Conference organizers: Federation of Employers of Ukraine (FEU) and the Union of Entrepreneurs and Employers of Poland (ZPP)
Topics covered: Polish-Ukrainian economic cooperation in the areas of transport and logistics, trade, and infrastructure cooperation
Speakers Transcribed (Transcriptions start after summaries):
Valerii Tkachov, deputy director of the Commercial Department of JSC Ukrzaliznytsia (Ukrainian Railway)
Valerii Tkachov discussed how Ukrzaliznytsia has been impacted by the war, losing half of its cargo base and now transporting about 100-120 million tons annually. After Ukraine's ports were blocked, the railway became the main export route, but European infrastructure struggled to handle the increased cargo. The Greater Odesa ports have since reopened, redirecting much of the export flow.
Despite underutilization of western border crossings, he said, Ukrzaliznytsia is working on expanding infrastructure, especially towards Europe, and focusing on increasing container transport. Looking ahead, their post-war strategy includes rebuilding industries and aligning with European transport standards.
Andriy Smorodin, President of the Ukrainian National Platform 3SI
Andriy Smorodin highlighted Ukraine's unique opportunity to accelerate infrastructure development, focusing on integrating with Polish businesses through the Three Seas Initiative. He also mentioned leveraging modern technology, like advanced steel production and waste processing, to improve efficiency and reduce workforce needs.
He also stressed the importance of attracting investment, referencing a specific project for rehabilitating a hospital in Lviv for critical infrastructure workers.
Oleksandr Chervak, executive director of the Confederation of Builders of Ukraine
Mr Chervak highlighted the major challenges facing Ukraine's reconstruction, focusing on a severe labor shortage and a lack of financing. He said Ukraine has lost over 20% of its construction workforce, which has been further impacted by mobilization due to the war. Additionally, rising electricity tariffs and limited access to resources are significant hurdles.
Chervak emphasized the need for vocational training, retraining programs for women and veterans, and greater involvement of technical schools. He also pointed out that Ukrainian construction companies are ready to invest and scale up operations but will face a continued shortage of workers, potentially requiring labor migration solutions.
Viktor Dovhan, transport consultant and former Ukrainian deputy minister of infrastructure
Mr Dovhan expressed frustration over the lack of Polish investments in Ukraine, despite multiple forums discussing Ukraine-Poland cooperation. He said Polish businesses are cautious, often opening small offices but not fully engaging in projects or tenders due to perceived risks like customs issues.
He questioned whether Ukraine’s reconstruction will truly become the "project of the century," citing significant financial challenges, including the World Bank's estimate of $100 billion in damages and limited funding prospects. He emphasized the need for clear recovery plans and more active involvement from both the private sector and foreign investors, particularly in essential infrastructure projects.
Valerii Tkachov Transcript
"I’m glad to welcome everyone. Thank you for the invitation, and I'll try to explain step by step what has been happening since the beginning of the military actions and how things unfolded.
First of all, I want to say that indeed, when the military aggression against Ukraine started, before the war, Ukrzaliznytsia was transporting almost 100 million tons of cargo annually towards the ports of Greater Odesa and other ports. These 100 million tons were being exported. After this route was blocked, our only remaining path was to the West.
Therefore, in 2019, we actively developed and enhanced this alternative export route from Ukraine. We realized that today, we have a very limited capacity to export through the western borders. Why? Let's look at the numbers.
Today, Ukrzaliznytsia has 16 western border crossings, including four with Poland. In theory, we can transfer approximately up to 6.5 million tons of cargo through these borders. In reality, when we tested this in 2020, we found that we could only handle about 3.5 million tons per month via the western border crossings.
The problem is not unfinished crossings but rather that the European railway infrastructure could not accommodate these additional 200 million tons of Ukrainian cargo per year. Secondly, unfortunately, the nearest seaports in Poland and Romania did not have sufficient port capacity to handle and transship these 100 million tons of cargo.
We tested this, and after that, in 2019, thanks to the initial agreement on the Turkish corridor and later the unlocking of the Greater Odesa ports, these Ukrainian ports are now operational thanks to the Armed Forces of Ukraine. And today, the freight flow has returned to pre-war levels.
In eight months, approximately 10 million tons were exported by rail. Of these 10 million, 10.5 million were sent to the Greater Odesa ports, and only about 10 million went through the western border crossings. So, in eight months, 21 million tons have been transferred at the western borders.
Now, regarding Poland's share. Currently, Ukraine and Poland have four cargo crossings. In eight months, we exported 9.4 million tons. We transferred 9.4 million tons at the Polish border, and about 4.1 million were comfortably accepted as imports.
As a result, thanks to these Ukrainian-Polish crossings, we processed 13.5 million tons of cargo in eight months. Now, let’s look at what this cargo consists of.
In terms of exports, 9 million tons were exported. The first place is ore, with about 3.5 million tons sent. Second, third, and fourth places are grain, around 1.5 million tons. Further, there is sunflower processing from Zhmerinka, about 1–2 million tons, and construction materials.
These are the main exports through the Polish border crossings. Now, regarding imports, the first place is oil products, with about 1.5 million tons imported, constituting roughly 10% of total imports. The largest import from Poland is oil products. The second is coal, followed by other infrastructure-related goods.
That’s a brief overview of what we’re handling today. Now, concerning infrastructure. The four existing border crossings are operating at only 60% of their capacity.
This is due to the fact that a more attractive export route through the Greater Odesa ports has emerged from a logistical standpoint. Hence, our exporters are choosing this route. As a result, about 90% of exports are going through the ports, and only 20% through the western border crossings.
So today, Ukrainian-Polish border crossings are underutilized, operating at only 90% of their potential capacity. However, we understand that Ukraine is moving towards the European Union, and we need to increase cargo transportation to the West via land border crossings.
Thus, Ukrzaliznytsia is implementing its program to develop border crossings, which primarily includes track expansion, necessary equipment installation, and terminal reconstruction. Still, we believe that the private sector should invest in terminals, while we, as the railway operator, should ensure the transportation of cargo from these terminals.
Therefore, there is an internal development program and a joint program with Euro 2012. Many projects are already approved or in progress. Some of the larger, well-known projects include Mostyska and Sknyliv construction. But for now, project documentation is being prepared.
There are also plans to expand the 2012 standard gauge tracks from the Romanian and Polish borders. In summary, the current infrastructure capabilities are not fully utilized.
Thus, we invite both Ukrainian and Polish businesses to increase rail transportation, as we are ready. We have the necessary infrastructure and, most importantly, the will. Thank you. That's the brief version. If there are any questions, please ask. Thank you.
Because of the war, Ukrzaliznytsia lost half of its cargo base. For example, before the war, we were transporting 100–200 million tons annually. Now we transport 100 million, and this year we plan to transport about 100–120 million.
So, we still have the opportunity, or rather the need, to reach pre-war volumes. But unfortunately, we see that we will not reach these levels quickly, not because of Ukrzaliznytsia, but because dozens or even hundreds of enterprises have been destroyed, starting with Mariupol and Donetsk enterprises.
So unfortunately, we don’t see a quick return to pre-war volumes. For Plan B, we understand that we need to transform both the railway and the transport system of Ukraine to European standards. What does this mean?
The percentage of container transportation should increase. Currently, container shipments make up 5% of Ukrzaliznytsia's structure. In Europe, it's 10–20%. We had long functioned as a raw-material exporting country, focusing on bulk shipments of coal, ore, grain, and large trains without paying much attention to containers.
Now we understand that things will be different. There will be a decrease in bulk cargo, and processed products will increase. First, we foresee an increase in container shipments, particularly towards Europe, where trade volumes are rising.
For example, with Poland, we have seen a 20% increase in trade volumes via rail in the last eight months compared to 2019–2020. This amounts to about 22 million tons, a 20% increase.
Therefore, we are grateful to Polish businesses and Ukrainian exporters for this growth and recovery of our cargo base."
Valerii Tkachov Audio
Andriy Smorodin Transcript
The route from London to Bombay passes through Poland, reaches Lviv, and then continues through Chernivtsi and beyond. This is precisely the route we need to rebuild and profit from. By the way, I looked at documents from 1911, and they built a railway from Lviv to Chernivtsi in two years—1919, to be exact. So, we should also take this opportunity. Why is Ukraine interesting? We are not yet part of the European Union, so we can accelerate some standards and build faster. We have a unique chance right now.
Why are we emphasizing the Three Seas Initiative project? Because it's real integration. It’s about using Poland's European Union experience and Ukraine's potential to build and speed up road construction, for example. I’ve also studied this. If we are talking not about rebuilding but about creating a new country, then I would focus on steel production. You don’t need 1,000 workers; 100 would be enough with modern technology. This is a different approach to manufacturing, and we need to think about how to use it.
Polish and Ukrainian entrepreneurs can supply goods to India and make the most of the opportunities that this region offers. That’s why I say that if Ukrainian businesses integrate and cooperate with Polish businesses, we can earn much more together than if we try to compete on a global level.
This is my personal view. For example, when we talk about projects, we have platforms, we have the best Ukrainian technical universities, and we have unique technologies. For example, in waste processing, we have technology that no one else in the world has. Even Americans are studying it. We can use Polish investments to integrate, as they did in Poland and other countries.
We have many opportunities. For instance, we have a project to rehabilitate a hospital in Lviv specifically for infrastructure entrepreneurs and critical infrastructure workers. For example, we don’t always know what illnesses electricians may develop due to their profession. We can use our experience to treat these issues, and it will be significantly cheaper for us. This is a great business opportunity.
Business is interested in where it can make money, and we need to make this happen. That’s all I have to say. Mr. Andriy, I completely agree with you. We have Mr. Marian in the room, and he’s listening. After our panel, please approach him and present your projects. He’s ready to review and invest in them. Yesterday, he joked that it took us a month to organize a mission to Rivne, but he promised me he would speed up investments in Ukraine.
Andriy Smorodin Audio
Viktor Dovhan Transcript
Speaker 1:
What is the fund focusing on right now? Who is it ready to support, and what kind of investors could be attracted? Could Polish investors be encouraged to invest in certain sectors?
Mr Dovhan:
Thank you. Look, I'll be quite patient. I don’t see Polish investments yet. There’s talk of a fifth Ukraine-Poland reconstruction forum, brotherhood, and all of that. It’s understandable, and we are very grateful that we’re reaching out to Polish brands. Right now, you have a unique opportunity. Before the war, no one from Kyiv was really looking at Warsaw. The U.S., China, the EU, and the UK were the key players, mainly due to logistics. But now, with the potential replacement of Belarusian and Russian imports of building materials, fuel, coal, and defense materials—let’s call them that—coming from Poland, you have a great opportunity, and you understand that.
You often say, “We know the Germans will come with their financing, the Americans too, and Polish firms will be left behind somewhere.” Well, let’s not say where—somewhere in the background. Unfortunately, I’ve been working with several Polish companies for almost two years now, and they’re very cautious. It ends with them opening a representative office, with one or two people, analyzing projects, looking at tenders, but not really wanting to participate. As we’ve seen with Polish loans, customs checks happen twice at these border crossings, and Polish companies aren’t willing to take risks. Polish businesses focus mainly on tax benefits, as the expert rightly said.
When you tell them, “Look, for example, to sell fertilizers”—take a small group like Azot, a public company, probably the leader in Eastern Europe, and maybe even the EU, in fertilizer production—they say, “Okay, we can sell.” But let’s at least start with something—perhaps a local distributor, a legal entity, an office, people, managers, a warehouse near Lviv. We’re not even talking about Kherson here. It takes a long time. And why?
Speaker 1:
What’s their argument? For instance, they have an export credit agency that is ready to insure investments.
Mr Dovhan:
Look, everyone needs to understand, we’re very asymmetric with Ukraine. On the one hand, that’s good, but on the other hand, you say that the reconstruction of Ukraine will be the project of the century or even the millennium—but maybe not. Our losses are huge. The World Bank estimated them at $100 billion. Are you sure we’ll be given that amount? I’m not. I see the financing spread over three years. Right now, Ukrainians can manage $10 billion and take an interest-free loan. Using frozen Russian assets, we get 10% for three years. That’s it. Work with that! But that’s not all. There’s also the budget deficit and the IMF.
Today, in Kyiv, Finance Minister Marchenko plainly said, “There will be no more money. Raise taxes.” It’s not because Hetmansev is bad, but because there’s no money. We all understand how much is being spent on defense. So, it’s not certain that this will be the project of the millennium.
Speaker 1:
Perhaps we need the private sector.
Mr Dovhan:
Again, what exactly are we rebuilding? After Lugano, I was a bit surprised. Well, okay, that’s a critique of the previous team under Kubrakov. Now there’s a new team under Kuleba. Hopefully, they will take charge. But is there a recovery plan? What exactly are we rebuilding? We have a national transport strategy. I was one of the authors of this document, and every three years, there’s a plan to implement it. It includes projects like Mostyska-Sknyliv, 100 million euros. It’s not that difficult. We managed to do it in one or two years.
But the recovery plan? There is none. Why are we spending five billion to build a highway, or a bridge to Chernihiv, when we need a first-class bridge to Chernihiv? It was second-class, and traffic is expected to increase. Are we expecting tourists to go to Belarus? This isn’t necessary. We are designing and building.
Viktor Dovhan Audio
Oleksandr Chervak Transcript
Mr Chervak:
Construction, the reconstruction of Ukraine, and the fact that this will be the largest project of the century, perhaps Ukraine's reconstruction. What are the main challenges currently arising during the rebuilding of infrastructure projects that were destroyed? Or maybe not? Good day, colleagues! Thank you for the invitation. Regarding challenges, we conducted a survey among our participants, and today we have the federation, the largest construction association in Ukraine. We are actively working in our business with international partners.
To strengthen cooperation and the focus of our activities, we aim to facilitate processes to improve quality of life now and prepare for the scale that will come in the future. The number one issue, and this is no secret, is a common factor for all businesses. The biggest limiting factor is the labor shortage. According to statistics, Ukraine lost almost a third of its workforce before the full-scale invasion, but the volumes fell, and at first, it wasn’t felt. We lost over 20% of the workforce in the construction sector. Half of the industry is now facing this challenge, and it’s the number one issue.
We conducted a survey among our participants, and the profession that surprised us the most with shortages across the board was drivers. After that came project managers, and so on. Other limiting factors include the lack of financing sources. In the last period, the construction sector has been significantly affected by the full-scale invasion. We saw a 10% decline after the invasion, and now it’s at 20%, about 20% of the pre-war level. While we are recovering, the share of construction in GDP today is 100. The share of construction in Ukraine's GDP is lower than the European average of 7%, including in Poland. Before the full-scale invasion, the share was about 3%.
What other challenges do we see? Labor shortage, lack of financing, rising electricity tariffs, and limited access to resources. The construction market in Ukraine currently relies on just a few key indicators, such as the construction of engineering, fortification, infrastructure, and transportation facilities. The most affected segment, which is slowly recovering, is housing. It’s still very low. We are talking about a drop of 2%. Only now is it starting to recover.
Of course, businesses are responding to potential additional initiatives that we expect, and this could also impact the volume of work and the cost of projects in general, as well as the market and its size. Given that, where can the construction industry find qualified labor if you say there’s a shortage? Yes, indeed, a large number of our people have been mobilized, which is why our business is suffering. But where can we find replacements? Perhaps there are reintegration programs for companies that can operate in this sector?
In any case, construction adapts to any situation. One of the factors is the lack of stability. Surveys of business activity generally indicate that Ukrainian construction companies see themselves having work for no more than nine months on average. These are short-term projects, and there are no long-term plans. But if the scale of construction increases, Ukrainian builders and investors are ready to ramp up investments to expand their capacity to handle the work.
As for preparation, we are working with our partners, and regarding the labor shortage, we are focusing on vocational education and technical schools. Recently, our Swiss partners pointed out that although there is a profession like “trainer,” we haven’t had anyone teaching it or producing specialists in the last three years. Now, we are dealing with fortification, reinforced concrete, and so on. So, professions that have disappeared are being revitalized.
Thus, we are focusing on vocational education programs, including retraining programs for women and people registered at employment centers. Additionally, we are involving rehabilitated veterans in construction projects wherever possible. We have many improvised tasks. Drones, for example, are used not only in the military but also in construction management. The percentage of construction workers currently serving in the military is significant.
So, we are focusing on three areas: vocational education for young people, involving people where possible, and rehabilitation. We are working on this. Since June, a school for training operators of special machinery, such as cranes and bulldozers, has been launched with the support of the Brigade project. By the end of the year, 10 women will acquire new skills at a vocational college, receiving certifications to operate specialized construction machinery. The demand for such training is already higher than expected.
These are some of the approaches we are taking. However, given the scale of the destruction, there will still be a shortage of labor for the expected volume of work. We will need to find mechanisms to attract more workers, potentially through labor migration on one-year contracts, and so on. That’s about it. Thank you.
Speaker 2:
Thank you, Oleksandr. Let’s move from attracting labor migrants to attracting investments.
