Cities are sorely lacking in funds for financing the resumption of the full-fledged operation of public transport in Ukraine and its development. A possible solution to this problem is to establish a closer and simplified dialogue between city authorities and international financial institutions to enable them to receive funding quickly, as is currently the case with the provision of weapons by Ukraine’s Western partners.
This was discussed during a roundtable on "Electric Public Transport in the Context of Ukraine's Post-War Recovery," which was held in Kyiv on 13 June 2023 and organized by the CFTS and the Vision Zero non-governmental organization (NGO).
Before the full-scale Russian invasion, Ukrainian city authorities worked closely with international financial institutions, which financed the purchase of new means of public transport. This cooperation has now ended in most cases. As a result, cities cannot pay for the rolling stock they ordered and manufacturers are incurring losses. "We are currently fulfilling a contract for the supply of 10 trams to Lviv. We expect payment for the delivered products from the European Investment Bank in six months. We delivered the trams last December, but we are still unable to receive payment for them. This has a very negative impact on the company's operations," the Electronmash tram manufacturing company’s Commercial Director Volodymyr Budzan said during the roundtable discussion.
Another Ukrainian tram manufacturer, Tatra-Yug, also had a similar experience.
Serhii Vovk, director of the Center for Transport Strategies (CFTS), said that the model of Ukraine's relations with international financial institutions is currently undergoing a reboot. "The procedures that existed before the war, particularly the procedure for regulating the speed of payment, are not working as quickly now. It takes so long that it will take a very long time to rebuild Ukraine even if these funds are available. There should be a two-way movement in resolving this issue. On the one hand, Ukraine needs to show a higher level of transparency, for example, in public procurement. At the same time, European financial institutions, the EBRD, and the EIB should also simplify their procedural requirements for holding tenders and making payments under them. I call this a ‘financial Ramstein,’ analogous to the meetings at the Ramstein Air Base. We have managed to create a new mechanism for cooperation on the supply of weapons, which allows Ukraine to outline its needs and allows Europe and the world to respond more quickly. We also have to work on rebuilding Ukraine," said the expert.
According to him, negotiations on changes to relations with international financial institutions are already underway. "I hope we will see dramatic changes soon. I think we will hear some positive news in this area at the conference in London," Vovk said.
The 2023 Ukraine Recovery Conference will take place in London on 21-22 June 2023.
Ukraine’s Deputy Economy Minister Nadia Bihun said during the roundtable discussion that her ministry is working to introduce a factoring mechanism that could help Ukrainian cities resolve their difficulties related to financing procurement. "We are aware of the problem of delays of payments from international financial institutions. However, they have their complicated procedures we cannot yet influence. As a possible solution, we are currently working to introduce factoring, like the current ‘Affordable Loans 5-7-9%’ program. This mechanism will allow a bank to pay a supplier of products immediately, and the customer will pay the bank and not the supplier. If representatives of the public-transport sector have their own solutions, they should please send their proposals to our ministry," the deputy minister said.
In early May this year, the participants in the All-Ukrainian Urban Mobility Forum, which took place in Lviv, adopted a resolution calling on the authorities to pay more attention to urban electric transport. The document stated that public transport and urban mobility, in general, should be the subject of attention from the legislative and executive authorities and that they should have a place in public policy in line with the European Union’s documents and best practices.
In particular, the resolution emphasized that Ukraine should implement the European Union’s Directive 1370/2007 (paragraph 1875 of the EU-Ukraine Association Agreement on public passenger transport services by rail and road) as soon as possible. This will enable cities to switch to a modern and sustainable system for procuring transportation work instead of the outdated and inefficient system of tenders for bus routes.
