure in June appealed to the Cabinet of Ministers with a proposal to return the rate to the PORT is on the level of 50%. However, the decision is still pending.

With the aim of forming a more predictable situation and a better development of the industry that brings the state a stable income and provides transportation for more than half of the exports, not to mention the related industries, I suggest that in the long run to stick on the state level, the fixed rate of dividend of 30%. This will give the state an opportunity of filling of the budget, at the same time will allow us to invest the remaining profits from 70% in ports, for the maintenance of hydraulic structures and other infrastructure at the proper level. I am confident that the implementation of strategic projects in ports could give the economy much more than the removal of funds from enterprises to the budget. So, today, each nested in ports to approximately UAH 5 UAH invests in private business, which, again, creates jobs, pays taxes and attract investment.

– The program of development of ASD until 2032 – that will change in connection with new rules on deduction of dividends?

– I believe that Ukraine should now focus on maintaining existing infrastructure. But for new projects it is necessary to seek other sources of funding. We can talk about the projects of public-private partnerships through the mechanism of concession.

You may want to consider the lease of berths. According to estimates, the maintenance and development of the berthing capacities of Ukrainian ports in the next five years will need to spend about 20 billion UAH. ASD have no such money, and with such onerous dividend policy – and never will. At the same time rent berths with the obligations of the lessee to reconstruct, to carry out capital and current repairs will diversify the sources of financing for development of berthing front.

In addition, one of the important conditions for increasing investment in the development of port infrastructure should be the adoption of the Procedure for compensation for investments provided for by the law on ports. Common sense and the experience of European countries also suggests the need for the country to have such a mechanism. But while the draft of this document is a stage in the bureaucratic machine.

– And still about dredging: what can we expect for winter?

– While maintaining high rates of dividends we will not be able to start new projects capital dredging. You need to decide: ASD is primarily a donor to the budget or state-owned enterprise responsible for the development of port infrastructure? Because other sources of funding for capital investment in ports, in addition to profit, ASD, Ukraine has no budget to Fund such projects, as in other countries, is not provided.

So far, I hope we don’t cancel, and “move” all large-scale projects in the hope that at least next year rate to 90% of payments of dividends will reconsider. And then we can continue with capital dredging. In particular, in the port “Pivdennyi”, which, according to our strategy to become one of the most deep-water ports of the Black sea. Also a large amount of work to be done in the “Black sea”.

– Do I understand you correctly: in Ukraine this year is likely to remain without major dredging?

Not quite. We still managed to complete two of the project capital dredging – in “Pivdenne” and “Black sea”, which was launched in 2017-2018, the Total amount of work there was over 4 million cubic meters. But the following stages in the development of the water areas of these ports and increase the number of deep-water berths for private and state stevedores under question.

With the beginning of the year USPA made a good start. Projects capital and maintenance dredging have already seized more than 2.8 million cubic meters (1.1 million cubic meters during the capital dredging. 1.7 million cubic meters of maintenance dredging). I insist that in such projects, the maximum use of own fleet of ASD is economical and effective.

– What do I need to purchase to repair?

– We continue to repair and rebuild the fleet that was passed to us “Ukrvodshlyah” is 22 units of specplot. Recently out of repair several ships. For this fleet I see two problems: maintaining the dimensions of the fairway on inland waterways, and maintenance dredging in the channels and water areas, where possible based on the technical capabilities of each vessel.

Also this year plan to close the tender for the purchase of another new modern dredger. This will allow Ukraine to increase the number of its own dredging fleet, including the Azov, which is now one of the “Meotida”. Given the high natural sensenot in the ports of Berdyansk and Mariupol, the power of this one dredger to maintain the passport deep enough.

In the future I want to go to ensure that the entire scope of production deepening ASD did on their own. It is much more profitable economically, allows you to be more mobile and flexible for the solution of actual problems in the maintenance of passport depths. And for large projects on capital dredging will be contracted out through open tenders.

– ASD in 2019 planned to conduct dredging in ports 8 and keep the volume turnover at the level of 2018. It’s been almost six months, as the reality changes the plans?

– Over the past two years has managed to significantly improve the efficiency of our fleet in the past year ASD has spent 3.5 times more jobs than in previous periods. This year one of our priority tasks is to restore the passport of depth in the ports of Mariupol and Berdyansk. There we were able to have a contractor through the e-tendering system Prozorro. The first vessel arrived to Mariupol on July 1 and the start of work at the pier No. 18. Around August we plan to finish the dredging in the Kherson port. An ongoing project on dredging in Nikolaev.

Has actually finished projects on capital dredging in the “Black” and “Pivdenne”. Completed maintenance dredging in Izmail, where in this volume, it was not performed in the last 11 years.

Is one of the major port business, said that the industry is “at the bottom” and turnover has fallen dramatically. Is that so?

– It is not. Today, everyone, including businesses, financial institutions, Supervisory Board, these experts see a positive dynamics of cargo turnover. The increase compared to last year, according to operative data, is more than 13%! While two thirds of transshipment in the ports form three types of goods. The first is the production of the agricultural sector. Only grain shipments in the first half of the year we record the growth compared to the first six months of last year to 6 million tons, or almost 35%. The share of agricultural goods in transshipment of sea ports increases every year and this year may reach 40%. The second volume of transshipments is ore. There is also positive dynamics is observed. The increase is more than 26%, or almost 3.5 million tonnes. In third place – metal products. For the first six months the volume of transshipment remained at about the level of last year – more than 8.5 million tons.

The exports through the ports this year increased by 20%, while the import has grown only on 0,5%. Unfortunately, given the political situation, we are continuing the reduction in transit – on 15,5% in comparison with the first half of 2018.

Important trend: there has recently been a consolidation of the volume of transshipments. So, “Pivdenny” increasing the volume and shows this year growth of 20%, “Nikolaev”, at 19%,”the Black sea” – 21%, Odessa – by 12%. As a result, according to our estimates, by the end of the year we can go up to 140 million tons of cargo in all ports.

Not a rosy situation in small ports whose cargo predictable absorb large ports. “Ust-Dunaysk”, “Lviv”, “Odesa” very much gives way for handling that sooner or later will lead to the need of optimization of the functional administrations from them.

– You have some vision of what to do with small ports next? To keep, to preserve, to someone to transfer the concession to sell? What to do to stop “hanging” on the budget of dead weight?

The national transport strategy up to 2030 clearly suggests that the state sector in stevedoring operations should be transformed into private. I completely agree with this. This is necessary because hostivitova uncompetitive: their work is regulated, investment opportunities are limited due to the same dividend policy, they have a big social burden and an outdated technological base. So they lose in competition to private business. In fact, if you look at the last five years, their share of transshipment has decreased slightly over 20%, while previously they were transshipped to 40% of the freight.

I believe that the development of small ports in Ukraine should go towards such thing as a “local port”. You can consider the transfer of small ports to local authorities, because the function of the ports, they have almost no flavor, but can be used as part of the city’s infrastructure for business development and tourism.

In the same “Skadovsk” and “Ust-Dunaysk” the traffic will not develop as fast as in large ports. However, there can be successfully implemented completely different functionality: Marina, yacht services, cruise and tourism business. And with that the local authorities can cope on their own, without the involvement of the ASD.

I am sure that the local authorities must also be involved in the management and development of major ports. Especially when we are talking about “Nikolaev” and Odessa, where the ports are very much integrated into the urban infrastructure and do not have their own areas for development. The local authorities have land, and we have – water areas and strategic infrastructure. It is this tandem will allow the city and the port to develop fully taking into account the interests of all parties.

After corporatization when ASD will become a joint stock company, we will be able jointly with the territorial authorities to do the following step on improvement of the management system. When local authorities develop related infrastructure, access roads and solve the issues of ecology and the port authority manages the port itself is an asset without being distracted by noncore activities.

– Have you planned reduction in the number of branches, responsible for controlling the ports from 13 to 5-8 with the goal to optimize the work of the administration as a whole. What stage is this initiative?

– Continue this project because it will improve the efficiency of the enterprise as a whole. To date, the law clearly States that the branches of ASD needs to be in every port. But we are trying, in the framework of existing legislation to find opportunities that allow us to redistribute financial and administrative burden and consolidate them on the basis of the larger branches.

– What is the situation with the land question in the ports? Previously you have mentioned that this issue significantly hinders the development of the industry…

In 2018 the Fund of the world Bank – PPIAF – allocated technical assistance in the amount of 200 thousand dollars for the project for further reform of the Maritime industry in the direction of the ordering of land relations in the ports. Today, ASD is responsible for the development of ports has no effect on the control/administration of land distribution in ports. With the aim of bringing to the model port, the landlord requires that ASD had the opportunity to dispose of a land Bank, how it works in the port administrations around the world, but not yet in Ukraine. The existing legislative framework needs to change to achieve this goal. For this project we developed a technical specification, consisting of several components. For the implementation of each of the components responsible consultants – Patrick Verhoeven (analysis of the current system of land relations in the ports at the macro level and examples of successful reform administrations in the world), Andrew Pidgaynaya (analysis of legislative basis and proposals for changes based on the selected concept of land management from the point of view of ASD), Andrey Shklyar (development of geographic information systems to visualize the situation with the land in the three ports). Intermediate results of the project were presented at the Ukrainian Ports Forum 2019 may 2019. The final report is expected by the end of July 2019, after which the results together with the world Bank will present to the Ukrainian government.

MMC: how does the handling, what types of loads in priority? Are there any investment projects for upgrading of specialized facilities?

– If we are talking about the near future, the MMC loads were and still are one of the major positions of transshipment in Ukrainian ports. About a third of the turnover are ore and metal products. However, we see that because of the actions of Russia, the transit is greatly reduced, and therefore now we can talk primarily about two potential directions of traffic. The first cargo, including mining and metallurgical products, which can be imported from Belarus via Ukrainian ports. And the second is the supply of raw materials for metallurgical enterprises located in Europe, by sea and via our inland waterways. On the one hand, it may be a good alternative for producers who are faced with difficulties, political and logistic in the supply of raw materials from Russia. On the other hand, will allow you to upload ports of the country and realize the transit potential of Ukraine.

Also Ukraine is obliged to rebuild a logistics with the railroad, when large deep-sea ports – like “Pivdenne” or “Black” – taking heavy court, which are loaded and then the goods go by rail and river in Europe.

Of course, the modernization of specialized facilities in ports will contribute to this. Today, ASD expects that during implementation of the project concession of the state stevedoring company in the sea port “Pivdennyi” will need to focus, in particular, on the upgrading of capacities, capable of working with loads of MMC. This is the most competitive on the export and import of goods. In pretio developed by an international team of consultants Egis, it is noted that one of the variants of development of the stevedore includes the construction of specialized complex for import of coal, which will, in particular, to ensure energy independence of Ukraine.

– Are there any plans for the revival of cruise shipping in Ukraine? And how much time will be able to restore it the direction to an economically efficient level?

River cruises are developing well. So, in 2018, “Ust-Danube” river was 36 calls, which is 25% higher than in 2017 and 74% more than in 2016. And was transported 5338 passengers. It’s the tourists that descend on river cruise ships from Europe to reach the zero level of the Danube and back.

I see prospects in development of this direction, but it is necessary to actively develop tourism infrastructure, to involve local authorities. We see center of river cruise shipping in the Ukrainian part of the Danube Izmail. In the early years of ASD finished the reconstruction of the sea port, it now corresponds to European level. Created working group with participation of local authorities, negotiating with Romanian and Ukrainian colleagues on the development of new routes. Such complex approach in close cooperation between ship owners, cruise operators, municipal and regional authorities interested in developing business associated with the tourism industry, can produce results. Overall positive dynamics is. And we will achieve that in the next five years, the number of cruise ship calls on the river has tripled.

Do I see here an opportunity for ASD to gain a substantial profit? This activity is unlikely in the near future will be more profitable than cargo ships. But if we are talking in General about the region’s development and integration of border territories of Ukraine to Europe, it is very important to do now.

– What sea cruises? When Odessa starts to take the white ships?

With sea cruises, the situation is different. If we talk about large cruise liners that came to Odessa, now they are almost there. The reason was the beginning of hostilities in the East, the annexation of Crimea and insecurity in Turkey. Feature of cruises is that passengers liners of the day should be able to stay on the land, to explore the sights. At night, the liner goes in the other port. Before cruise ships called at the Crimean port, but today this route can not exist, for obvious reasons. Plus the security issues. And while these two issues are resolved, to speak about the revival of cruise shipping in the same volume prematurely.

Our task now is to lead a permanent job with international cruise lines, to convey to them information about what the level of security in our ports meet their requirements, the infrastructure allows to accept and send ships and the tourism sector and the level of service can satisfy the interest of the passengers.

In October last year, the world’s largest Association of cruise business Medsruise supported the initiative of the ASPU on a joint marketing promotion of the black sea ports of Ukraine, Bulgaria and Romania in the global market of marine tourism. Considers the inclusion in this group and Turkey. And in April of this year at the largest international cruise exhibition in Miami, we together with colleagues from these countries presented the capabilities of our ports to major cruise lines to include them in their routes.

The first signals about the revival of the sea cruise ship is already there. The port of Odessa has received the reception of two cruise liners this year. Unfortunately, in may, the 145-metre liner AEGEAN ODYSSEY did not come into port due to a technical failure. The second crusnik will visit the port of Odessa on October 30. It’s a giant ship AMERA German company Phoenix Reisen (flag of the Bahamas, length – 205 metres, with capacity for 800 passengers). Ukraine in its route will be the eighth of 14 stops.