In the first six months of 2006, the total value of Polish exports to Ukraine reached $1.295bn, 55 percent more than in the same period of 2005, according to the Polish News Bulletin.

      From 2002 to 2005, it has increased from $1.180bn to $2.588bn. As a result, as an importer of Polish goods Ukraine has overtaken Hungary and presently holds the same position as Sweden.

      Meanwhile, the value of Polish investments in the country exceeded $240m, thus amounting to 2.5 percent of the total value of all foreign investments carried out locally in H1 of 2006.

      Polish investors are most willing to launch their projects in special economic zones, which at present house investments of over 70 companies from Poland.

Alone the projects carried in the vicinity of Lvov are worth over $150m.

      The growing presence of domestic investors in Ukraine and consolidation of the metallurgic industry resulted in a boom on the trans-border shipping market. Since May, domestic company CTL Logistics has been shipping coke to Ukraine and to Romania via Ukraine and Moldova for international giant Mittal Steel.

      It is the first case of the Ukrainian railways establishing co-operation with a private shipping enterprise. "In the next few years, the volume of raw material shipments from Ukraine to countries located further East, such as Kazakhstan, may be expected to grow.

      In order to facilitate shipments from EU member states to Central Asia, we decided to spend ZL40m on the construction of two trans-shipment terminals on the Polish-Ukrainian border," says Trans Trade CEO Ireneusz Gojski.

      Shipments from Ukraine usually carry mass loads of materials such as minerals or steel, with machinery, home appliances and cars heading in the opposite direction. Recently, shipping companies have included customs services in their offer. In this way, they do not have to transport the shipped goods to Kiev, where most of their clients have established their local headquarters.

      "Following the customs operations, which are performed at the border, the goods are delivered directly to receivers. In this way, transport costs are lowered by up to 20 percent," estimates Andrzej Kozlowski from Ukrainian branch of Raben.

      Domestic companies are experiencing problems with distributors in Ukraine, which is a country twice the size of Poland. In order to evade this obstacle, Nowy Styl chair producer, which built a factory in the special economic zone near Kharkov, decided to take shipping its products into its own hands.

      After investing in vehicles, it set up a network of warehouses in the entire country. On the other hand, can manufacturer Can-Pack managed to establish successful co-operation with local transport firms.

      However, its representatives admit that warehouse space in Ukraine is greatly insufficient. According to real-estate market research company DTZ, the country is lacking as much as 400,000 square metres of warehouse space.

      The existing warehouses are often located near railway tracks, which encourages Polish shippers to use railways to deliver the goods to the receiver.

      Such is the case with Polfrost, whose Deputy CEO Marek Siwiec stresses that so far the goods his company was responsible for were never stolen, whereas in Poland he has seen entire loads disappear from warehouses.

      However, investors operating in the country still have to deal with omnipresent corruption. According to Transparency International, Ukraine remains one of the most corrupted states in the world. On the other hand, those willing to take the risk may hope for high profits.

      So far, this incentive has tempted several shipping companies, including Schenker, Kuehne + Nagel, Frank Maas and Raben. Over the last 12 months, the latter firm has set up six trans-shipment terminals and increased employment from 10 to 150 people.

      So far, Polish logistics and shipping companies, such as Pekaes, Trans-Poludnie, Link or Omega-Pilzno, are reluctant to enter the Ukrainian market. "We might consider taking such steps in the future. At present, however, the long queues at border crossings and the reigning corruption are not in the least encouraging," says Rafal Pijar from Trans-Poludnie.

      The news was monitored by The Action Ukraine Report (AUR) Monitoring Service, Morgan Williams, Editor.