Ukraine Sector Competitiveness Strategy - Key Findings

7/28/2019 Ukraine Sector Competitiveness Strategy - Key Findings

1/20

key findings

Cpss

d P Sc Dp

UkraineSeCtor ComPetitiveneSS Strategy


2/20

The OECD Eurasia Competitiveness Programme was launched in 2008 to support Eurasian economies

in developing more vibrant and competitive markets. It includes seven countries rom Central Asia

(Aghanistan, Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan) and six

countries rom Eastern Europe and the South Caucasus (Armenia, Azerbaijan, Belarus, Georgia, the Republic

o Moldova and Ukraine).

The Programmes approach leverages OECD instruments and tools in order to assess where and how

to enhance the competiveness o countries, sectors and regions to generate sustainable growth. Since

its inception, the Programme has developed and implemented several regional and country specifc

competitiveness strategies, complemented by capacity building seminars and coaching or policy makers.

This document has been fnanced by the Swedish International Development Cooperation Agency, Sida. Sida does

not necessarily share the views expressed in this material. Responsibility or its contents rests entirely with the author.


3/20


4/20

nuus cp ds

abUnDant

natUralreSoUrCeSUkraine has 311 000

square kilometres o arable

land, the largest such area

in Europe. It has the largest

manganese-ore felds

and the second-largestmercury deposits in the

world. It also has access

to other abundant mineral

resources, such as coal,

iron, nickel, uranium.

StrategiC

loCationThe country has access

to the Black Sea and is a

key energy transit country

or Russian gas exports to

Western Europe.

a well

qUaliieDlaboUr

orCe

Ukraine has universal

literacy and high general

school enrolment: the

combined gross enrolment

ratio in education o bothsexes was 90% in 2009,

higher than in some OECD

countries.

riSing

inComeSSince 2000 per capita

income has increased

by more than 60% (in

purchase power parity),

accelerating domestic

consumption.

4

ukraine: sector competitiveness strategy


5/20


6/20

6


7/20

7

a-usssUkraine has ore arabe and (over 31 iion hectares) than

any other European country, an abundance o rich, back soi and

avourabe ciatic conditions. Other sources o copetitiveness

incude a ong tradition in agricuture and ow abour costs.

The country has a signifcant opportunity to urther strengthen its

aready iportant roe in agribusiness, by addressing the oowing

-w :

Difculty in accessing short and long-term fnancing, resulting in

the continued use o obsolete technologies and low investment inchemical inputs such as ertilisers and pesticides

Lack of knowledge, skills, and abilities in the elds of agronomy and

agro-management

Difculties in accessing land

Low productivity

Product quality below the standards of neighbouring markets,

hindering the development of high-quality exports

The expected rise in deand or basic and processed agricutura

products coud ake this sector ore attractive to private investors,

-

. tw - w

identifed: grain and dairy.


8/20

sector strengthsUkraine is well-positioned to consolidate its leading role as

a grain producer and exporter and to increase the share o

processed goods in overall output. Its production costs are

estimated to be about 50% lower than those o European

producers. Its geographic position guarantees low reightcosts or exports to neighbouring Western Europe and to

growing importers such as Middle-Eastern and Arican

countries. Finally, considerable potential to increase

productivity and the availability o unused arable land

could contribute to the signifcant growth o Ukrainian grain

commodities output and processed goods production.

a-usss sc:

sector challengesDfcu ccss fc is a main concern or

small and medium-sized armers, limiting their ability to

invest in operational activities and fxed assets.

l pducis the result o a limited use o high

quality inputs (e.g. ertilisers, seeds), especially by small

and medium-sized arms, and a lack o investment in fxed

assets, such as machinery and storage acilities.

a s-psd u d ss has

prevented ree competition and hindered investment and

productivity gains. It has also had an adverse impact on

access to fnance since land is rarely owned and as

a result cannot be used as collateral and on oreigninvestments, as land cannot be purchased by oreign

individuals or oreign companies.

Updc d pcs sometimes run counter

to market conditions, penalising armers. For example,

restrictions on exports were temporarily implemented

during the global grain price rise in 2010.

l u also adversely aects the ability to

process it and, ultimately, overall sector competitiveness.

Facts:

a Grain production akes upore than 40% o Ukraines

agricuture production.

a Wheat accounts or around50% o tota grain production(in vaue).


9/20

9

0

2

4

6

8

France UK

Germ

any EUChina USA

Ukr

aine Canada

Arge

ntina Brazil

Russia

Austr

alia

Wheat yield Barley yield

Ukraine has the potential to improve relatively low grain yields

Average wheat (let) and barley (right) yields, tonnes per ha, 2005-2010

Source: Investment Capital Ukraine, Sector Primer Agriculture, December 2010.

g a hu cp ss with the needs o the

sector. Entrepreneurship know-how, technical skills, and

fnancial literacy must be tailored to the requirements o

Ukrainian armers.

g c ccss fc through policies to

support supply-chain fnancing, leasing, and insurance to

cover against risk.

g r d pcs attract investors and enable

the ull usage o land assets as collateral.

recommendations for sector reform

g uh dp su scs, such as credit

inormation services, collateral registration, and market

inormation services.

g es scs d such as quotas to

improve predictability and the attractiveness o the sector

to domestic and oreign investors.


10/20

10

a-usss sc: d

Facts:

a Doestic deand inUkraine or processed dairyproducts is expected toincrease by 25% over thecoing decade, according toOECD/FAO projections.

a cis m-ecountries are aready keyiporters o Ukrainian dairyproducts.

a Ukraines raw ik is sortedinto three quaity grades.

Its highest quaity categoryis ower than the singe EUstandard grade.

sector strengthsUkraine is traditionally a dairy producer, although its

herd sizes and output have been decreasing since

independence. Production costs in the sector are

comparable to those o New Zealand and signifcantly

lower than most o Eurasian countries. The domestic

market is expected to grow strongly in the coming years.

Moreover, Ukraine enjoys proximity to a number o large

or developing markets, such as the European Union (EU),

Russia and the Commonwealth o Independent States

(CIS) countries.

sector challengesqu sdds o milk or ood production do not

match those o the EU, and even the highest-quality

Ukrainian milk is not exportable to Western Europe.

m ds, although improving, are still 50% less than in

other key producing countries.

Pduc sucu: the production o raw milk isstill scattered, with 80% o production coming rom

households that own ewer than fve cows.

th s h sc s , preventing

necessary technological upgrades.


11/20

11

the Ukrainiandairy indUstry

already exportssignificantvolUmes of itsprodUction

Dairy consumption/export

ratio o Ukraine,

thousands o tonnes, 2009


g b hu cp h cp

ds to improve both productivity and quality o raw milk

output.

grs u sdds to meet EU standards.

gc ccss fc, which would allow an

increase in the number o cows per household, in order

to reduce the number o contact points or processors.

Possible approaches include, or example, micro-fnance

institutions, supply-chain fnancing, efcient credit

guarantee schemes, and cooperative banks.

gac j ss to the dairy

processing sector by creating a long-term strategy

around two priorities: i) improving both the quality and

productivity o raw milk production and ii) targeting frst

Ukraines domestic market beore moving on to the CIS

countries, and fnally to the EU.

Source: OECD/FAO, 2010.

0

100

200

300

400

Chee

seBu

tter

Whole

milk

powd

er

Skim

milk

powd

er

Consumption

1 0.43

0.630.431

Exports Imports


12/20

12


13/20

1313

e-fcc d

sucs s:

bss

The use o bioass to produce energy was pioneered by the United

s n , d, f

sw, - . s

the 1980s, bioass has aso been increasingy used or oca heating

purposes. In 2006, about 10% o goba priary energy deand was

et through energy produced based on bioass.


14/20

Wind 1%

Hydro 17.7%

Solar, tide 0.6%

Geothermal 3.3%

Solid biomass/charcoal 72.9%

Liquid biomass 2.4%

Renewable 0,9%

Gas from biomass 1.1%

18.63

14.01

Biomassrepresents asignificant share

of the worldsrenewaBle energyprodUction

Structure o world renewable

energy sources supply, 2007

Source: IEA, 2009.

sector strengthsUkraines abundant agricultural and orestry waste could

provide the basis or the uture development o energy

production based on biomass. The expected convergence

o natural gas import prices in Ukraine to Western

European levels should urther increase the attractiveness

o renewable energy sources.

sector challengesads s substantially limit investment

opportunities in the sector, and a credible national plandefning the role and objectives o biomass in the energy

landscape is still needed.

ld cuc u d ss

h pss uss ss among armers, industrial

companies and utilities brake the sectors development.

a c ccss cp, ddss c

us d s ps csusalsohinder sector growth.

Facts:

a The econoic potentiao crop waste per year isestiated at the equivaento 14 iion tonnes o coa.

a b

econoica when consuedon site or transported overdistances under 80 k,depending on transportationcosts.


15/20

15

gis pc d p is a priority area

or reorm, or example, by streamlining administrative

processes (e.g. permits) or implementing a single-window

approach or investors.

ga sc-spcfc p should be defned by the

government, spelling out a long-term strategy or

development o biomass-based energy production, and a

mid-term action plan.


goh s d h

sc, including alignment o prices, market

regulation, solving the problem o payment arrears by

consumers and privatisation o the utilities sector.

the Breadth of the Biomass waste sUpply chain represents

mUltiple opportUnities for BUsiness development

Collection oresidues and wastes

TransportProcessing orpreparation

Transport Storage TransormationSale o power, heat

or hot water

biomass supply

PRODUCTS

typicaloptio

ns

production SAlE

Agriculturalby-products

Truck Pressing Truck Tank BurningElectrical

power

Forestryby-products

Tractor Drying Tractor StorehouseGasifcation and

burning

District orindustrialheating

Municipalby-products

Conveyor belt

Residues and wastes

Mixing Conveyor belt Silo

Pile

Fuel

Power, heat or hot water


16/20


17/20


18/20

18

0

5000

10000

15000

20000

25000

30000

35000

40000

total =19,410

2010

current fleet

2030

expected fleet

total = 39,530

the civilian

aircraft sector

is set to grow

significantly

Total expected

demand or civilian

aircrat by segment

over 2011-30

sector strengthsThe Ukrainian civilian aircrat industry is renowned,

thanks to the countrys long-standing presence in the

sector, its engineering skills and capabilities, and its cost

competitiveness. Ukraine inherited a signifcant part o

the ormer USSRs capabilities in the aerospace sector,

starting with Antonov, its national aircrat manuacturer.

sector challengeso-d c s-d cps

d sc s pcs prevent the

implementation o business strategies based on global best

practice and limit integration into the global supply-chain.

U ucus c fc ch,

due to the size o their market, the restricted government

budget and a lack o advanced fnancing schemes or

manuacturers and customers.

Dd s s . As a result o all

these challenges, the majority o demand or Ukrainianproducts is currently concentrated in Ukraine and other CIS

countries, while most o the demand or civilian aircrat in

uture years is expected to come rom non-CIS countries.

Source: Boeing Current

Market Outlook, 2011.

Africa

Middle East

CIS

Latin America

Europe

Asia Pacific

North America


19/20

Facts:

a Ukraine enjoys a strongreputation in aerodynaics, orexape in wing design.

a The goba aircrat arketis divided into three distinct

duopoies or regionaturboprops, regiona jets and orarge aircrat. The European ATR c bdoinate the regiona turboprop, w b bz e j . b Airbus doinate the arket oraircrat over 100 passengers.

recommendationsFOR SECTOR REFORmg

s d c h h sus dh c c-d cps. The

civilian aircrat manuacturing industry should be ully

separated rom the military industry, thus enabling it to

interact with global suppliers and partners. This would

oster closer industry partnerships and would help solve

fnancing issues.

g is s pc d p s

to showcase reorms which make the sector moreattractive to oreign investors and other industrial partners.

g ip c ss to remain competitive in

this high value-added sector. To preserve and enhance

workorce skills, action could be taken to improve initial,

vocational and continuing education.

however, antonov has difficUlties competing in the gloBal marketof regional jets that are dominated By other leading firmsNumber o aircrat deliveries in 2009 by market player

Source: Company annual reports, press reports

498 477 123 122 54


20/20

www.oecd.org/da/psd/eurasia

key contact information

m. a S

Acting Head, OECD Eurasia Competitiveness Programme

[email protected]

For general enquiries

[email protected]

Media Contact

Ms. Vanessa Valle

Communications Manager

[email protected]

Date post:	03-Apr-2018
Category:	Documents
Upload:	oecd-global-relations
View:	222 times
Download:	0 times

Ukraine Sector Competitiveness Strategy - Key Findings

Documents