Andriy Pyvovarsky, the new minister of infrastructure, aims to improve corporate governance of major state enterprises in his domain. A former general director of the Continium group of companies, who also used to head investment banking department at Dragon Capital investment house, Pyvovarsky, 36, hopes to increase the transparency and efficiency of state companies and bring in competent managers.
State railway monopoly Ukzaliznytsia is having its assets audited, a move needed for its reorganization, according to Pyvovarsky. “I hope that by mid-year we will be able to switch from a system of (six) regional railway companies to a multi-branch centrally managed company,” he says.
The railroad will remain a state asset, while movable assets like rail cars can be privatized. “We need to develop movable assets. It’s very difficult nowadays to attract new international debt (financing). Private investors can do that, they can invest in railway cars and repairs,” he says. Ukrzaliznytsia issued $500 million in 5-year eurobonds in 2013 but no new deals like that can be expected nowadays, as access to capital markets is closed for Ukraine until the war in the east is over.
Russia’s war against Ukraine has inflicted massive damage to infrastructure in Donetsk and Luhansk Oblasts. Perhaps, the biggest loss is Donetsk airport, which cost $750 million, most of which came from the state budget, as part of preparations for the Euro 2012 football tournament. When asked about losses and the plan for reconstruction of the Donbas, Pyvovarsky says the ministry “will work out plans when military actions are over…It’s difficult to assess real loss because we don’t have access to some of the territories, but it’s substantial.”
Ukraine’s government recently allocated Hr 10 million ($625,000) for restoration works and financial assistance to the injured and families of killed in Mariupol shelled by Kremlin-backed insurgents on Jan.24. “For reconstruction of the Donbas a much bigger sum will be needed but right now I would prefer not to give any (numbers),” Pyvovarsky says. Currently the ministry is also working on assessment of infrastructure losses in Russia-annexed Crimea.
In January, Germany provided a 500 million euro loan to Ukraine which will be primarily allocated for reconstruction of infrastructure in eastern Ukraine, as Prime Minister Arseniy Yatsenyuk said. Pyvovarsky hopes to attract more financial aid and investment at the upcoming donor conference planned by Ukraine and the European Union in spring. “We have substantial investment potential in port, road infrastructure which should be unleashed,” Pyvovarsky says.
The ministry is currently working with foreign and local investors on several projects on transferring grain in the ports. There is also a number of projects for toll roads in western Ukraine. “The state has no money to invest in road construction. To develop roads we need to have toll or concession roads and I hope that in February we will suggest several ideas to investors,” he says.
Airports also need help. Ukraine has been facing considerable decline in passenger flow spurred by military actions in the war-torn east, according to Pyvovarsky. Ukraine’s largest international airport Boryspil, which serves more than 60 percent of air traffic, has lost 13 percent or 1 million passengers in 2014, compared to the previous year.
“The ministry should do everything possible, so that Boryspil airport becomes a real European hub, not just local airport. We also have to pay special attention to Lviv airport which has the potential to become a hub for low-cost air carriers,” he says.
Ukraine plans to sign the Open Sky Agreement with the European Union which is supposed to make connections with 28 member sates easier in terms of paperwork and licenses, attract new carriers aand introduce stricter safety regulations. “I hope we will sign it this year. We are hostages of the issues between Spain and Britain over Gibraltar. Europeans have to solve domestic problem and then we will sign it.”
In the meantime, recruitment for the new management for both airports, Ukzaliznytsia and the state postal service Ukrposhta. started. Experts from Deloitte, Talent Advisers and EBS are engaged in selecting candidates according to Pyvovarsky. Audits are also planned there.
Pyvovarsky was praised by Yatsenyuk as a “person who’s known in Ukraine as the one who can make changes,” when he was appointed as a minister in December. This decision at the same time fueled concerns over possible influence by his former Continium employer, which has controversial lawmaker, millionaire Igor Yeremeyev, who supported so called “dictator laws” during the waning days of ousted president Viktor Yanukovych, among its shareholders. Pyvovarsky says it won’t affect his work. “My moral and ethic norms would never allow to influence business processes of any companies within the ministry.”
Kyiv Post staff writer Anastasia Forina can be reached at [email protected]
