1. Industry Development. in Ukraine. Analysis & Ideas of the
Industry Development in Ukraine Analysis & Ideas of the Industry Working Group of German Economy 30th March Ministry for Economic Development & Trade

2. Main possible impacts of the Free Trade Agreement between the European Union and Ukraine
General areas of impact:
Impact on country in total
Impact on main industries and their value chains
Impact on local market and producers
Impact on quality level of goods
Impact on EU market and on CIS region
Possible developments:
Challenge for local producers to reach EU standards for their products in time (economic part of agreement is freezed until )
Industries with high dependence on Russia likely to suffer
Consolidation or re-formation of market players
Extension / gap-closing of value chains
Increasing importance of EU28 as market for Ukrainian goods
Increase of FDI and big international players entering the market
Integration into mid-european production value chains (e.g. automotive industry)

3. Extreme level of energy inefficiency and wastage in the Ukraine is likely to drive longer term shift to lighter industries
Total Primary Energy Consumption per Dollar of GDP
BTU per $ of GDP
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
Ukraine
Russia
China
Saudi ArabiaSaudi Arabia
South AfricaSouth Africa
Poland
Turkey
United StatesUnited States
France
Japan
Germany

4. Conflict is acclerating the shift from traditional heavy industries to lighter industries

5. What influences and drives industrial development in Ukraine

6. Barriers which could limit the main drivers for industrial development in Ukraine

7. demand of energy efficient technologies will rise clearly
Main assumptions
shift from energy-intensive heavy industries to less energy consumptive clean and light industries
demand of energy efficient technologies will rise clearly
step by step closing of the value adding chain: from agriculture and commodities to food and other products for national consumption and export

8. Main assumptions 2
DCFTA gives better access for Ukrainian products to EU markets
deeper integration of Ukrainian economy into value adding chains in the European Union, especially in Central Europa (e.g., in the automotive industry)

9. Areas of German industrial commitment in Ukraine
automotive components
construction materials
electronics
industrial suppliers
light industries, processing industries

10. Major learnings from German industrial development experience
support those areas with strong market perspectives
no industrial development out of social reasons
most innovations coming from small and medium size companies
the state is more or less helpless when it comes to innovation
governmental development programmes often fail
major task: setting up a stable and competitive business environment
it’s all about people
deregulation is the best instrument against bribery and red tape

11. Concrete examples of development measures
Cluster development: automotive
today more than 20 thousand work places in this industry in Western Ukraine
99% foreign direct investments
strengths: low work force costs, not far from EU border weaknesses: high country risk, too much red tape, unreliable court system
cluster management: small office in Lviv or Ivano-Frankivsk (2-3 people), developing image of Ukraine as an automotive component production location
getting commitment of regional authorities and automotive companies in Western Ukraine
setting up “win-win”-situations

12. Import from Germany into Ukraine: minus 33,1%
Source: Statistisches Bundesamt, BMWI

13. Structure of German import into Ukraine 2014
Source: Statistisches Bundesamt

14. Changes in German import structure into Ukraine 2013-2014
Source: Statistisches Bundesamt

15. Structure of Ukrainian export to Germany 2014
Source: Statistisches Bundesamt

16. Changes in Ukrainian export structure to Germany 2013-2014
Source: Statistisches Bundesamt

17. Thank you very much for your attention
Industrial Working Group
Delegation of German Economy in Ukraine
34, vul. Pushkinska, Kyiv
phone ,
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