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Illusory improvement

At the end of July, the World Bank published the Logistics Performance Index – 2018 (LPI), where Ukraine ranked 69th among 167 countries.

Compared to the results of the previous Index, which was published in 2016, the position in the rating of our country has improved by 11 points but did positive changes in national logistics really take place?

The fact is that LPI is based on the assessments of international experts of the logistics industry, who give points to each country for 6 parameters: customs; infrastructure; international supplies; logistics competence; goods tracking and timeliness of delivery. The maximum amount is 5 points. I would like to draw your attention to the fact that Ukraine has scored 2.83 points this year, whereas the leader of the Index is Germany with 4.19 points.

The fact that experts, who have certain but mostly narrowly specialized experience of cooperation with the country, for example, use exclusively the auto logistics infrastructure in their activity, give scores but do not know because they did not encounter railway problems, gives in whole a certain subjective nature to the Index. A striking confirmation of this thesis, unfortunately, is the critical state of affairs in the national railway, which, I would like to recall, transports according to various estimates 60-80% of the country’s cargo.

Now the national railway not only does not meet the demands of the market and can not provide a delay-free timely delivery of goods but also slows down the growth rate of the country’s exports as a whole.

According to the IMF group Ukraine, the acute shortage of traction of Ukrzaliznytsia will have reached 35% by 2022, which will cause future losses for our economy in the amount of 4.8% of the underproduction of GDP per year.

Over 26 years of independence of Ukraine, Ukrzaliznytsia car fleet has decreased by 171,000 cars, though only 25,500 new cars have been purchased, including 15,000 of gondola cars.

The agrarians are particularly suffering from the lack of cars because Ukrzaliznytsia can not satisfy about 20% of the general request of the industry companies for grain carriers. The railway monopolist can provide about a thousand cars for loading per day, while the market needs are about 6000 units during the peak period. To meet the needs of agrarians for grain transhipment about 22,000 cars are needed respectively. I will just notice that currently there are about 11,000 grain carriers in the inventory rolling stock of Ukrzaliznytsia and about 4 thousand grain carriers in the private one.

As one can see, the situation is pathetic for agrarians. If large export agricultural holdings have already begun to form their own fleet of grain carriers, solving the issue of grain delivery from the field to the ports, the remaining agricultural producers are forced to transport grain with cars, thus significantly increasing the cost of grain.

Unfortunately, if the solution to the issue of modernization of the railway infrastructure, traction and rolling stock remains at today’s project level, our business and country as a whole will lose not only income but also the country’s image.

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