New Silk Road for Ukraine: a chance for billions

(from the issue №4, 148, November) Chinese “New Silk Road” can become the project of the century for Ukraine, taking into account the volume of potential freight traffic between China and Europe, being able to go through our country, and its cost. How to adapt the national economy to the requirements of the project and to make Ukraine more interesting for international business – all this was discussed by the participants of the Ukrainian Silk Road Forum, which was held in November at “Intercontinental” hotel in Kyiv.

The forum participants speak for the level of the event, organized under the aegis of public organization “Silk Link” and the Silk Road Chamber of International Commerce. Among the main actors and the guests of honor were the first lady of Ukraine Marina Poroshenko, Vice Prime Minister of Ukraine Gennady Zubko, First Vice-Speaker of the Verkhovna Rada Irina Gerashchenko, Ambassador Extraordinary and Plenipotentiary of China in Ukraine Du Wei.

Marina Poroshenko

Speaking to the audience, Marina Poroshenko urged the business communities of Ukraine and neighboring countries to actively develop the projects that contribute to business integration, and authorities – to remove all obstacles in the way of economic development.

According to the Chinese Ambassador Du Wei, Ukraine should make efforts to develop the Trans-Caspian international transport route, as part of the Silk Road. He believes in the feasibility of establishing a free trade zone between the two countries.

During the video presentation of the Silk Road Chamber of International Commerce, the president of the organization, Lu Jianzhong noted the importance of such international cooperation format. “This is a platform for a comprehensive international partnership; and 54 participants of national standing already work with us,” – he stressed.

During the forum, there was a series of thematic panel sessions to discuss prospects of trade and economic relations between Ukraine and China, challenges and prospects of investment activity in the framework of relations between the two countries, Ukraine’s potential as a transport and logistics hub in the New Silk Road.

Du Wei

Also, several documents were signed that day: Agreement on cooperation and development of e-platform “eSilkRoad” (between the public organization “Silk Link” and the Silk Road Chamber of International Commerce), a memorandum on strategic cooperation between the Ukrainian House in Beijing and the Silk Road Chamber of International Commerce, Agreement on cooperation between the Centre of contemporary China “Tianxiang Link” and the Silk Road Chamber of International Commerce.

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“Silk Link” is a platform focused on boosting business and political cooperation between Ukraine, China, and the European countries; A global network that brings together partners in more than 25 countries in Europe and Asia. Among the purposes of the project there is realization of the potential of Ukraine to become the important transport and logistics hub, financial and business, commercial and economic center of Eastern Europe and the Baltic-Black Sea region in the frames of the Silk Road Economic Belt

The structural parts of the project are: Fund of direct Chinese investment “Silk Link.Fund” (investment promotion, development and implementation of high-tech projects, infrastructure projects as part of the Silk Road Initiative); project office “Silk Link.Project” (approval process of international cooperation, the selection and development of investment projects, etc.); think tank “Tianxiang Link” (analytical reasoning, analysis, evaluation of problems and prospects of social and economic processes, the development of legal acts, public opinion research, etc.).

Among the key events are the annual Ukrainian Investment Forum of the Silk Road, meeting with government officials and influential politicians, sectorial round tables.

 

Ukraine looks to China

During the discussion of trade and economic cooperation between Ukraine and China – including its transport component, – President of the European Business Association Krzysztof Sidletski noted that in this situation Ukraine is a “gateway” for the Chinese industry and business. But there are other aspects. “Today, your country feeds 150 million people – at a potential of 400 million. It is necessary to look not only at China as a big economy, but also to see the role of Ukraine in this process – and it can be of great importance in it. Ukrainian producers, in fact, have not a threat but a great prospect in the Chinese market. And besides, Europe and China can place their production capacities in Ukraine, in particular – taking into account the cost of labor here,” – he stressed.

Speaking directly about the development of transport and logistics complex, the First Deputy Minister of Infrastructure of Ukraine Eugene Kravtsov said that 2017 will be a significant year for the country, due to coming into force of new transit management in tariffs. Also, in his opinion, not enough attention is paid to traditional freight way – by sea on which there is a large amount of goods from China (with transshipment in Ukrainian ports), as well as a significant amount in the opposite direction – mainly from Ukraine (mainly agricultural and metallurgical products).

“We need to make the process of attracting of new cargoes as comfortable as possible, because at this point we compete not only locally, on the Black Sea market, but also much more widely – with the Baltic, the ports of Southern Europe. And Ukraine today is not competitive enough – in tariff rates in seaports. The Ministry of Infrastructure plans to adopt a new methodology of port charges by the end of the year. Working with the World Bank and the International Finance Corporation in this direction is already in the final stage,” – said the first deputy minister.

According to the Honorary President of the Silk Road Chamber of International Commerce Jemal Inaishvili, the reality today is that bringing a container from China to Ukraine or the Baltic countries by rail can be fast but it’s quite expensive. Therefore, the sea route is still the most competitive. But if China in the near future will develop its western regions – for example, the Xinjiang Uygur district, – and carry cargoes from there, then overland road will become more competitive.

He agreed that a common problem for Ukraine and Georgia, as potential participants in the project of the New Silk Road, is in the high port dues. “Conventionally, the thing that costs 10,000 dollars in Turkey, will cost more than 30,000 in Ukraine and Georgia. It is necessary to introduce regulation in this sphere,” – said the expert (in 1997-2003 headed the sea port of Poti and increased the turnover of the company from 1.3 million to 6 million tons).

Port dues in Ukrainian ports were also touched by the CEO of “COFCO Agri Ukraine” Vladimir Osadchuk (Chinese “COFCO Argi” opened a large grain transfer terminal in May 2016 in Mykolaiv). “Charges should be brought to a common standard. For example, a call at Yuzhny sea port has a discount of 50 percent, but Mykolaiv haven’t. And Yuzhny and Chernomorsk have more resources for infrastructure keeping than Mykolaiv,” – V.Osadchuk said.

Among the “screaming” issues requiring urgent solution, he called the “collapse of the internal logistics”, which occurred due to the tightening of weight control on the roads and, consequently, a shortage of traction on the railroad, which had a negative impact on all economic processes during peak periods of cereals shipping.

Necessary measures according to Vladimir Osadchuk are: the improvement of technical regulations for locomotives (so that they could transport loads of private companies), the increase in the depths of the sea ports (to avoid additional loading of ships at anchorage), the intensification of river transportation (to release the auto and rail transport) as well as the implementation of PPP projects to invest in the construction of barges, tugs and missing infrastructure on the left bank of the Dnieper.

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