Ports have Needed a Systemic Approach to their Development for a Long Time
On 16 September the Operations Office of SE “Administration of Sea Ports of Ukraine” held a press conference, which was attended by Yuri Vaskov, Chairman of SE ASPU, Aleksandr Golodnitskiy, First Deputy Chairman of ASPU, Chiefs of ASPU Services: Viacheslav Voronoi, Strategic Development Service, Gennady Garas, Fleet Service, Dmitriy Yakimenkov, Information Technologies Service, and Vladislav Zukhin, Engineering Service. Discussed were the issues related to the port industry reform, its pluses and problems, prospects of operation and development of Free Economic Zone, dissemination of the Odessa Port experience concerning the implementation of the port community information system (PCIS) at other ports , development of capacities of the ports, etc.
Three months have passed since the day when Law “On Sea Ports of Ukraine” entered into force. This, according to Yu. Vaskov, is a small period of time. Therefore, it is too early to speak about any outcomes.
“Moreover,” Head of the Department stressed, “that there is nothing to compare with. After all, the port industry is reformed for the first time” the Head of the Administration noted. “SE ASPU performs the basic functions prescribed by Law: adequate accumulation of revenues from ports’ activities, their target usage and implementation of the Strategy of ports’ development. But we continue to improve our work, and the ports – theirs. And this is understandable as the economic situation is changing. Therefore, on the one hand, the Administration is actively working, and on the other hand, the legal sphere is being adjusted in accordance with the new structure”.
“According to Law ‘On Sea Ports of Ukraine’ port ceases to be a legal notion and becomes a geographical one. As a result, all business entities located in the territories of the port must become a part of its composition. How does this process take place?”
“Indeed, the Law reads that ‘the boundaries of a seaport are the boundaries of its territory and water area.’ In accordance with the transitional provisions of the Law, any enterprise called ‘marine terminal’ and located on the coast within the borders of Ukraine, processing any goods, having docks, transhipment equipment and allowing to service ships and cargoes should be included in the territory of one of the eighteen ports. However, this is not an instantaneous process – it takes time. The central executive authority carries on the dialogue with the marine terminals determining their reference to some concrete ports within whose boundaries each of them should be located. The emphasis is placed on the fact that all marine terminals are required to have “connection” to a specific port. A Draft Resolution of the Cabinet of Ministers concerning the port territory is being approved now. At the same time CMU has approved the Resolution on the water areas of eighteen ports and the list of ports, which can be entered by the foreign vessels. Thus, all the activities of the industry subjects from now on will be normalised. From the point of view of the state it is definitely the correct approach. Serious companies planning their capacities long-term development have already decided on their choice and confirmed their consent to be referred to a particular port. For example, ‘Avlita’, ‘Nika-Tera’, TIS, ‘Nibulon’ and others. Such companies see more “pluses” than “minuses” in joining the ports.”
“Can we say that the industry reform enabled systematization of the marine terminals’ work?”
“The Ministry of Infrastructure and SE ASPU did a great job thanks to which 153 marine terminals were revealed in Ukraine.” A. Golodnitskiy continued the conversation. “Under the Law provisions marine terminals that existed before 13 June of this year shall be subject to mandatory inclusion in the territory of the ports. As a result, some lands and water areas that had previously not been formally assigned to the ports were included in their territories. For example, for the first time in the history of independent Ukraine the territory and water area of the Kerch Sea Port were designated... The list of terminals not included in the Register has been submitted with the Ministry of Infrastructure for inclusion in CMU Resolution. If before Law ‘On Sea Ports of Ukraine’ entry into force some private operators had avoided providing information on their territories, then now everyone understands the need to respect the norms of the Law and joins the specified port. Because it is the key to their normal transparent work. A big “plus” for the private owners is their participation in the ports’ councils that among other issues consider the development of the ports, government regulations, etc.”
“What are the preferences gained by marine terminals when getting into the area of responsibility of a specific port?”
“A simple question,” Yu. Vaskov noted, “What is better for a private trader – to be within the boundaries of the port or without them? There used to be the terminals, which were located in the territory of some enterprise and transhipped cargoes being subordinate to nobody, captain of the port included. At the same time, no one doubts that each population aggregate and each enterprise of any form of property located in the territory of the Region should be subordinate to the Regional Administration, which, in its turn, is responsible for the condition of the traffic roads, communications, budget, territory development, etc. Now imagine that some village is not subordinate to any administration. It is clear that any development of this village or the welfare of its people is out of the question. The same thing happens in the port industry. What kind of port development strategy or balanced transport policy can be spoken about, if you have no clear idea about the number of terminals available in the industry and what economic activities they carry out? Unfortunately, due to the experience of the past years many investors treat all novelties introduced by the state with distrust. The task of ASPU is to prove that by joining some concrete a private investor gets a great opportunity for development. But the most important things are the possibility of getting port fees, provision of navigation safety, declared depths, more civilized status for cargoes and their owners of a participant of the geographical sea port, application of innovations that we are trying and implementing in conjunction with the Ministry, etc. And with all those no one seeks to change the form of ownership of private terminals or interfere in their business activities. What is at issue is just how to systematize the work of the private business.”
What the Administration of Sea Ports of Ukraine is dealing now,” V. Voronoi continued the thought of Head of the Department, “is an attempt to develop a systemic approach to the development of the port industry. In my opinion, before the Law entered into force the port were growing chaotically. Today we are trying to develop the rules of the play, procedure and system of the work. All the facilities available in Ukraine have been audited. At present a register of marine ports and terminals is being made up. This will be a unified database, which you can enter and see the number of terminals, their capacities, what depths they dispose of, which cargoes they can process, who operates them, etc. In order to know in which direction ports should develop or build no unpromising moorages, a special research team for analysing the problems has been organised. Quarterly the experts analyse all the information, monitor all traffic flows, their movement, the condition of the market, the situation in the Black and Mediterranean Seas, track all changes in the legislation, etc. It is especially topical to do all that as the Port Development Strategy is made up for 25 years. Another important aspect is the drawing up the rules governing the operation of the ports. Most of them were developed in the days of the Soviet Union and continued to operate until recently. The Ministry of Infrastructure and ASPU approved the Rules of Services Provision in the Sea Ports and the latter has already partially replaced the Rule 4-M (the General and Special Rules of Cargo Carriage, Ed.), which were last changed in 1991. There are still a number of guidance documents and instructions that regulate the provision of services at the ports, which have not been revised since the Soviet times. At present the experts of ASPU in conjunction with UkrNIIMF prepare the requirements specification for the next few years in order to change those documents.
“How do you see the further development of state-private partnership?”
“One of the most important tasks of ASPU,” B. Voronoi continued, “is direct support of investor on each investment project including the concession ones. The investors, especially the foreign ones, do not always able to track the current amendments to the standing legislation. This is done by our experts. They can also give a hand with the making of the so-called road map and to act as a guide. I know from experience that some of the projects were not implemented in their time due to the fact that the investors were out of their bearings in the coordination procedures. How will these projects develop? It should be joint work. The investor designs the infrastructure on shore. Our task is to ensure the safety of navigation, required depths and keeping them at the proper level. As a result, this will increase the number of ship calls and, in consequence, the port charges, as well as the volumes of the processed goods.”
“In accordance with the Law on ports the main form of state-private partnership is concession. Are there any projects on transferring integral property complexes to concession, and at which ports?”
“The feasibility study for the construction of STC (specialized transhipment complex ) in the Port of Yuzhnyi has become a forerunner of the future concession project,” A. Golodnitskiy said, “The feasibility study was developed with the participation of experts and presented in August jointly by Acting Director of SE Sea Port of Yuzhnyi and Chief of Administration of Sea Port of Yuzhnyi at the meeting of Concession Commission set up at SE ASPU. Soon a verdict on the expediency of the project implementation will be brought in and submitted with the Ministry of Infrastructure. In the case of a positive decision after all the necessary procedures the feasibility study will be offered to potential investors. There are offers from investors including the foreign ones directly received by the branches of sea ports administrations of the Ministry of Infrastructure.”
“How relevant today is the establishment or re-establishment of the free economic zones at the ports?”
“The Law clearly states,” Yu. Vaskov said, “that free economic zones may be established within the borders of sea port. In the long term success of each sea port development will depend on whether it has a special status. Under current Law “On the Basic Principles of Special Economic Zones Functioning”, 2000, the main preferences were determined for each zone by separate laws. There are two additional laws governing the activities of SEZ: on SEZ “Porto Franco” (Freeport) at the Port of Odessa and SEZ at Reni Port. But in 2005 the Law on the Budget eliminated all preferences for SEZ. De jure such zones exist, but they have no benefits. Therefore, the legislation needs improvement. We have prepared the amendments to this Law. Now it is offered to determine which areas adjacent to which seaports may be reserved for acquiring special status. Among other things SEZ is an actual mechanism for attracting transit. Raw materials come to these areas, are processed in them and then transported from the SEZ territory to various countries. And that means creating jobs, attracting investments, etc.”
“What is the situation with the establishment of clusters on the basis of sea ports?”
“Clusters already exist de facto,” Yuriy Vaskov says. “For example, around the Port of Odessa, in Adzhalyk Liman (the Port of Yuzhnyi); clusters are actually functioning in Ilyichevck and Nicholaev Regions. There is a cluster in Dunaiskiy Region, too, but unfortunately it is depressive. Our task is to ensure that these clusters develop and new jobs are created. Ports councils including business representatives have been established at all ports and, in a sense, they are the official representative of clusters.”
“About 5 months ago the Port of Odessa has introduced at the port the industry's first port community information system (PCIS). On 3 July CMU supported the initiative of the Ministry of Infrastructure and adopted a Resolution amending Resolution # 451 dated 21 May 2012. The essence of these changes is that the control and clearance of goods in Ukrainian ports will be optimized and caused to conform to European standards. The system will be mandatory for all ports, freight forwarders, agents and other participants in the transport process. What are the prospects of implementing PCIS in other ports?
“In accordance with Order of Chairman of SE ASPU,” V. Voronoi told, “a working group for implementation of PCIS at Ilyichevck Port has been established. Working places have been equipped and networks have been laid. From 23 September the test operation of the system will be started for those forwarders who wish to participate in the experiment. At the Port of Ilyichevsk the electronic system will operate in test mode in parallel with the paper documents until the end of the year with the participation of all shipping companies. What will the implementation of the PCIS first phase give to business entities? Just as in the Port of Odessa the most important thing is the possibility of registering the application for cargo clearance. The operating procedure stipulating that not more than two hours should pass from the time of the client’s application has been agreed with the Pivdenna Customs. Another important factor is that the paperwork time is reduced: sitting in the office the forwarder, after logging in, processes the documents. In the same system and in accordance with the existing procedure the customs officer must make the necessary formalities within two hours so that the freight forwarder may see the result.”
“Will you tell us about the prospects for the ports development concerning the engineering part?”
V. Zukhin, Chief of the Engineering Service,
“It is the Law on Ports which aims at the development of the infrastructure through the port charges targeted usage. The monies obtained in the form of port fees should be allocated for maintaining the depths and construction of new state infrastructure projects. When there appears an investor whose development plan is recognized as effective one, the expediency of maintaining the adequate depth, construction of new channels or berths is determined in view of the port or adjacent territories. Unfortunately, not in all ports the depths correspond to those, which are shown in their passport of hydro technical structures. At the same time, these same enterprises are not provided with sufficient volumes of cargoes. In all probability, in this case it is necessary to make trade-off decisions in order to save jobs. The situation is similar with moorings. The ports’ development programs provide for overhaul and modernization of the berths. But first it is required to determine the economic feasibility of such works. Now we are drawing make a plan for 2014, in which, where possible, we will take into account the projects included in the development plans by the managers of port administrations. In the first place we will focus on the work related to the safety of navigation and operation of hydro technical structures. Anyway, the approach to the modernization and dredging in each particular port will be the individual one.”
G. Garas, Chief of the Fleet Service,
“In connection with the port industry reform on SE ASPU has entered in its Balance Sheet 165 units of the fleet providing services within the port water area and involved in levying port charges. The audit showed that the fleet are in various conditions. Proceeding from this we make a decision on the ships’ repair feasibility. A separate question is the fleet modernization. We have a large deficit of icebreakers – just one ship “Captain Belousov” built in 1954, which was seriously upgraded in 2007 in conjunction with the Dutch Company “Damen”. It was in winter of 2011-2012 when we felt the lack of icebreaking fleet. So, today we work on the decision to purchase an icebreaker. Besides, we accumulate the information about dredging fleet, which we also need. But everything will depend on the development program, which is now being formed in consideration of the fleet partial renewal, too. The main thing is that we must provide for the ice campaign of 2013-2014.”
A. Golodnitskiy, First Deputy Chairman of SE ASPU,
“The prospect of the industry development in general is based on the development plans of each of the eighteen ports. And, as we have already said, the word “port” is used as a geographical notion. The best option is to observe the balance between the production capacities and cargo flows. Besides, we are determined to return the lost transit cargo flows. The first steps towards the development of the first concession agreement have been taken. The Administration of Sea Ports must ensure equal access to port infrastructure objects for all market players. Presumably in a month and a half the Development Plan for all eighteen ports will be composed.
Interview by Tatiana Ovrutskaya
“Transport” # 39 (779), 2 October 2013