Concept for the development of multimodal transport in Ukraine

1. Concept for the development of multimodal transport in Ukraine INTERNATIONAL TRANSPORT WEEK May 29-31, 2019 Odesa Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

2. Concept for the development of multimodal transport in Ukraine Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

3. General overview of foreign trade Transformation of Ukraine's foreign trade model, billion $: Within the past years, Ukraine trade flows changed ¹ EU 28, in the conventional understanding, + Switzerland, Norway, and other European non-EU countries (Taken in this form for convenience, since the number of countries in the EU in 1996 and 2018 was different) 11% • The CIS countries were the main trading partners of Ukraine for a long time. • The transport infrastructure was tailored for the purposes of trading and cargo transportation to the CIS countries and was not developed towards EU and Asia countries, where the basis of a transport network is multimodal transport. • Currently, the rapid process of economy reorientation is undergoing. of Ukraine. Ukraine is changing its vector of foreign trade towards Europe. • The volume of trade with the EU countries in 2018 was 2.3 times higher than the volume of trade with the CIS countries. • Exports from Ukraine to Poland in the first quarter of 2019 amounted to $ 818 million, which is greater by 8% than to the Russian Federation. 26% Other countries Asian Countries 44% 6% European Countries¹ 11% 25% 57% CIS Countries 19% Sources: State Statistic Service of Ukraine (including distribution of countries by groups) Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

4. The situation with container transport in Ukraine Ukraine is a "Grey" zone in the international container transport network • Main reasons: • Lack of the national policy • Lack of developed infrastructure EC Belarus RF Ukraine • Containerization – 45% • Number of terminals -> 1000 • Volume of transport by rail – 30 mln. TEU • The number of regular connections –> 400 • Containerization – 15% • Number of terminals–9 • Volume of transport by rail – 0.38 mln. TEU • The number of regular connections – 12 • The main terminals were built in the period from 2000 to 2015; During this period, the scope of container transport increased 7 times • Containerization – 5% • Number of terminals -> 80 • Volume of transport by rail – 4 mln. TEU • The number of regular connections – 60 • Containerization – 0.5% • Number of terminals -> 8 • Volume of transport by rail – 0.32 mln. TEU • The number of regular connections – 17 Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

5. Dynamics of container transport in Ukraine in 2013-2018 Dynamics of container transport, ths. TEU: CAGR – 1.3% 34% 66% Export Import Domestic Transit Railway Railway Road Road Sources: USPA, Ukrzaliznytsia, Market Players Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

6. Priority areas of multimodal transport development Multimodal transport of goods Transportation of goods by road and waterborne transport Transportation of goods by road and rail transport Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

7. Analysis of key factors of negative impact to the development of multimodal transport Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

8. Non-tailored transport infrastructure: The situation with multimodal transport in Ukraine today In most of the territory there is no infrastructure for the multimodal transport There is no equipment for organization of piggyback transportations in all existing terminals • There are only 8 internal multimodal terminals (dry ports) in Ukraine • None of the terminals has the equipment to organize piggyback transportations • More than 50% of consignors and consignees in Ukraine have no access to multimodal transport infrastructure • Consignors are forced to ship their goods by road transport Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

9. Non-tailored transport infrastructure: the situation with multimodal transport in Ukraine today Further development of multimodal transport is not possible without the comprehensive development of transport infrastructure Comments EU and other European countries (main trading partners) Issue Ukraine Air River • The most of the trade flow is by the road transport. • The average increase in volumes of transport by the road transport between Ukraine and the EU is 8% (in 2014-2018), which leads to negative consequences for the environment • Rail transport constitutes only 9% Other Rail Difference in rail gage 1435 mm 1520 mm 45,966 mln. dollars Maritime Road Orientation of infrastructure to transportation of bulk cargoes Multimodal container and piggy-back transportations Transportation of bulk cargoes • More than 50% of consignors and consignees in Ukraine have no access to multimodal transport infrastructure • Consignors are forced to ship their goods by road transport • The level of containerization of cargoes on rail transport in Ukraine is only 2.8%, and at the main trading partner is up to 40% about 1000 multimodal inland terminals 8 multimodal inland terminals Undeveloped multimodal transport infrastructure Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

10. Non-tailored transport infrastructure: some of the main issues. Comments EU and other European countries (main trading partners) Ukraine Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

11. Case: Ternopil The way the infrastructure serves as a catalyst for development of container transportations by rail An example of transportation growth after opening a new terminal, ths. TEU: • After opening, grain cargoes previously transported by grain trucks switched to containers • Products of the food industry, oil cakes, forest goods previously transported by road switched to containers • Construction of terminal capacities will allow to create induced demand and switch flows from road transport to railway/waterborne transport + 7.9 ths. TEU Opening of the multimodal terminal in Ternopil Domestic Import Export Sources: Market players Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

12. Shortcomings related to organization processes (administrative barriers) Ukraine EU and other European Countries (Main trade partner) Lack of state incentives Directive (EC) 92/106 Multimodal transport development programs 'Marco Polo I', 'Marco Polo II' Government incentives in accordance with the needs of every individual state Unfavorable conditions for investments Inefficient administrative procedures for crossing the border and customs clearance of goods Simplified administrative procedures More flexible tariff policy: tariff differentiation for 30-feet containers Non-flexible tariff policy for rail transport Obstacles in the process of state property handover to lease, concession Adjusted mechanisms for operation of assets Non-aligned interconnection between all modes of transport and the need to synchronize their operations (inconsistency of operation schedules, time for registration of transport documents, type of documents, etc.) Synchronized operation of different transport modes Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

13. Government support in other countries: example Comparison of countries: tools to support multimodal transport: 40 tons 56 tons Weight restriction    Motorway, public roads All roads   Rod use tax Key factors Motorway, public roads Motorway, public roads EU and other European countries (main trading partners) Motorway, public roads Basic regulation Sunday, national holidays Weekend, night time, holidays Weekend, night time, holidays   Prohibition of transportations  40 tons 64 tons 40 tons 8.5 € / h Same fee for drivers 8.7 € / h Public funding Public funding Terminals     Up to 80% of costs  40 – 60% of costs Up to 2.5 M € Innovations   40 – 60% of costs Up to 0.8 M € Investments  Other, e.g. rolling stock 40 – 60% of costs Refund per loaded unit Refund per loaded unit and train Refund per tonne-kilometer (transit only) Railway operations    Operators Terminal operations Multimodal subsidies1   Additional load weight + 4 tons (44 tons) + 4 tons (44 tons) + 4 tons (44 tons)  Up to 65 km to / from a terminal Up to 200 km to / from a terminal Exemption from prohibitions for drivers   Other incentives Refund of tax for transport vehicle Refund of tax for transport vehicle Refund of tax for transport vehicle Refund of tax for transport vehicle Tax refunds       Non-resident carriers   No quotas No quotas No quotas No quotas 1 Official legislation and programs Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

14. Legislative gaps • Lack of the concepts of multimodal and combined transport in the legislation • Inadequate regulatory legal regulation of multimodal and combined transport • Insufficient efficiency when implementing international agreements related to combined transport • Non-harmonized existing legislation and the European Union legislation on combined transport Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

15. Network of existing routes of container trains in Ukraine • In 2018, 17 regular container trains were running in Ukraine International Legend Domestic Legend Bulgaria Turkey Georgia (1547 TEU in 2018) Routes of ferries Sources: UZ Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

16. Network of routes of container trains in the EU • The multimodal network of the EU is characterized by hundreds of regular trains, some trains have several trips a day • Number of terminals: > 1000 • Number of daily regular trains: > 400 • Transported every year by railway:>30 mln. TEU • Multimodal transport system is the basis for the logistics of foreign and domestic trade PARIS • The basic unit of the network is a multimodal container terminal NANTES TOURS DIJON LIMOGES • The terminal network is a cluster-type system covering all the EU territory, and united by means of regular connections • A cluster is the territory adjacent to a terminal where investors deploy production facilities TOULOUSE MONTPELLIER MARSEILLE Sources: Market players Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

17. Level of containerization of cargoes on railways in Ukraine and other countries in the world On the basis of practices of different countries, Ukraine has a huge potential for growth in container transport by rails 26% 9% The Netherlands Slovakia Belarus USA Germany Switzerland Russia Ukraine Romania Poland Hungary France India EU countries and far abroad (selectively) The countries of Central and Eastern Europe having common border with Ukraine • Note • The level of containerization in the countries of Central and Eastern Europe having common border with Ukraine is 9%, while in Western Europe and the USA it is 26% • Containerization of freight on rail is 2.8% • The main impact factor is the lack of container infrastructure Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

18. Development of international combined transport The number of permits for carriage of goods by road transport to the EU countries is decreasing Solution: development of piggyback and container transport The total number of granted reciprocal permits to Ukrainian carriers in 2018 and 2019, ths.: Assessment of the lack of reciprocal permits in 2018 (of the total number): • Number of permits projected for 2019 reduced • That makes the development of regular combined transport routes between Ukraine and the EU a very topical issue • Establishment of combined transport routes can resolve the issue Sources: Eurostat, Market Players Ministry of infrastructure of Ukraine Delegation of the European Union to Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

19. Cargo base for establishment of RO LA routes and container transport routes between Ukraine and the EU: infographics Stages of development of combined transport routes Transport modes in Ukraine-EU trade in 2018: 2 1 River Air Other Rail Maritime Road Sources: Eurostat, Market Players Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

20. Establishment of potential international combined transport routes (first phase) and their integration into the EU multimodal network Regions with the biggest potential for connection by regular routes of combined transport (based on cargo traffic in 2016): If we take into account the first stage of multimodal transport infrastructure development (by 2030), the service of combined transport between Ukraine and the EU can be as follows: To successfully launch such a service, considerable attention shall be paid to development plan of the multimodal transport infrastructure and initiate the negotiation process between Ukrainian operators and European multimodal transport operators Sources: Market players Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

21. Case: TIS. New container trains Transportation in container trains, TEU: • Growth occurred due to the launch of regular container trains by TIS on the following routes: • Nizhnedneprovsk-Prystan - Chornomorska (TIS) • Kyiv-Lisky - Chornomorska (TIS) • Kharkiv-Lisky - Chornomorska (TIS) • Dnipro-Lisky - Chornomorska (TIS) • Ternopil - Chornomorska (TIS) 40,163 21,221 42% Sources: Market players Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

22. Domestic combined transport. Existing infrastructure and areas for development Multimodal transport infrastructure exists only in 6 oblasts - it virtually makes the use of rail transport impossible and explains the low level of containerization Analysis of shortage of domestic terminal capacities by regions: 1st stage of infrastructure development 2nd stage of infrastructure development • . Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

23. 1st stage of infrastructure development (up to 2025): Stages of combined transport infrastructure development in Ukraine: stage one 1st stage of infrastructure development (up to 2030): • Construction of terminals in oblasts: • Kyiv oblast • Dnipropetrovsk oblast • Zaporizhia oblast • Kharkiv oblast • Vinnytsya oblast • Ivano-Frankivsk oblast • Lviv oblast Terminals to be constructed Existing terminals Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

24. Development of freight yards of railway stations Existing view of a freight yard on the example of a station in "Vinnytsya") The view of a freight yard in case if mechanisms for participation of a private investor are in place Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

25. Development of river infrastructure Obsolete and low energy efficiency of locks Implementation of activities for modernization of locks on rivers (improvement of their technical condition). Study a possibility of creation of an electronic queue at locks No constant depth of 3.65 m Ensuring guaranteed depths in water areas of sea ports and on Dnieper (3.65 m) for the purpose of navigation development including inland waterways, and possibilities of diverting part of the freight traffic from road and railways to water transport Lack of fleet and modern navigation systems Adoption of the laws on inland water transport Create conditions for integration of Dnieper into European water transport network Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine

26. CONCLUSIONS:Comprehensive approach to development of multimodal transport • Simplification of administrative procedures for border crossing and transit procedures • Establishment of a flexible tariff system (tariffs for 30 ft. containers, etc.) • Implementation of activities aimed at stimulating development of combined transport • Cooperation between state authorities and business to achieve results • Preparation of an action plan for development of a network of multimodal transport terminals • Preparation of a plan for development of a network of regular combined transport routes • Implementation of measures for development and • upgrading of transport infrastructure • Development of investment • attractive environment • Improvement of mechanisms for • public and private partnership • Decisions to overcome administrative barriers • Decisions to eliminate legislative gaps • Decisions for infrastructure development • Approval of the required package of legislative acts • Development and approval of a set of government incentives for development of combined transport • Development of international cooperation in the area of combined transport Delegation of the European Union to Ukraine Ministry of infrastructure of Ukraine Support to the Implementation of the Association Agreement and of The National Strategy in The Transport Sector in Ukraine