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Which reforms does the port business want: report from the Transport Forum

16 August 2019   Andriy Muravskyi

Participants of the Forum outlined major problems of the industry and their solution

Which reforms does the port business want: report from the Transport Forum

On August 13, Forum ‘Transport as a Mirror of Reforms in Ukraine’ took place in Kyiv. The event gathered a full hotel hall of the audience. Vast majority of the present (that is more than 170 people) were representatives of stevedores, ship owners, marine agents, etc. It is crucial that the event was attended by three newly elected deputies, although, as the forum moderator, Volodymyr Shulmeister noted, ten representatives from the Servant of the People political party promised to come. Since a purpose of the event is to help them to understand what problems exist in the transport industry and how they can be solved in the session hall. In addition, to draw attention of the President of Ukraine to these problems as well.

Forum began with a discussion of the issues related to activity of the Maritime Administration. Director of Tranship Service, Ivan Niiakyi, called it as the most odious structure in the industry. ‘Our industry has the worst luck with the regulatory authorities: before the Maritime Administration, there was Ukrtransbezpeka whose inspectors came to foreign vessels and asked: ‘Well, what have you got there?’, And before that there was Ukrmorrichinspektsiia, abbreviated as UMRI. They were suppressing and supressing but we managed to stay afloat’, the speaker said with irony. He noted that the Maritime Administration has only been operating for a year, but over this year the new structure ‘managed to create complete confusion in all functions that it is to perform’. ‘Failed reform of the captaincy, problems with certification of the seafarers, attempt to unite two different scientific institutes into one’, he listed the issues well known to representatives of the industry, but probably not yet known to the deputies.

Representatives of the industry told deputies about acute problems

Pursuant to Article 77 of the Merchant Shipping Code, the harbour master shall be appointed by order of the Minister of Infrastructure upon recommendation of  the head of the Maritime Administration. In May 2019, all harbour masters were dismissed by the Minister and new ones were not appointed. This is a criminal offense: at present, there is no supervision in the ports, and all documents issued to seafarers by the pseudo-harbour masters are illegal. The solution is to reinstate harbour masters to their positions and reform captaincy by establishing a state-owned enterprise which would include all harbour masters with their services as well as would supervise merchant shipping and deal with certification of seafarers’, Niiakyi stated.

Thereafter he proceeded to the issues arisen in connection with the newly established service centre for seafarers. The services which seafarers received in the diploma and passport offices of the ports are now provided at an additional cost by the state-owned shell company. Maritime agents received letters informing that now all arrivals and departures of the vessel should be performed only through Morrichservis for a fee. Although this service is a non-profit and is to be provided by the captain authorities. Consequently, Morrichservis should be eliminated.

One of the underlying causes of the problems, which the forum participants see, is a lack of professionalism of the management of the Maritime Administration. ‘Since ‘a fish rots from the head’, it is necessary to change head of the structure - it should be chaired by ‘a person with an impeccable reputation who is well known in the industry’. For this purpose a transparent tender for filling a position is required,’ underlined Ivan Niiakyi.

Ivan Niiakyi

 ‘You may and should use us both as a stick and as a carrot for the market. However, we have to comprehend clearly what problems exist and how we are going to solve them. When there are contradictions in regulations of the laws - we understand how to solve this. If there are ineffective managers, we will control the government so that they monitor the situation and you, as representatives of the business, will not allow such managers to be at the helm’, said in his turn the deputy Vladislav Krikliy.

During discussion, it turned out that the newly elected deputies do not understand all the nuances of these issues yet. Therefore, representatives of the industry had to explain to the present people’s deputies that Morichservis is not an analogue of the service issuing a foreign passport when you have the choice to wait longer for less money or to have it sooner and with better service for a bit larger amount of money. ‘Morichservis’ is a state dump that provides no service but only collects fees’, says Shota Khadzhishvili, the Head of Risoil S.A. ‘Arrival and departure of the vessel should be executed in any case, port charges are paid for this. This is the control responsibility of the state. It is made-up service, a procedure that should be coordinated with international regulations’, added Mykola Kapatsyna, member of the Supervisory Board of Ukrainskyi Budivelnyk. ‘Two years earlier, when USPA was charging money for this service, the Antimonopoly Committee decided to prohibit to charge any fees for the vessel’s arrival/departure since they constitute a part of the vessel’s fee’, specified Tetiana Tytarenko, managing partner at Le Grant law firm.

Later in her speech, Tetiana noted that a certain trend is observed in the transport industry: state monopolists take advantage of their position and introduce obligations for counterparties by virtue of signing accession agreement. ‘This is an agreement where conditions are established by one party, and another party is not in position to offer conditions of the agreement and must fully accept what is imposed on it unilaterally. The USPA and the Maritime Administration have used such a tool, and in July Ukrzaliznytsia proposed its draft accession agreement’, stated Tytarenko and called, in particular, the Antimonopoly Committee to oblige monopolists to elaborate non-discriminatory contractual conditions, to include into the contracts liability conditions that would be commensurate with liability of the other side as well as to ensure transparent procedure for concluding agreements.

It is necessary to curb practice of imposing obligations unilaterally for counterparties as state monopolists do

Keynote of the event was that the business wants to have a possibility to influence decisions to be made by the government entities whose area of responsibility covers the industry. In this connection, Ivan Niiakyi put emphasis upon the disregard of business by management of the Maritime Administration. ‘The Head of the Maritime Administration, Mr. Petrenko, has never sat at the same table with us. It is necessary to establish a council under the Maritime Administration including well-known people in the industry who will be able to influence decisions taken by the Maritime Administration’, he stated.

Philipp Grushko, Head of Business Development for TIS-port, noted that the ASPU receives incomes from port charges. Although it does not directly affect the freight traffic, indirectly – it does, since it creates favourable or unfavourable conditions for the business operation. ’Financial plan allocating tens of billions of port charges shall be subject to public discussion. So that the rules of game will not be not adopted behind a closed door and later imposed on us - those who generate these port charges together with customers’, he declared.

 ‘There should be at least an advisory voice on behalf of the industry. With great difficulty, we forced our way to the government committee where the ASPU’s financial plan was being discussed. Representatives of the industry and American Chamber of Commerce managed to be there as well. We were given only three minutes to our questions. We had 19 questions. And everyone was surprised why we, owners of private business, came there as the state money were distributed’, Grushko emphasized.

Business wants to participate in decision-making by relevant government entities

 ‘It would be appreciated, for example, to create a platform on the basis of the Maritime Chamber where there were market participants responsible for drawing up amendments to the laws and delegated legislation, and thereafter submitting them through the deputies to the Parliament, furnishing them for approval through the new Cabinet of Ministers and so on’, added Kseniia Pidruchna, Executive Director of the Association of Maritime Agencies of Ukraine.

 ‘For example, it is necessary to amend the Law on Seaports of Ukraine and bring into conformity with the EU standards, i.e. with the framework principles of access to the port services market. In virtually all EU countries, port administrations publish their income and expenses as well as coordinate their plans with port councils or administration advisory bodies consisting of port supervisory board and all market participants who work in the sea ports’, she said.

Andrii Motovylovets

Deputy Andrii Motovylovets promised that while working in the transport committee he would endeavour to ensure ‘that no one - neither the ASPU nor the Maritime Administration - forget why they have been established’.

However, he asked all the present who applied for filling position of the head of the Maritime Administration or claimed membership in the Supervisory Board of ASPU. There were few of them in the hall. ‘I understand that those who submitted the application are not here right now. But I know many of you, and you have not participated in this. Until you come here and change something, nothing will change’, Motovylovets underlined.

Following speeches and discussions in the margins, it was clear that representatives of the industry were upset by the ‘failed attendance’ of the deputies. Nevertheless, lots of representatives have not lost their faith that it would still be possible to attain changes in connection with both bringing in line legislative aspects and changing management of the government entities – we’d like to believe that they will be replaced by people who will consider business opinion and help to develop such an important for the Ukrainian economy industry.

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