Restructuring of industrial economies in countries in transition: Experience of Ukraine

Among the main reasons causing the slump in manufacturing sector may be called the
following:

• liberalization of prices and, as the result, their rapid growth for energy resources;

• payments crisis, which creates the situation of severe deficit for money in turnover curbing
the production process as a whole;

• sharp reduction of the demand in the shrank Ukrainian market;

• difficulties in acquiring imported raw materials that had especially severe consequences for
cotton and textile industries.

The most dramatic developments have happened in high-tech branches of industry that
actually supposed to be the core for economic growth. The growing deindustrialization of the
country and the threat of irreversible destruction of the country’s scientific and technological
potential become apparent exactly in the high-tech industries. The output of the sector has
practically dropped for all the types of products with the reduction of major ones from 25 to 50
per cent that of the level of the early 1990s, that is the reduction for more than one third. For
some types of products the slump in output is just catastrophic. For example, the production of
robots was 1.8 per cent in 1996 that of the level of 1990. And for the most high-tech industries
the slump means really irreversible degradation of technological processes. The domestic
producers intensively lose their market positions under the severe competition in the world
market.

Owing to a short-sighted conversion concept one can witness grave consequences in the
military-industrial complex development which actually concentrates scientific potential and
high-tech technologies.

The decline output of durable goods output has been reduced beginning in 1991 and has
embraced practically the complete list of goods produced (Tables 14, 15, 16; Chart 4).

Table 14: Durable Goods Output in Ukraine, thousands units

15

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