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Commentary of the Union of Entrepreneurs and Employers: Transport infrastructure to be expanded



Warsaw, 4th September 2023

 

Commentary of the Union of Entrepreneurs and Employers:
Transport infrastructure to be expanded

 

  • According to forecasts, the grain harvest in Poland will amount to approximately 34 million tonnes, which will translate into the need to export approx. ten million tonnes of surplus and use almost five million tonnes that remained in the country after last year’s season.
  • According to USDA data, the production of wheat alone in Ukraine will amount to approx. twenty-one million tonnes – 3.5 million tonnes more than expected in the previous forecast.
  • Due to Russia’s termination of the grain agreement, which guaranteed safe transport of goods from Ukrainian ports on the Black Sea as well as above usual grain stocks in Polish warehouses and harvests exceeding forecast values, an intensification of the transit of Ukrainian products using Polish infrastructure should be expected.
  • The increase in the volume of Ukrainian grain crossing the EU border into Poland since the beginning of the war is not a temporary situation, but a change that will reshape the national agricultural system for years to come. Therefore, it is necessary to conclude long-term agreements between Polish and Ukrainian companies that would secure the stability of investments in transit infrastructure.
  • Polish authorities face the necessity to draw up a long-term plan to increase the capacity of borders, railway lines, roads, and harbour infrastructure, which is essential to conduct an effective transit policy and start implementing the inevitable investments, which – due to their nature – should be co-financed from EU funds.
  • Increasing the volume of transit of Ukrainian products across Poland, while implementing infrastructure investments, is a real development opportunity for domestic enterprises and actual help for Ukraine, which is at risk of war.

Forecasts regarding the grain harvest in Poland indicate quite clearly that over thirty-four million tonnes of grain will reach the domestic market this year. This means the need to export a surplus of ten million tonnes and ca. 4-5 million tonnes (twice as much as on average in recent years) which remained in the country after last year’s season. For years, Polish grain exports have been coping harmoniously with the proper management of foods, delivering them to recipients on foreign markets – member states and non-EU markets alike.

The situation changed with the Russian invasion of Ukraine. Without deciding on the mistakes made in recent months with regard to the policy shaping the import of Ukrainian goods to Poland, we should bear in mind the changes that the current geopolitical situation may bring in the future. Russia has terminated the grain agreement that was in force since August 2022, which basically prevents the export of Ukrainian grain from ports on the coast of the Black Sea. Safety guarantees for ships – regardless of flag – that transport Ukrainian products through a safe corridor have also been abolished. Insurers refuse to send ships to areas of conflict. Missile attacks destroyed grain and oil terminals in Ukrainian ports. This created pressure to intensify the search for new export directions for Ukrainian products. In this context, it was also necessary to establish new transit corridors for goods from Ukraine. Poland turned out to be one of the most important destinations.

We must not forget that, despite the ongoing hostilities, harvests were also taking place beyond our eastern border. As a result of the closure of the Black Sea routes, we should take into account the intensification of shipments of Ukrainian goods also via Polish routes. Due to the possibility of transit of these products across Poland, it is expected that a significant part of them will reach final recipients using Polish border, road, railway, transshipment and finally port infrastructure. Meanwhile, their capacity remains far from sufficient.

Furthermore, it is naïve to think that the issue of Ukrainian grain (but also other product categories) is temporary. Even if the corridors on the Black Sea are unblocked, Poland may prove to be a promising destination in the long term for countless Ukrainian enterprises. The wrong narrative here is to demonise Ukrainian goods, which are vital for Poland both in the context of transit and – in many cases – import. An issue that requires consideration and detailed consultation with business environments is to determine target quotas for the import of Ukrainian products to the Polish market. Regardless of this, the volume of goods transiting across Poland will be much higher than before the war.

For Poland, this is a chance to become a major transit country, but also a trader of Ukrainian grain. Already nowadays, for example, the Port of Gdańsk has significant storage and transshipment capabilities. Last year, at the Port of Gdańsk, grain transshipment amounted to approx. two million tonnes, which was the port’s previous record. It was also 19% more than last year. The first six months of 2023 will see another significant increase in agricultural transshipment. As a country, we can annually purchase and transit more or less 6-8 million tonnes of Ukrainian grain. This will allow us to use the transport and port infrastructure and other resources in Poland, which translates into nearly 20-30 thousand additional jobs for Poles and control over transit.

Trading should be carried out by entities representing domestic capital under strict control of the authorities or by the authorities themselves, which is necessary to maintain a strict separation of transit and imports. We have everything to establish our position on the market, but it still remains latent potential. Meanwhile, in the years to come, our transport infrastructure will be burdened to an extent significantly exceeding that until February 2022. This requires efficient actions on part of the Polish authorities, which must immediately make decisions aimed at increasing the capacity of border crossings with Ukraine, expanding railway and storage infrastructure at the borders or in ports, including by starting actual works on the construction of an agricultural port in Gdańsk and – as planned – in Świnoujście. All these investments should be undertaken considering the potential benefits for the European Union, thus completed with EU funds. However, before that happens, companies operating under Polish law must sign long-term contracts with the Ukrainian side, which will secure the stability of their investments in the long term.

Currently, it is necessary to improve the T-1 transit documentation so that recipients can also accept part (not only the entirety) of the goods, to reduce the bureaucracy of the procedures for issuing decisions by regional Inspectorates of Agricultural and Food Quality Inspection, to increase the staff of both these Inspectorates and Sanitary and Epidemiological Inspectorates at railway crossings, to open additional border points of both institutions, for example at Werchrata/Rawa Ruska crossing, expansion of the Dorohusk/Jagodzin railway crossing by adding railway tracks, enabling temporary storage of goods in Polish customs warehouses for goods in transit, simplifying customs clearance procedures on the Ukrainian side and a number of other solutions proposed by entrepreneurs.

Meanwhile, we still lack strategic decisions that would prevent Poland from having to implement further expensive spontaneous aid programs. Ukrainian grain will cross the Polish border – either in transit or import. The sooner we accept this state of affairs, the sooner Polish enterprises dealing in universally understood transport and trade will benefit from these decisions. It is also a chance for the entire national economy, as well as real help for war-torn Ukraine.

The price situation on the grain market is still unclear. This is particularly important in the context of Russia’s dumping prices, which are even USD 30 per tonne lower than in the case of EU countries. Grain prices fell on the markets this week, which was the result of a forecast indicating higher harvests in Ukraine. According to USDA data, wheat production in Ukraine will amount to approximately 21 million tonnes which is 3.5 million tonnes more than expected in the previous forecast. Theoretically, Polish farmers can refrain from selling grain, again counting on higher prices. If this situation does not happen this year, it cannot be ruled out that it will happen in the following years. Poland’s current infrastructure capabilities may then be insufficient, and domestic producers will be left with their grain in warehouses. Domestic consumption has been fluctuating in the range of 24-26 million tonnes for years, and the surpluses must be utilised. This year’s harvest in Poland and Ukraine may contribute to the return of the demons of recent months.

In September, we must take into account that EU’s preventive measures regarding the import of grain from Ukraine will not be extended. This gives Poland a mandate to negotiate dedicated EU funds for storing Ukrainian grain and to develop other infrastructure (such as terminals) necessary to accept the increased volume of products.

 

See more: 04.09.2023 Commentary of the Union of Entrepreneurs and Employers: Transport infrastructure to be expanded

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