THE BIG CONSTRUCTION INITIATIVE

The Investor Ukraine 2021  I  Analysis  I  Infrastructure

“UKRAINE HAS LAUNCHED THE LARGEST INFRASTRUCTURE DEVELOPMENT PLAN IN THE HISTORY OF THE COUNTRY AND ONE OF THE BIGGEST IN THE WORLD.”

Ukraine’s Cabinet of Ministers approved the country’s 2022 draft budget on September 15. Infrastructure spending is once again among the top spending priorities in the draft document as President Zelenskyy’s push for a historic road-building breakthrough continues. The draft 2022 Ukrainian state budget includes more than US$ 4.5 billion for road construction and repair work. The bulk of this will go towards funding the President’s flagship Big Construction program, which aims to dramatically upgrade Ukraine’s national road and highway network.

 

Announced in the months following Zelenskyy’s landslide presidential election victory of spring 2019, the Big Construction program has emerged over the past two years as a key focus of government efforts to deliver visible change to Ukrainians. Work continued throughout 2020 despite the disruption of the Covid pandemic, with 4,056 km of state roads and 2,527 km of regional and urban roads built or repaired. The target now is to repeat this performance in 2021 and next year. The Big Construction initiative has been positively appraised in Ukrainian opinion polls. It has also won backing from Ukraine’s international partners, with G7 ambassadors among the latest to voice their support for the country’s infrastructure development reforms during a September 15 meeting with Infrastructure Minister Oleskandr Kubrakov. Zelenskyy has stated that he wants to be remembered as “a president who built good roads.” Speaking during the September 2021 YES conference in Kyiv, he highlighted the economic logic underpinning this emphasis on infrastructure. “We started building roads like the Americans did during the 1930s to mitigate the negative effect of the Big Depression,” noted the Ukrainian leader.

 

The task facing Zelenskyy and his administration should not be underestimated. Roads form a key component of Ukraine’s infrastructure portfolio. Ukraine has an estimated 46,000 km of state roads under the management of the State Agency of Motor Roads (Ukravtodor), along with 123,000 km of regional roads managed by regional administrations, and over 250,000 km of urban roads administered and managed by municipalities. Ukravtodor has been pushing to adopt the Engineering, Procurement, Construction and Financing (EPCF) contractual framework for large road construction projects. Much of this network has been neglected since the 1991 collapse of the Soviet Union and has fallen into a state of disrepair. In addition to a lack of maintenance and repair works, roads have also sustained damage due to often overloaded freight vehicles.

 

For many Ukrainians, this deteriorating road network has served as a visual reminder of the country’s losing battle with corruption and stagnation in the decades following independence. This makes the drive to transform Ukraine’s road network a potentially powerful symbol of national revival. According to experts of the Kyiv School of Economics (KSE), the implementation of the presidential Big Construction project will increase Ukraine's GDP by 2.2% in the next five years. Only the Big Construction will likely account for between 35-50% of the country's net GDP growth in 2021 with total expenditures reaching UAH 138.5 billion, or US$ 5 billion, this year. It is also expected to increase public capital in the transport sector, the courier and tourism sectors, reducing travel time and minimizing fuel and repair costs, expanding business opportunities, creating prospects of emergence of new enterprises.

 

The Government is also giving priority to localization. In the recent approval of three flagship projects of Big Construction -- the Zaporizhzhia, Kremenchuk and Yampil bridges -- it was said that 90% of the materials used are produced in Ukraine. Thus, the Big Construction project is providing essential support to the Ukrainian metallurgy, mining and processing industries. These bridges are over 500 meters long with span structures and bridge piers with currently only 13 such artificial structures in Ukraine.