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



The decline in the Ukrainian industry is stipulated by the compound complex of
economic and political factors in which problems of structural changes are not the last ones.
One has to indicate that the general trend in growth rates decline was appeared even at the end of
1970-s and the beginning of 1980-s. In different sectors of industry the evidence of the decline
was different and depended on a number of factors such as the obsoleteness of fix capital,
investment, subsidies and financial support. By 1989 the decline of output in the fuel industry
had reached 2 per cent, ferrous metallurgy - 0.8 per cent, electric power generation - 0.6 per
cent. Those negative trends in the economy objectively showed the necessity of effective
structural policy which would be in the consent with the current economic needs.

The reduction of output has not brought any positive changes in the Ukrainian economic
structure and high-tech industries as well as the ones producing consumer goods have suffered
more then the other sectors of the Ukrainian economy.

Changes in sectorial proportions of capital that happened over the last years can not be
assess as the great ones and they caused mostly by physical obsoleteness of fix capital rather
then any goal oriented measures to form an optimal structure of the Ukrainian economy. For
example, at the moment that consumer goods and foodstuff processing industries suffer from a
deep decline the share of fixed capital of the industries is being consciously reduced without
obvious attempt to restore the production with the obvious domestic market. At the same time
one can observe the growth of the share for the heavy industries that aggravates the raw material
orientation of the Ukrainian economy. Among the sectors of basic industries we can see the
growing percentage of the fuel and power generating industries (from 13.4 per cent in 1989 to
18.5 per cent in 1996). The reduction of fixed capital in other sectors, in the machine-building
for instance, is caused by conversion of military industrial complex (from 27.6 per cent in 1989
to 22.3 per cent in 1996). The similar picture is in the metallurgical sector, chemical and
petrochemical (by 0.2 per cent and 0.7 per cent correspondingly).

Investment in the Ukrainian economy (Tables 5, 6, 7) has reduced more than in fife
times, compared to the one in 1990 (similar prices). The same investment slump has happened
for the government investment.



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