Ukraine’s agriculture sector is currently booming. This success has helped to attract investor interest to the agricultural infrastructure sector, with a number of eye-catching investments in recent years. Ukrainian sea and river ports are obvious focuses for this infrastructure investment. As gateways to global markets, they play a crucial role in getting Ukraine’s agricultural wealth to customers around the world and help to determine the volumes Ukrainian producers are able to ship. Mykolaiv is a leading port for the Ukrainian agribusiness industry, and has been a key focus of investment as the country looks to upgrade its agricultural capacity.
Founded in 1990, UPSS Terminals currently operates a major processing, storage and transshipment port complex at the Dnepro-Bougsky Sea Port in Mykolaiv. The complex offers export, import and transit services while boasting convenient road and rail transportation connections that bypass Mykolaiv city and link up directly to Ukraine’s key intercity arteries.
UPSS Terminals plans to launch a major expansion of the port complex in the coming years to boost transshipment capacity, construct new berths, and add a range of production, processing and storage facilities. The upgraded port complex will undergo dredging to increase the draft restrictions for the vessels the new complex can handle, while a full scope of customs and certification services will be available on site.
Business Ukraine magazine spoke to UPSS Terminals Executive Manager Dmytro Falko about the importance of improved infrastructure for the further development of the Ukrainian agricultural industry, and the role Mykolaiv can play in this process as the country’s major gateway to global markets.
What impact will the new port complex development have on the local economy?
Initially there will be 250 new jobs created, and this will rise to 1200 once the project reaches full implementation level. Indirectly, we expect it to lead to the creation of at least 6,000 regional workplaces in related businesses such as construction, transport, agriculture, and food processing.
Since 2014, Ukrainian agricultural producers have made a conscious effort to expand into new export markets. How has the geographical distribution of your client base developed in recent years?
Let me put it this way - the world map where we mark the destinations of our shipments barely has any room left for new flags! All customers are different in terms of their requirements but this does not create any specific problems for us as we have a sufficient variety of storage facilities to meet the quality control needs and specifications of virtually any client. We have always traditionally supplied to countries in the Mediterranean and Atlantic regions including Greece, Turkey, Italy, Spain, France, and the UK. In recent years, there has been a marked increase in demand from Israel, North Africa, and Asian countries such as India and Thailand. This trend is strengthening. It offers exciting opportunities as we seek to expand our port complex.
Many Ukrainian and international investors currently view the agriculture sector as the most attractive opportunity in the country. Due to this heightened interest, there are numerous infrastructure projects at various stages of development. Are you confident that demand will be sufficient to meet the increased capacity envisaged by the many infrastructure improvements presently in the pipeline?
Despite the numerous challenges currently facing the Ukrainian economy, the agriculture sector continues to develop dynamically. It would actually be accurate to call it the engine driving the entire Ukrainian economy behind it. The key factors driving the growth of the agriculture sector are the development of infrastructure and logistics. It is all very well to sow fields and grow a good harvest, but it is equally important, if not decisive, to have an efficient delivery system to bring your agricultural produce to global markets via the country’s ports. This makes the development of port complexes for the transshipment of grain and other agricultural products vital for the further growth of the agriculture industry. Every addition to Ukraine’s agricultural infrastructure creates more opportunities for the country’s producers to receive a fair price for their commodities. With the global population growing and demand set to rise for many years to come, Ukraine needs as much agricultural infrastructure expansion and improvement as possible.
What do you see as the key obstacles to the further development of Ukraine’s agricultural infrastructure?
The port sector has been able to develop in spite of the relative absence of state backing. Large-scale investment projects must often confront the reluctance or inability of the state bureaucracy to provide the desired support. There are no clear rules governing the land market or returns on investment. Investors also face extremely long licensing procedures. If we can solve the problem of a corrupted bureaucracy, then we will be able to develop the sector much more effectively in the future.
Despite the obvious appeal of Ukraine’s agricultural sector, the country’s economic recovery remains fragile and the geopolitical environment in the region is unstable. In the current conditions, how challenging is it for Ukrainian companies engaged in agricultural infrastructure to attract investment?
I do not agree with assessments that Ukraine is currently experiencing a period of economic crisis. There are certainly some difficulties associated with heightened risks – including of a military nature – but this has not prevented us from developing the agricultural infrastructure sector or attracting investment. In order to facilitate the arrival of additional new investors to the Ukrainian market, it is important to demonstrate our own faith in the market on a daily basis and our confidence in its future stability. The main capital of UPSS Terminals is our impeccable reputation and the trust we have built up over many years with our international partners. These reputational assets are invaluable to the company and help us to attract the partnerships we need in order to grow further. Other Ukrainian companies with similarly positive reputations are now enjoying the same advantages in this challenging but exciting period for the country.