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Landlord Port: Ukrainian context

Volodymyr Shemaiev, Head of Strategic Planning Department of the SE ‘USPA’
10 January 2020

Ukraine has already moved away from strictly state ports - model appropriate for previous stages of development

‘Management of the Ukrainian ports does not comply with any of the four classical models’, consultants of the World Bank noted in their report concerning analysis of the use of port territories and recommendations for approximation to the landlord-port management model in the Ukrainian context. Itmeans that Ukraine has already moved away from strictly state ports - a model inherent in previous stages of development, and actually has ‘private ports’ with operational water areas. At the same time, the vast majority of ports operate on the ‘landlord-port’ model constringed in the land functional.

Figure 1. 4 Main models of port management in terms of international practice (analysis of the World Bank)

Essence of the landlord-port consists in the following:

  • port administration, which has the right of ownership or in any other way (trust property from authorities, leases, etc.) exercises control of the use of port territories, is responsible for planning and integrated development of the ports;
  • private port operators conduct stevedoring activities under concession agreement or lease of assets and land agreement concluded with the port administration;
  • while investing in modernization and development of the infrastructure of port industry, the sea port administration on the conditions of public-private partnership has the right to provide investors with port infrastructure facilities as well as land plots for construction, whereas the investors have the right to operate constructed terminals within specified time period after completion of which they may eitherextend the agreement or return land plot together with the terminal.

Ukraine is an Eastern European maritime state and one of the largest suppliers of agricultural products in the world, most of which are exported by sea.

At the same time, Ukraine lacks a balanced mechanism to manage and plan development of the sea ports aimed at using territories efficiently, harmonizing interests of the state public, municipal and private sectors as well as attracting investments.

The World Bank report indicates that approximation to the landlord-port management model will facilitate further development of the port industry of Ukraine in favour of the national economy, heighten interests of the investors and port operators as well as local population.

It has proved itself positively in the international practice and is applied in most leading ports in Europe and in the world, such as Rotterdam, Antwerp, Singapore, Riga, Constanta and Gdansk.

It is a logical follow-up of the reform of port industry started in 2013 stipulating a comprehensive approach to planning and use of the port territories. At the same time, the reform should not foresee amendments in the rights of existing investors regarding relations of the land ownership in ports.

In the process of reforming, it is necessary to take into consideration Ukrainian context. Ukrainian ports are the territories which are used by different entities (see Fig. 2) and which, apart from existence of the port development plan stipulated by the Law of Ukraine ‘On Sea Ports’, do not involve system planning and management within the context of land.

Fig. 2. Absence of consolidated land ownership and land use in the sea ports of Ukraine (through the example of  Pivdenny sea port)

The system of involvement of the local authorities in development of the sea ports of Ukraine is incomplete as well, in particular it concerns allocation of the land to set up new transshipment facilities, and arrangement of their connection with the main lines of communication. This situation complicates application of the world’s best port management practices in Ukraine.

Nevertheless, certain steps have already been taken towards approximation to the landlord-port model in Ukraine. In 2013, the Administration of Sea Ports was created with its branches - port administrations that do not transship cargo and provide market participants with access to the strategic infrastructure. Two ports have already obtained certain boundaries - Belgorod-Dniester (in 2018) and Mariupil (in 2019). The state is withdrawing from the stevedoring segment and concession tenders are holding in the ports of Olvia and Kherson where the USPA will be a party to the contract on the side of the Ministry of Infrastructure vested with certain monitoring and control functionality as well as operating bottom dredging functionality.

On the way of reforming the USPA, it is anticipated to:

  • improve regulatory environment including amendments to the Land Code;
  • carry out inventory of port lands, including determination and attaching at the legislative level of the boundaries of port territories as well as formation of a ‘land bank’;
  • improve mechanism of management of the USPA by virtue of enterprise corporatization;
  • entice local authorities into the activities of port councils, and following corporatization of the USPA into participation in pilot projects of the common ownership by individual port administrations.

Approaching to the landlord-port management model will allow port administrations to perform effectively functions of port planning and development, ensure further increase in the competitive environment in port industry of Ukraine, and therefore will facilitate its quality development.

At present, Ukraine has an opportunity to reform port industry in order to achieve maximum level of its effectiveness as well as further extension of the scope of international trade.

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