Amid Ukraine’s declared pro-European economic and political course, the nation hasn’t forgotten Asian markets as well.
On Oct. 7, experts at Kyiv International Economic Forum discussed future prospects for development of international cooperation between Ukraine and Asia.
The head of Chamber of Commerce and Industry of Ukraine, Gennady Chizhikov, said that, in the past decade, trade turnover with both Asia and the European Union has grown. According to him, in 2005-2015, trade turnover between Ukraine and Asian countries increased from $8.6 to $12.4 billion while turnover between Ukraine and the European Union increased from $10 to $13 billion
New Silk Road
Currently, Ukraine’s strategic goal is to establish a sustainable transportation link with China in the framework of Beijing’s New Silk Road project which aims to connect China with Europe via land and sea passageways.
Yevhen Kravtsov, first deputy minister of infrastructure of Ukraine, said that ex-Soviet countries don’t appear to be promising trade partners for Ukraine anymore. Due to geopolitical tensions exacerbated by Russia’s war against Ukraine, trade turnover between Ukraine and other ex-Soviet republics dropped from $10 to $7.8 billion.
And while Europe is an obvious vector for the future, European markets are very competitive, so Ukraine needs to find other options.
In the aftermath of Russia’s ban on the transit of Ukrainian goods through its territory to Kazakhstan and Kyrgyzstan imposed on July 1, Ukraine sought alternative routes to connect with China via Georgia, Azerbaijan and Kazakhstan.
Not only does this path allow Ukrainian exporters deliver their goods to landlocked Central Asian countries and Xinjiang region, it also provides opportunity for Ukraine to benefit from transit status on the way from Europe to China and back.
“In order to improve logistics, we have been working on making transit cheaper and reducing the time of delivery of the freight shipment from Ukraine to China. Once the tariffs are lowered, we need to develop common customs rules between participant nations,” said Kravtsov.
In January, the Ministry of Infrastructure ran test shipments by train and ferry from Ukraine to Dostyk station on the border of Kazakhstan and China. Now the delivery takes 7-10 days, and this transport corridor was proven to be technically feasible.
Kravtsov also reported that on Oct.7 that Ukrzaliznytsa signed an agreement with Kazakh railways to lower tariffs on transportation from nearly $6,500 for 20-feet container to $3,500. The public company hasn’t released an official statement yet by the time of this publication.
Asian investments
China is third largest trade partner of Ukraine after the EU and Russia. However, Ukraine is looking for other areas of non-commercial cooperation and trying to attract Asian investors into its infrastructure projects.
In May, Chinese COFCO Agri Corporation opened a new grain terminal in Nikolaevsky seaport with $75 million dollars worth of investments.
Next year Ukrainian government is planning to grant foreign companies a license to operate two seaports, Kherson and Oktyabrsky, in the framework of public-private partnership supported by the European Bank of Reconstruction and Development.
However, unlike maritime sector, Ukraine’s road and railway sectors are not ready for big investments yet, Kravtsov admitted.
“At present Ukraine needs billions of dollars for the development of its land transportation system, but it doesn’t have enough experience in managing them. There’s a need for new legislation, new management methods to work with large investments,” said Kravtsov.
Investor Singh Manmeet believes that Ukraine has to work on building credibility before it will be able to bring in Asian investors. Although the country has gone through significant legal reforms in recent years, it still lacks consistency in investment policy and success stories of foreign investments.
“The majority of foreign investors perceive Ukraine as a scary place. The only thing they know to a large extent is military conflict with Russia. Ukraine hasn’t marketed itself, nobody abroad knows any successful projects from here,” said Manmeet.
In his opinion, Ukrainian government should be more compromising in order to get first investors in by offering them preferential conditions and reducing bureaucracy.
He also suggested considering Asia not only as a potential investor, but as a prospective market too.
“Every time I’m in Ukraine I hear question “How can we bring foreign investors here?” What I don’t hear is “What Ukrainian entrepreneurs can do for Asia?” Whereas China and India alone are vast markets with the world’s fastest growing middle-class population, I think Ukraine has engineering capacity and qualified talent to create service products for Asian consumers,” said Manmeet.
