TRANSPORTATION IN UKRAINE

by Serhiy Rabeshko

Located astride major trade routes between Europe, Central Asia, and the Middle
East, Ukraine has great potential as a crossroads for freight moving between some
of  the fastest growing markets in the world.  Whether it becomes such a
crossroads depends largely on the country's abilities to restructure, modernize, and
privatize its transportation sector.  To succeed, Ukraine must address a host of
issues, including the erratic supply and high price of fuel; the shortage of spare
parts; outdated customs infrastructure; and the lack of modern technology and
equipment needed to successfully adapt to changes in the composition of  freight. 
The Ukrainian Ministry of Transportation attributes the current decrease in the
volume of shipping to a decline in the production of goods usually transported by
the Ukrainian transportation network, including  raw materials and heavy capital
goods.  To attract new business, a selective overhaul of the transportation system
will be essential.  Such an overhaul offers commercial opportunities for U.S.
engineering, construction, architectural, transportation, and heavy equipment firms.

Rail
Rail transport plays an important role in connecting Ukraine's industrial and urban
centers, and port facilities with neighboring countries.  Four major railroad lines run
through Ukraine.  The heaviest concentration of track is in the Donets Basin and
the Dnipro (or Dnieper) River provinces.  The largest railroad centers are Kharkiv,
Kiev, Dnipropetrovsk, Bakhmach, Ysinoviataya, Debaltsevok, Kovel, and Kupyansk. 
Ukrainian railroad specialists contend that only 60 percent of the railroad network
capacity is currently being exploited.  According to recent figures, the volume of
goods transported by rail fell by 7.4 percent in 1995 when compared with the
previous year's figures.  

Although declining demand for rail transport services has resulted in some cutbacks
in state subsidies, the current monopoly rail carriers have little incentive to
modernize the system or improve the quality of rail transport services.  Privatization
of the railroad sector may be an important factor in attracting foreign capital
necessary to modernize and restructure this potentially lucrative industry.  Most
commercial opportunities in the rail sector will be in computerized car-control
systems, switching systems, track upgrading, refrigerated cargo handling, cost
accounting systems, and telecommunications.

Road
As with rail traffic, there has been a significant drop in the volume of over-the-road
freight shipments.  According to the Ministry of Transportation, non-rail surface
carriers will move approximately 163 million tons of cargo in 1995, compared with 
437 million tons in 1993.  Until recently, Ukraine's trucking system was based on
state-owned holding companies that acted as state monopolies operating regional
trucking enterprises.  Recent regulatory changes, however, opened the
transportation industry to competition from private enterprises and spurred growth
in service providers.  There are over 1,000 motor transport enterprises in Ukraine
today, using 80,000 trucks and other vehicles, and the country's road network is
likely to see a major growth in traffic over the next several years.  Trade and
investment opportunities in this sector will include long-haul trucks; road
reconstruction and  resurfacing; transportation and distribution software and
hardware; and transportation consulting services.

Seaports
Ukraine has 12 large ports serving international and costal trade.  Major sea ports
include Odessa, Yuzhny,  Illichevsk, and Mariupol.  Ukrainian port facilities  account
for a large volume of  freight that passes through the country.  Most of the ports,
however, have only limited capabilities for containerized, refrigerated, rolling or
break bulk cargos, or other general freight.

In order to take advantage of their proximity to expanding markets such as Turkey,
Eastern Europe, and the Middle East, Ukrainian ports will have to modernize their
existing facilities.  Opportunities in port development are likely to include,
construction of drydocks, ship repair and maintenance facilities, warehouses and
cranes, as well as computer software and hardware for cargo management.  For
more information on transportation in Ukraine, contact BISNIS at (202) 482-4655. 
Serhiy Rabeshko is with the Commercial Service of the United States in Kiev.

**Produced by the Business Information Service for the Newly
Independent States (BISNIS)