Yuriy Shchuklin, logistics market expert, advisor to the “Ukrzaliznytsya” Head of Board

 

For the first time, Kyiv is hosting the Ukraine-EU summit while Ukraine is already in the official status of a candidate country, and expects positive conclusions from the European Commission’s delegation about the preparatory work done, as well as the specific timetable for the start of official talks on the EU membership. The optimistic vision of the Eurointegration process was made public by the Prime Minister, Denys Shmyhal: This year, Ukraine will be ready to start official negotiations on accession to the EU, and Ukraine will be fully prepared to join the EU after two years. However, the experience of processes of such a level proves that the other side will inevitably lower the discussion agenda down from the height of our expectations to the specific level of our preparedness.   

For instance, the question may arise whether we are moving towards Eurointegration at the level of infrastructure, whether the present-day leaders of the government, as well as countries, allow for radical changes of the management technology and the level of access for economic agents to the railway infrastructure, as the EU will demand before the official membership of Ukraine is approved?  In this respect,  our huge hopes for the accelerated membership may be hurt by the recognition by the European side of our unpreparedness which will be proven by the failure, on the Ukrainian side, to fulfill the “homework” specified by the 2014 Association Agreement with the EU.    

Then, Ukraine undertook to implement, within 8 years (until 1 November 2022), clauses of 12 EU Directives and Regulations into the national legislation, thus creating an open and competitive market of railway logistics. The key component of the European logistics space, introduced in the EU countries since 1991, is the removal of factors of natural monopoly of state-owned shippers.  The European directives provide for the provision of equal and non-discriminatory access to the resources of strategic infrastructure of railways for all users within the limits of their competence, irrespective of the form of ownership. This reform is obligatory for the EU membership and, taking into account the volume of preparatory work, changes in legislation, technology of shipment, Ukraine got eight years for fulfilling this part of the obligations within the framework of the Association Agreement

It was stipulated that over this time Ukraine would introduce the following: 

• The state-owned “Ukrzaliznytsya” shipper will retain only the strategic infrastructure without which shipping of cargo is impossible; 
• The state will provide for equal and non-discriminatory access for all users to the resources of strategic infrastructure, within the limits of their competence, irrespective of forms of ownership, including access to information resources;  
• Managing shipping with the use of strategic infrastructure will be done on the basis of both long-term and urgent contracts (orders) of participants in shipping, taking into account the state of strategic infrastructure objects.  

However, the Draft Law No.1196-1 “On the Railway Transportation of Ukraine”, submitted during the epoch of the parliamentary “turboregime”, had not reached the session hall and had quietly “died” while being agreed in the parliamentary committees. Most probably, this had happened because this novelty affected the interests of a number of influential stakeholders.  Among them are the state-owned operator of railway shipping, “Ukrzaliznytsya”; those market participants who are satisfied with the current monopoly status of “Ukrzaliznytsya”; and officials who would not be able to monetize their personal interests within the open electronic system with equal access. The fact that the Eurointegration track has fallen out of the agenda of the infrastructure chapter of the current Cabinet of Ministers headed by Denys Shmyhal, was proven by the “Ukrzaliznytsya”’s plans for cargo shipments, made public by the end of 2022.  The announcement among “the iron changes” of the new monopolist function of forwarding cargo is an eloquent proof that the implementation of Eurodirectives is not planned at all while there is movement in the opposite direction.     

Ukraine amazes the world, and one of the symbols of our resilience and inventiveness during the war is “Ukrzaliznytsya”.  This, however does not mean that if we, Ukrainians, are so courageous and “Ukrzaliznytsya” is so iron-strong and heroic we will be allowed to not fulfill the requirements of the directives fulfilled by all railways of the EU countries.  Due to our healthy adventurism and entrepreneurship we demonstrate to all Europeans how we find ways out of the emergency situation. But we are at the stage now when they expect from us not the adventurism and inventiveness in avoiding obligations but adequate behavior and responsibility in adhering to obligations.   

If the implementation of Eurodirectives is remembered now and put on the agenda, there will also emerge the issue of preparedness of the legislative foundation, technological means, digital infrastructure to the format of work that Europe demands from us.  Ukraine’s membership in the EU supposes that our railways will be used by shippers with their locomotives, that there will be an equal access to the infrastructure, not the access as seen by the commerce department of “Ukrzaliznytsya” and by those who now profit from this outdated technology.   

If, for instance, at the demand of European partners, the Draft Law “On the Railway Transportation” is urgently put to consideration and approved in the “turboregime” this is not going to solve the problem.  This is because the current legislative basis and the automated traffic regulation system of Ukrzalznytsya, the best in Europe and the CIS, does not allow for the presence of different shippers and of different owners of railway cars. Everything that is happening in railway shipping managed by Ukrzaliznytsy will stop because it will be torn apart with different pieces having no interaction. No one is getting ready for this. In addition, when the Law is adopted, everyone will see that the current model of interaction between cargo owners and shippers does not fit this Law! The European concept of railway shipping is different from the current Ukrainian concept in that logistics are not dictated by the interests of a monopoly shipper but stipulated by the interest of cargo owners who commission and pay for the service of shipping.  It is the manufacturer who finances the entire chain of services.  Ports, forwarders, traders all live because the manufacturer has produced goods and goes to the market with them.   

At the moment, we don’t have a system which would provide for interaction with them after the law is adopted.   

The current shipping technology and the fitting automated system were built over 15 years. This is an enormous work, impossible to be done within short time. The main thing, however, is that in order to start making a new system today, it is necessary to understand which technology will be in place tomorrow.  What is the mission of railway transport in the context of the post-war rebuilding and of Ukraine’s European integration?  The problem is that the Cabinet of Ministers, as a shareholder of the state-owned shipper, when hiring for a year or eighteen months a new TOP manager for “Ukrzaliznytsya”, does not set a task for the company’s head concerning the company’s mission. 

It is because of this that the horizon of planning of the “Ukrzaliznytsya” managers is short-term and does not allow for system changes on the agenda, this is why short-term financial results come to the fore. There are questions concerning the competence of the “Ukrzaliznytsya” functionaries and apprehension that their mentality won’t allow them to imagine the very possibility of free competition without the monopoly leverage of the state-owned shipper. This is why there are doubts concerning their initiative in creating the future for “Ukrzaliznytsya” where it is not the monopolist but  one of the many shippers who compete for cargo among them all.   

The current legislative basis and the shipping technology of “Ukrzaliznytsya” do not correspond to the announced course of Ukraine in the direction of the EU and are incapable of solving the tasks of post-war restoration of Ukraine’s economy. If the desire to swiftly join the EU is a real aim and not an emotion, the Cabinet of Ministers must swiftly put on the agenda the issue of the mission of the railway transport of Ukraine and the role of the state-owned “Ukrzaliznytsya” shipper within the future context of economic relations where the post-war renewal and European integration of Ukraine come to the fore.  Ukrainians regard the Eurointegration as a means of getting something but it should be seen also in its different dimension, as a means of giving something.  The senses of European directives on equal access correspond to the vision of Ukrainian exporters, manufacturers who have, with their actions, confirmed their preparedness to work along European criteria and principles (and with European prices, too). Ukraine possesses developments in the sphere of information technologies to synchronize interaction of Ukrainian agrarians and shippers with European shippers, railways, and ports in organizing exports.     

This system of throughout responsible planning of railway shipments will allow to take the EU railway logistics to a new level of throughout business processes and may become Ukraine’s weighty contribution to the creation of the joint European logistics infrastructure and be our gratitude to European partners for their current support.  

The latest sociological surveys’ results demonstrate the unseen-before unity of Ukrainians in relation to the EU. Almost 90 percent are sure that Ukraine will become an EU member in ten years, while 65 percent are prepared to suffer material hardship during nearest years for the sake of this goal. It would be desirable to find understanding of the country’s top officials that each month of further existence of outdated technologies of railway shipping makes Ukraine’s chance of becoming an EU member farther, undermines the European partners’ belief in our capacity to root out corruption, and deepens doubts that Ukraine does deserve the credit of trust that we got due to resilience and courage of our warriors.