Ukraine's port industry: failure and lack of prospects.
Despite state-funded PR campaigns, the Ukrainian port administration consistently shows a decline in workload. The slight overall increase in export volumes of sunflower oil, grain, and containers is unlikely to be the work of the port workers, much less the administration. This is a result of the global market situation and the specific nature of the Ukrainian economy, nothing more. In all other respects, there is a failure and no prospects.
We've previously detailed how port authorities manage the property entrusted to them. For example, "The Failure for Which No One Was Responsible" and "If You Can't Swim, Don't Torment the Sea."
It's worth noting that the Odessa Port container yard, into which billions of public funds were "poured," has stood empty for three (three!) years, and the breakwater, sunken into the sea (for which no one was held personally responsible), has become a special calling card of the Hero City. This is in addition to the Hero of Ukraine star awarded to the port director, who initiated and partially implemented this utterly disastrous undertaking. The photos are recent, no one has been held criminally responsible, and the state, naturally, is completely at fault. The newly built berths are becoming overgrown with weeds, and the breakwater continues to sink into the seabed under the pressure of the waves. And this winter, naturally, no one will do anything about it: storms...
The red arrow indicates the "sunken" breakwater in the Odessa port, which cost the treasury hundreds of millions of dollars.
Recently, the topic of dredging in state-owned ports has also appeared in the press. Here, it's important to distinguish between operational and permanent dredging. Operational dredging is mandatory to ensure the passage of vessels to berths and is promised by the state to both foreign and domestic captains. Permanent dredging, on the other hand, is done "at the request of those who wish."
Corruption is possible with any type of "digging," but major dredging offers a perfect opportunity to satisfy any embezzlement desires at the state's expense. For example, active "major digging" at the Yuzhny port in recent years for vessels with a capacity of nearly 200 tons has not resulted in an increase in cargo handling at the port, especially at the berths for which the dredging was performed. Several large-capacity vessels were loaded, but overall, the handling volumes decreased by 20-35%. Why spend billions on dredging if cargo turnover is not growing?
It should also be clarified that port fees and loading/unloading charges are almost directly related to the volume of cargo handled. Port fees are calculated based on the length of the vessel and are virtually identical for four 50,000-ton vessels and one 200,000-ton vessel. This means that for Ukrainian ports, handling just one vessel or four smaller vessels doesn't provide much benefit. The main beneficiary is the exporter, for whom sea freight costs are significantly lower for a larger vessel.
One could, of course, argue and argue that the additional dollars earned by Ukrainian exporters also represent state revenue. But in our country, this is absolutely not the case, because every self-respecting exporter (including the country's President) has an offshore company. And to accumulate export revenue, they, the exporter, "bring" to Ukraine only what is truly necessary for Ukrainian business to cover expenses and taxes. The difference, naturally, ends up in the offshore company, far from Ukraine. And any savings on sea freight for the exporter also remain in the offshore company. That's how our economy works.
Yes, the state, represented by the port administration, can undertake major dredging for any interested party, but it's not a given that this exporter will bring in additional, significant funds to Ukraine. So why bother with major dredging at the expense of a state-owned enterprise? Because billions are at stake. They could at least try to secure kickbacks from dredging. Dredging in Ukraine has become a two-stage scam: taxpayer money wasted on pointless waste heaps, ending up in the pockets of the organizers, and also a PR stunt for the Sea Ports Administration. "We're working hard and looking to the future!" they say.
And here's the new "equipment." This summer, the port administration holds a billion-ruble tender for a "capital project," and the Prime Minister then orders: "Cancel... Only through Prozor." Alleging corruption.
Corruption must be addressed, of course. But who will even assess the need for new dredging? What is it for? Is it merely to implement the memorandum signed by the previous minister, A.N. Pivovarsky? But this memorandum still has very, very questionable benefits for the state.
Let's get to the bottom of it. They're planning to dig for ships with a draft of up to 22 meters. Again, billions. This means ships with a deadweight of nearly 250 tons. Where? At the grain pier. Has anyone ever loaded 200-250 tons of grain in one shipment? No, that's never happened in the history of Ukraine. And in the history of shipping in general? I couldn't find any such facts.
After all, ships with such a draft not only can't pass through the Suez Canal and must skirt Africa on their way to China, but are sometimes forced to round Australia, as they're too small to pass through the Strait of Malacca. And to load such ships with grain, without a firm contract or any certainty that such work will be carried out, is it necessary to spend billions on dredging at public expense? Even if there's no corruption in the tendering process itself, those who initiated this "equipment" should immediately be subjected to lengthy and careful questioning as to why the state needs it and what the actual purpose of this "equipment" was.
And three comments at the end.
1. To load large vessels, offshore loading to the required draft is used very effectively worldwide, and in Ukraine in particular. Yes, in this case, the exporter will lose $4-5 per ton of their product and will be forced to reduce their offshore demand. But if the state spends several billion hryvnias dredging the seabed for this exporter's cargo, is anyone in the government confident that this won't be just a waste of money? There's no certainty or evidence of this. Billions will simply be wasted. And what difference does it make whether corruption is involved or not, whether billions are wasted in a country at war through Prozoro or not?
2. Around the world, bank financing is often sought for such projects. Not only because the organizers themselves lack the funds. This is perfectly fine with the state-run Port Authority: public funds are plentiful. In civilized countries, banks are attracted, if only because they can have the business plan re-evaluated by third-party experts, its ROI, and distribute responsibility and losses if the project doesn't go according to plan. Here, however, the Port Authority decides for itself what and where to dig, the ministry approves, and in reality, no one is held accountable. Isn't the Odessa container terminal and the hotel in the center of the Odessa port, which has been empty for years, proof of this completely criminal system of decision-making and the use of public funds in ports and port administrations?
3. Fact: cargo traffic at the Yuzhny Port fell in 2016. Why did they spend billions on it in previous years?
P.S. The figures in the tables are “reduced”, i.e. for the first 9 months of 2015 and for the same period of 2016:
Conclusion: the Port Authority created by Yanukovych needs to be closely monitored. So far, this administration has successfully carried out all the kleptocratic functions of "embezzling" public funds assigned to it by the Yanukovych "Family." However, oversight of the port industry is weak: criminal schemes are being established, developed, and strengthened. Unfortunately, this applies to any minister.
Measures are needed. Post-factum, with the pursuit of those involved abroad, is a poor option.
Alexander Zakharov, coordinator of the NO to Corruption in Transport Movement, specially for the Argument publication
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