A model for post-war recovery of ukrainian engineering: strategic objectives and instruments
The present study focuses on the definition of the policy goals and strategic tasks for post-war industry recovery with the identification of perspective types of Ukrainian engineering, based on the pan-European vector of integration and ensuring national interests. Improving investment climate, creating a network of industrial parks, stimulating cluster movement, promoting partnerships with foreign manufacturers, supporting export activities and diversifying production, introducing incentive and compensation mechanisms at the state, regional and local levels; expansion of domestic demand for domestic engineering products has been rightly identified as the important tools in the war and post-war period of the Ukrainian machine building recovery.
The full-scale continental war in Ukraine has led to negative consequences (losses of industrial potential by about 30%, destruction of production facilities and transportation chains, lack of access to resources, complications in doing business due interruptions in energy supply and communications, lower profits and deterioration of the financial and economic situation, shortage of personnel, etc.) This requires substantiation of strategic directions for recovery and implementation of effective support tools based on the best models of the foreign practice that will ensure the competitiveness of the Ukrainian engineering industry.
The production of engineering products provides an economic multiplier effect for related sectors of the economy, united by a single technological chain. The engineering industries are strategically important for socio-economic development, as they account for a significant number of jobs (almost 15% of industrial workers in 2021) with fairly high wages. The hostilities led to a loss of Ukrainian exports of engineering products by up to 70% of the level of 2021 ($6107.56 million in 2021 vs. $4216.9 million in 2022). The loss of production capacity is offset by significant imports of engineering products in the amount of USD 15983.54 million in 2022, which confirms the high import dependence of the domestic market of engineering products.
In addition to reducing the production of engineering products in Ukraine, the war will have a significant impact on the global engineering industry, in particular, it will exacerbate difficulties in supply chains. At the same time, it provides an opportunity for Ukraine to occupy the market niches in the European and global engineering markets that have been vacated by the Russian manufacturer due to sanctions, as well as to diversify its own production and become a member of global value chains for engineering products for the aviation, rocketry, medical, and military industries.
To create favorable conditions for the industry’s recovery, it is important to introduce effective tools:
- removing obstacles to the engineering enterprises entry into industrial parks, namely, amending the legislation to strengthen the responsibility of local governments for creating obstacles in the allocation of land boundaries and the projected point of connection (for new facilities), calculating payments for connection to the power grid and meeting connection deadlines;
- establishing an effective dialogue between state and local authorities, national producers and research and educational institutions, as well as close cooperation with European and international clusters;
- improving the system of public procurement and ordering through the formation of strategic procurement planning; reducing the control and regulatory functions of the state, liberalizing investments, taking into account the information and economic security of the state;
- amendments to the legislation to stimulate innovation in the field of Industry 4.0 implementation;
- establishing a system of state guarantees for foreign investors and a system of military risk insurance; supporting economic sustainability by providing grants for the development of small and medium-sized businesses;
- simplifying access into the entrepreneurial capital sector by optimizing the regulatory policy, reducing the number of inspections, providing preferential lending or other financing, including for the purchase of equipment for backup power supply;
- updating, consolidating and harmonizing existing government and sectoral strategic documents in line with the European vector “A European Green Deal”, “Sustainable and Smart Mobility Strategy” and the “Transport and the Green Deal” roadmap.