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INTERVIEW

Volodymyr Omelyan

Minister of Infrastructure
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Ukraine is Europe’s largest country, which creates both massive opportunities and challenges for the country’s minister of infrastructure. But as the new government undertakes bold reforms, opting to shed its Soviet past in exchange for a modern future, Volodymyr Omelyan is optimistic that Ukraine can become a global logistics hub, and that its infrastructure will provide a platform for economic growth. From roads to rail and ports to aviation, he outlines the various steps his government is taking to modernize and globalize the country, and how he is engaging with foreign investors for mutually beneficial projects

 You were appointed minister of infrastructure in April 2016, after having previously been the deputy minister and holding other senior roles. What has been achieved during your time in government?  

In 2014, most experts said Ukraine would go bankrupt, but we changed the situation rapidly. Not only did we survive, but we have seen tremendous progress. Due to the policies implemented since 2014, we have opened markets in many areas. The resistance is significant, but the country is changing. I’ve been a bureaucrat for 18 years, so I’m able to compare what’s happening today with the past. Samuel Huntington talked about dividing Ukraine into east and west along cultural lines, saying this was a fight between Western and Eastern civilizations. But in fact, there is only one fight – between the Soviet Union past and modern Ukraine. I am happy to state that the modern Ukraine is winning. As a minister, my key priority is to attract foreign investors into infrastructure. When we struck the $1 billion deal with General Electric, it didn’t happen overnight. I personally spent more than two years talking to GE, first convincing them to enter Ukraine, and then overcoming resistance within Ukrainian Railways. But we did it. The same happened with Ryanair, the biggest low-cost air carrier in Europe. Now they’re in Ukraine and they will start operations this fall, which signals a massive shift. They had been knocking on Ukraine’s door since 2011 but weren’t allowed to get in. I’m completely sure that without my personal intervention, and the personal interventions of the president and prime minister, it would have taken another 10 years for them to enter Ukraine. We do hope that by May, or August for sure, one of the biggest container seaport operators – Hutchison Ports – will enter and convert Ukraine into among the top seaport countries in the world. For us, these milestones are not only about the big investments themselves; they are clear indications for others that some of the world’s most important companies are successfully doing business in Ukraine and changing the country.


What are your priorities going forward?

Our policy is based on fair competition and a markets approach. I do believe that Ukraine should become part of the global supply and production chain, but I realize that without good infrastructure, we cannot think seriously about any investments. If a business can’t transport their goods, it would never enter a country. With this in mind, we have been demanding a huge reform in our road construction policy since 2016. We established a major state road fund, which is like the Highway Trust Fund in the United States. In the last two years we have constructed more than 3,000km of roads. Compared to other EU countries, it’s a huge amount. But in Ukraine, this is unprecedented because roads were not a priority in the past. The second most important issue was Ukrainian Railways. I fought for proper management of Ukrainian Railways for more than 18 months and eventually managed to change the leadership. I do believe that the successful story of Naftogaz could be repeated by Ukrainian Railways. It could become the biggest company in the country, and one of the top five railways in the world.

“In the last two years we have constructed more than 3,000km of roads. Compared to other EU countries, it’s a huge amount, but in Ukraine, this is unprecedented”

Besides the fact that infrastructure wasn’t a priority of the past, Ukraine is the largest country fully located in Europe. This means there are immense possibilities for investment in infrastructure. What is your strategy in terms of financing?

Infrastructure is a long-term investment. And we need huge investments – starting with roads, railways, seaports and airports. We calculated that a minimum of $50 billion is needed, but we understand that it will be impossible to do it purely at the state’s expense, which is why we should attract as much FDI as we can. We plan to concession everything that is possible. We will start with midsized seaports, then we will concession bigger seaports and for all other seaports, we will consider privatization or to concession. In terms of airports, the state owns two. It’s a big discussion whether we should concession them or keep them as state-owned because they’ve shown huge progress since 2014. In 2015, we were thinking of closing Lviv Airport because no flights were operating there. Today, however, it is booming due to proper management. This is a main issue – even state companies can be very successful if they are managed and run by a proper team. It’s been proven by the stories of Naftogaz, Lviv Airport and Ukraine Postal Service. If we talk about corruption or bad results in a company, it’s usually because they are managed by crooks or inept leaders. If there is not smart management, you can do whatever you want – but it won’t work.


Ukraine’s National Transport Strategy for 2030 has been drafted for approval this year. What is the vision behind this long-term strategy?

I hope it will be adopted in May of this year. It’s not an action plan; it’s a philosophy to show investors and the state what tangible results we hope to achieve by 2030. An action plan will come further down the road.

 

How important are Public-Private Partnerships (PPPs) in terms of infrastructure development?

PPPs are crucial. In 2017, we established a special PPP office under the Ministry of Infrastructure. We established this office with the help of US and European friends, and have developed more than 10 PPP projects with feasibility studies. The old philosophy in Ukraine was talking to investors, asking them for money and then spending it any old way. We have changed this and now conduct feasibility studies. Now, it’s not only about investing money; it’s about making money in Ukraine. We want any business that enters to thrive.

“When we choose foreign partners for infrastructure projects, the most crucial thing is transparency”

What is your ministry looking for when it chooses partners for infrastructure projects?

For us, the most crucial thing is transparency. I love foreign companies entering Ukraine for my own personal reasons – I want them to change Ukraine. I understand that if they are transparent and are successful in business, they will change Ukraine by example. If they implement best business practices in Ukraine, then the bureaucracy and civil service departments will follow their lead. It also means new jobs and new technologies. And we don’t only want to construct roads and develop seaports; we are also focusing on the future through electric vehicles or the technology of Elon Musk. We think Ukraine could be a great producer of electric vehicles because we have the largest lithium reserves in Europe, qualified labor and huge possibilities to start manufacturing. But it all takes time. You have to talk to investors and convince them.

 

In 2015, Ukraine signed an Open Skies agreement with the USA. What has this meant for civil aviation between the two countries?

This one is a little bit sad for me. We signed the treaty in 2015; it was adopted by parliament in 2016, but I still don’t see Delta or United Airlines operating in Ukraine. I have talked to US officials many times about making it happen because there’s a huge untapped potential. Only Ukraine International Airlines operates direct flights now. I just got back from New York and I was actually surprised to see that about 70 percent of the passengers on the flight were foreigners. It’s a good sign because it means they don’t only serve Ukraine; they serve the whole world. The market is big and since 2016 we have seen a 30 percent increase in passenger flow. That’s massive. But I think within the next year or so, American companies will come into Ukraine’s aviation market. We already have a number of Arab airlines, such as Qatar Airways. With them it was similar: we talked to them for more than 16 months, and last year they agreed to fly to Kiev. They had one daily flight from Doha and now they have started a second daily flight. They are very happy because they never expected that to happen. The same, I think, will happen with US companies.

Ukraine’s vast road, rail, air and sea infrastructure, along with its strategic location, make it an important transit corridor for trade and travel between Europe, Asia and the Middle East. How do you view Ukraine’s potential for becoming a logistical hub?

I’m always talking about this idea – that Ukraine should be a hub between Europe and Asia, and between North America and Asia. We can do it. Public perception is skeptical, but I think back to the beginning of the 2000s when all companies were focused on industrial production and everyone was skeptical about agriculture. We were importing grain and other staple products. Within a decade, the situation changed radically. Today the agro-industry is Ukraine’s top export industry. There are more and more countries interested in coming into services, and we should become a service-oriented economy as well. We see an increasing interest from Asia – China and India especially. We should use that interest and keep our friends like the US and the EU with us in this endeavor.

“Ukraine should be a hub between Europe and Asia, and between North America and Asia”

You are courting many different countries today as partners. What is the final message you would like to send to the international business community and policymakers about Ukraine?

First of all, there is no corruption, and I can 200 percent assure you that there is no corruption in the Ministry of Infrastructure. I’m personally happy to say that a $1 billion deal with GE was made without a hint of corruption. I don’t want to be immodest, but it is maybe the first time in the history of Ukraine that a deal like this was done without any hidden agreements. The same is true for Ryanair and Hutchison Ports. We are open with our partners; we talk to them and we take them by the hand to lead them through the bureaucracy. The second point is that Ukraine today is very different than what they used to know. It’s not a country on fire or at war, as some may imagine. When I was in New York, I talked to investment fund managers who said Ukraine was not under consideration at this stage. And then we spoke more, we had more meetings, and they changed their minds. This is the way we operate — a customized approach to each big or midsized investor. We implement a transparent environment, and they can come and invest and make money. It’s not about charity; it’s about business.

I would also like to point out that if in 2014-2015 we were talking about high-risk, high-return investments, in 2017-2018 and for the coming years, we can say that risk is very low but return is still very high. There are so many opportunities for business in Ukraine.

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