Ports are the Life Blood of an Open Economy
Jock Mendoza-Wilson, Director of International and Investor Relations:
Last week I visited Odessa, to speak at the Ukrainian Ports Forum. The event was organized by the Ukrainian Sea Ports Authority along with the think tank, Center for Transport Strategies and was designed to both explain the USPA forward looking strategy through to 2030 and to build a working dialogue between the organisation, government and the port industry and its users.
SCM is Ukraine’s biggest consignor of cargo, so ports and their development and efficiency are at the heart of our business. We have business assets in seven countries and we operate in 13 sectors of the economy and annually, ship more than 25 million tonnes of cargo through the country’s ports. Ukraine competes in global markets, so if we want to see Ukraine’s economy become stronger and more competitive then Ukrainian ports must also be globally competitive on both pricing and quality of service.
Being a major consignor of freight, we are interested in fair and competitive port charges. However, at present Ukrainian port charges are among the highest in the world.
Let me give you can example of how these charges affect competitiveness. SCM uses Cape size vessels to import and export cargoes of coking coal and iron ore. The same-size vessel pays 4.5 times more in Ukraine to access a port than it does in Brazil. When a Cape size vessel calls at a Brazilian port, the cost is $83,000 while in Ukraine the same vessel and cargo handling costs incurred is $430,000 (Yuzhny Port). Indeed Yuzhny’s fees are on average 4 times higher than the Black Sea ports average. This high cost is a drag on the competitiveness of doing business in Ukraine for both exporters and importers and holds back economic growth.
Therefore, SCM supports the Ukrainian Sea Ports Authority and the government in their intention to streamline port charges and create more competitive and fair logistics conditions for business in Ukrainian ports. Progress has already been made with a cut of 20% in charges earlier this year which both are to be congratulated on.
Like other cargo consignors, SCM is also interested in the intense development of Ukrainian transport infrastructure including motorways, railways, and ports as Minister Omelyan outlined in his presentation of Ukraine’s ambitious transport strategy to 2030 which will require $60 billion to implement in full. Ukraine has already examples of effective port investment. The government invested in dredging near berths No.5 and 6 in Yuzhny Port.
Today, these are the deepest berths not only in Ukraine, but also in the Black Sea. They can accommodate deep-sea vessels, including ships carrying SCM cargoes. The government has already recouped these dredging investments in additional port fees. In addition, the government invested in private project in Yuzhny Port with a deep-water area and a channel for a new grain terminal having been built from scratch. Business would like to see more of such projects and more commitment from the government to invest in projects which improve the effectiveness and efficiency of Ukrainian ports.
The transformation of the port sector cannot be achieved by the government sector alone. SCM is committed to helping the government develop infrastructure based on clear public-private partnerships. We will support and invest in public private partnerships which are backed by transparent rules and conditions offered by the government. Best International practices have shown that investments in the port sector always bring with them new technologies and equipment, a higher rate of vessel loading, effective management and employee development. Pilot projects of concessions at Ukrainian ports are already underway at Olvia and Kherson, with millions of private sector dollars which can be allocated to upgrade these two ports.
One of key principles for successful public-private partnership is a win-win result for the business, government and the society as a whole. Mutual respect and international practices should lie at the core of the cooperation. In particular, global practices show how effective and beneficial it is for the government when a freight owner manages a terminal. This approach proved to be excellent in Brazil and Australia, two of Ukraine’s key competitors in the mining and processing of natural resources.
Ukrainian ports can be proud of successful practices in operating grain terminals owned by leading grain traders. Most importantly, business expects to have a level playing field, transparent conditions, mutual obligations and responsibility in public-private partnership projects. SCM is committed to strong competition, international standards for port services, and level playing field for all market players. Global markets require global competitiveness and SCM is ready to be a major investor helping to transform Ukraine’s Ports and infrastructure to meet this challenge.