Structure and specialisation of the Ukrainian economy (including its technological basis)

 

According to the latest report of the World Economic Forum’s Global Competitiveness Report in 2015-2016, Ukraine remained on a mediocre position in 2014-2015 and 2015-2016 (see Table 1). While the country was ranked 76 previously, it ranks 79 now¹⁸.

 

 

UKRAINE in the GCI	RANK (out of 140)	SCORE (1-7)
Global Competitiveness Index		4.0
2015-2016
GCI 2014-2015 (out of 144)		4.1
GCI 2013-2014 (out of 148)		4.1
GCI 2012-2013 (out of 144)		4.1

 

Table 1: Ukraine's ranking in the Global Competitiveness Index from 2012 to 2016; source = World Economic Forum's (WEF) Global Competitiveness Report 2015-2016

 

The drop of Ukraine in the GCI compared to 2014-2015 is a consequence of the country’s worsened performance in the following areas:¹⁹

 

· Macroeconomic environment: 134^th place (previous: 105^th)

 

· Financial Market Development 121^st place (previous: 107^th)

 

· Infrastructure: 69^th place (previous: 68^th)

 

· Technological Readiness: 86^th place (previous: 85^th)

 

Ukraine is both an industrial and agrarian country, predominantly producing different kinds of rawmaterials. As regards the types of industry, the main prevailing sectors in accordance with the United Nations International Standard Industrial Classification²⁰ are

 

· Heavy engineering

 

· Ferrous and non-ferrous metallurgy

 

· Shipbuilding

 

· Automotive industry²¹

 

· Aerospace industry

 

· Manufacturing and supply for power plants

 

· Oil, gas and chemical industry

 

It has to be noted, however, that the remaining aerospace industry in Ukraine is severely affected by the termination of contractual relations with Russia. Also the automotive sector and the shipbuilding sectors are declining.

 

The current Global Competitiveness Report 2015-2016 by the World Economic Forum (WEF) provides some insights into the “technological readiness level” of Ukraine²², which help to set the scene for this chapter.

 

18. The absolute positions of countries in the WEF’s Global Competitiveness Report has to be interpreted with care, because the number of countries in the annual surveys change.

 

19. Self-assessment report: Scientific and technological sphere of Ukraine, MESU, 2016, p. 354

 

20. http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=27: accessed on 4 May 2016.

 

21 According to Igor Yegorov, it is problematic to consider this sector as a key one: now Ukraine produces less than 1000 cars per quarter.

 

Ukraine’s	GCI 2012-2013:	GCI 2013-2014:	GCI 2014-	GCI 2015-
performance in the	ranking and	ranking and	2015: ranking	2016: ranking
GCI based on the	grade	grade	and grade	and grade
factor “technological
readiness”
Technological readiness	81 / 3,6	94 / 3,3	85 / 3,5	86 / 3,4
level (overall)
Availability of latest	69 / 4,8	106 / 4,3	113 / 4,1	96 / 4,3
technologies
Firm-level technology	80 / 4,8	100 / 4,3	100 / 4,2	100 / 4,2
absorption
FDI and technology	109 / 4	131 / 3,6	127 / 3,7	117 / 3,8
transfer
Individuals using	88 / 30,6	93 / 33,7	82 / 41,8	80 / 43,4
Internet, %
Fixed-broadband	69 / 7	71 / 8,1	68 / 8,8	72 / 8,4
internet subscriptions
per 100 inhabitants

 

Table 2: Ukraine's level of technological readiness, given by stipulated indicators; source = WEF Global Competitiveness Reports 2012 to 2016

 

Compared to the last GCI from 2014/15, Ukraine remained on a mediocre position in terms of its technological readiness level. The scores given in the table are on a 1-7 scale, with 7 indicating the best score (apart from the values indicated in %). Based on the sub-fields, which specify the technological readiness level, Ukraine improved most in “availability of latest technologies” (from 113^th to 96^th position²³). Ukraine ranked best in 2012-2013, when the technological readiness of the country was assessed with a score of 3.6 (second left column).

 

Ukraine’s overall top-ranking before the most obvious political turmoil (2012/2013) is well reflected in all of the listed indicators. The level of availability of latest technologies in the country (both in the research and industrial sector) was highest in these years (69th place among 140 countries with a score of 4.8), as well as the firm-level technology absorption (80^th place with a score of 4.8) and the level of FDI and technology transfer (109^th place with a score of 4.0), which all have worsened since then. Only on the levels of individuals using the internet and fixed-broadband internet subscriptions Ukraine improves – in 2014/2015 41.8% of Ukrainians used the internet and 68 of 100 inhabitants had a fixed-broadband internet subscription respectively, which are both the highest shares of Ukraine within all the listed Global Competitiveness indexes.

 

Aspects of doing business in Ukraine

 

Important aspects for doing this assessment are the access to finance (credits, loans, and venture capital), the ease of technology adaption (distance to the technology frontier and innovation culture) and similar potential barriers when doing business.

 

First, data from the World Bank Group are scrutinised. In the current “ease of doing business-ranking

 

2016” Ukraine takes the 83^rd position from 189 countries in total.²⁴ More exactly, this snapshot is the junction of several smaller assessments in different aspects related to economy. Those, particularly important for our analysis, are the following

 

22. Schwab, Klaus (2015): „The global competitiveness report 2015-2016”, Insight Report by World Economic

 

Forum, p. 355.

 

23. The positions should be only regarded as indicative, because they are based on experts assessments rather than on valid indicators.

 

24. http://www.doingbusiness.org/rankings: accessed on 29 April 2016.

 

· Ukraine in “starting a business”: 30^th of 189

 

· Ukraine in “registering property”: 61^st of 189

 

· Ukraine in “getting credit”: 19^th of 189

 

· Ukraine in “protecting minority investors”: 88^th of 189

 

· Ukraine in “paying taxes”: 107^th of 189

 

· Ukraine in “trading across borders”: 109^th of 189

 

· Ukraine in “enforcing contracts”: 98^th of 189

 

Other additionally interesting aspects, covered by further sources such as the World Bank’s “World Development Indicators database”²⁵, the International Monetary Fund’s “World Economic Outlook Database”²⁶, the World Economic Forum’s “Executive Opinion Survey”²⁷, the International Labour Organisation’s “database of labour statistics”²⁸ include:

 

· “Domestic credit to private sector” in Ukraine: 42^nd of 141 (2013)

 

· “Market capitalisation of listed companies” in Ukraine: 86^th of 141 (2012)

 

· “Venture capital deals” (Venture capital per investment location: Number of deals) in Ukraine: 51^st of 141 (2014)

 

· “Intensity of local economic competition in the market” in Ukraine: 97^th of 141 (2014)

 

· “Employment in knowledge-intensive services” in Ukraine: 39^th of 141 (2013)

 

Political instability as a reference to the current situation is also among the most mentioned factors of doing business in Ukraine. Other factors, heavily discouraging global businesspersons to become active in the country are corruption, access to financing and inflation as shown in Figure 4.

 

 

Figure 4: Most problematic factors for doing business in Ukraine; source = Screenshot of WEF Global Competitiveness Report 2015-2016

 

 

25 databank.worldbank.org/wdi: accessed on 29 April 2016.

 

26 https://www.imf.org/external/pubs/ft/weo/2015/02/weodata/index.aspx: accessed on 29 April 2016.

 

27 http://reports.weforum.org/global-risks-2015/executive-opinion-survey-2014/: accessed on 29 April 2016.

 

28 http://www.ilo.org/ilostat: accessed on 29 April 2016.