For the last few years China has been actively promoting the “One Belt – One Way” initiative in order to consolidate its presence among the countries, including Ukraine.
As a result, during these few years many ambitious joint projects between Ukraine and China have been announced, but the question – “will we see Chinese investments?” – remains unchanged.
In order to understand, first of all, where the Chinese billionths of investment and, secondly, whether we can find real prospects for implementing the announced projects, last week in Shanghai and Beijing we raised the issue of supporting infrastructure projects in Ukraine in the framework of the “One Belt – One Way” initiative together with Vice Premier of the People’s Republic of China Liu He, the leadership of the State Committee for Development and Reform, the Ministries of Transport and Commerce and the Eximbank of China.
During the Intergovernmental Commission in December 2017, China announced an investment of $7 billion to the economy of Ukraine. Most of them simply hang in the air, part is at the stage of agreement, and others only at the initial stages of implementation.
Air Express
The famous “Air Express” is a Ukrainian-Chinese railway project between the capital of Ukraine (Kyiv) and the Boryspil airport. The China National Complete Engineering Corporation project was expected to experiment a great growth – it was planned to purchase a new rolling stock, support with electrification and build underground terminal for $372 million in lending.
In practice, there’s only a name remained from Chinese loan, because Ukrzaliznytsya commissioned the whole project at its own expense. We have terminated the loan agreement and are negotiating now the termination of the agreement between Eximbank of China and the insurance company Sinosure (for the further repayment by the insurance company of $36 million to the State Enterprise “National Aircraft Express Project”).
Roads
As for today, Ukravtodor has agreed three contracts with Chinese construction companies to perform works on the highways in Ukraine.
In October 2017, within the framework of a joint project with EBRD, between the State Road Administration of Ukraine and Xinjiang Communications Construction Group Co., Ltd. two contracts were concluded – one for an amount of about $38 million for improvement of traffic safety on the motorway M-12 (Khmelnytsky region), and the second – about $57 million for carrying out major repairs on the motorway M-03 (Lubny – Poltava).
In addition, in November 2017, in the framework of a joint project of EBRD and EIB, a 42 million euros contract was concluded between Ukravtodor and Sinohydro Corporation Limited for the reconstruction of M-06 motorway (Kyiv-Chop, bypassing the city of Zhytomyr) with the projected date completion of work – 20.06.2020.
However, both (!) these companies show extremely low rates of work, which means the risk of delays in the implementation of international projects in Ukraine.
Ports
Concerning ports, Cofco, which successfully operates terminals in the ports of Mykolayiv and Mariupol, expressed its readiness to provide additional investments in 0 berth of the Mykolaiv port and annual logistics to $30 million.
China Harbor has successfully implemented 2 bottom-dip projects in the ports of Yuzhny and Chornomorsk that cost more than $50 million in a total.
So, where is the problem hidden?
For most of the projects Chinese companies want to have state guarantees, and we, on our side, need to use the mechanisms of public-private partnership and concessions. There is a difference in the legislation of the two countries: we can announce tenders after signing loan agreements. Eximbank of China insists on the definition of general contractors during the application for a loan.
As a result, the projects seem to exist, and there is also a certain mechanism of cooperation! But the work is not moving from the dead point, because no one was engaged in these projects by the Government of the People’s Republic of China or is engaged but working in a very slow pace.
First of all, we need to move on to practical steps to implement the relevant projects, since Chinese companies are currently implementing infrastructure projects for the budget of Ukraine and with support of the EBRD and the World Bank loans.
The realization with Eximbank of China of the first pilot projects under loan agreements at a preferential rate of up to 3 percent per annum, is extremely important (previously we attracted funds on commercial terms at 6-7 percent).
Perspectives
However, Chinese state-owned companies are quite active in the preparation of infrastructure projects:
CRBC has prepared a project for the construction of a bridge over the Dnieper river near Kremenchug and a 1-line concrete road Odessa-Nikolaev-Kherson. I hope that the work on these projects will be more active, because they are extremely important from the point of critical infrastructure and we have been doing them for the second year.
CCCC is preparing a project to reconstruct 2 runways at Boryspil airport. By the way, Chinese air carriers (actually, it was Air China) met the proposition to make direct flights to Kyiv from Beijing and Shanghai quite positively.
The project of the fourth branch of the subway in Kyiv is quite complicated since it needs a large loan. China Railway has handed over a preliminary FS $2.5 billion USA.
In my opinion, it is better to divide the project into stages and, in the first instance, complete the construction of Podilsky-Voskresensky bridge. Only then we will be able to develop a feasibility study and look for sources of financing for the construction of the subway to Troieschyna.
CRRC Datong is preparing an investment proposal for leasing and a joint venture for the production of electric locomotives for Ukrzaliznytsya.
Another extremely important thing that we need to work on is the development of transit from China to the EU. Already this year 6,500 containers were transported to Austria and the volume of freight traffic under TMTM is increasing, therefore investment projects on the creation of multimodal terminals on the border with the EU (Lviv, Kovel and Uzhhorod) are our priority.
We also had agreed on signing the agreement on road transport to the next forum “One Belt – One Way” in May 2019, which is definitely a good step forward towards future Chinese-Ukrainian projects development!
