Six pilot PPP projects could attract $2 Billion for Ukraine’s roads
A new study reveals that properly structured public-private partnership (PPP) projects can help Ukraine attract potential investments worth around $2 billion in the roads sector, thereby bolstering the country’s transportation services.
Presented by IFC and the World Bank, the study outlines a viable business model to help the country mobilize private finance, which is essential to address the financing gap and rehabilitate and maintain the nation’s roads network.
Prepared in partnership with the Global Infrastructure Facility (GIF), the study—Ukraine National Roads Program -Options for Engaging the Private Sector in Road Upgrade, Maintenance and Operation—provides country-specific insights into Ukraine’s highway infrastructure. The research further demonstrates that the PPP model can effectively address the country’s massive infrastructure investment needs.
According to Ukraine’s State Road Agency (Ukravtodor), nearly 90 percent of the country’s road infrastructure is in poor condition, requiring investments worth at least $6 billion annually for overall improvement over the next five years. Public funds are not enough to address this massive financing gap, which is why private sector solutions are essential.
“Many of these roads are being rehabilitated this year as part of the President’s Program, ‘Great Construction.’ However, road improvements and maintenance are as important as rehabilitation. We have already increased our budget for road maintenance in 2021 and reviewed all design solutions. With the private sector’s involvement, we expect to ensure high-quality, safe, and comfortable roads that will enable efficient traffic management,” said Oleksandr Kubrakov, the Head of Ukravtodor.
IFC—along with its partners—assessed around 2,000 road segments and selected 21 potential PPP projects. While these are expected to be implemented in three phases, the first six pilot projects are likely to be finalized by 2023. These efforts are part of a wider collaboration between Ukraine’s Ministry of Infrastructure and Ukravtodor, aimed to improve the efficiency and competitiveness of the transport sector that accounts for 6 percent of the country’s GDP.
“The Road PPP Program serves as a bridge to ensure the private sector’s full participation in the construction, monetization, and maintenance of road infrastructure. In the medium term, the implementation of the program will attract more than $9 billion in private investment that can help rehabilitate and maintain more than 4,500 kilometres of state roads. This program is not about toll roads as such but about a viable business model that will be beneficial to taxpayers, investors, and the state in the long term,” said Vladyslav Krykliy, the Minister of Infrastructure of Ukraine.
As part of the new PPP program in Ukraine’s transport sector, IFC will be the lead transaction advisor. In this role, IFC will help Ukravtodor competitively tender the first roads PPP projects, designed in accordance with best international practice.
“Good roads are key to sustained social and economic development. In sync with the government’s efforts, IFC is well-positioned to help Ukraine transform the sector and attract international private investors. This will enable Ukraine to establish itself as a regional leader and a logistics hub in Europe, providing competitive and quality transport services to its citizens and businesses,” said Jason Pellmar, IFC Regional Manager for Ukraine, Belarus and Moldova.
In October 2019, IFC and Ukraine signed a memorandum of understanding to identify key sectors for joint implementation of PPP projects. In addition to the roads sector, IFC is analysing PPP opportunities in rail, energy, and health care, to help boost investments and drive the nation’s growth trajectory.