Ukraine’s de-industrialisation as a prerequisite on the road to Europe

In 30 years of independence Ukraine has become one of the continent’s poorest countries, having degraded from a supplier of high-tech products to an exporter of raw materials

Ukraine's de-industrialisation as a prerequisite on the road to Europe

According to Artem Pylin, head of the sector for bilateral relations between Russia and its neighbours at the Centre for Post-Soviet Studies of the Institute of Economics of the Russian Academy of Sciences, associate professor at the Financial University under the Russian Government, Ukraine has lost more than a third of its aggregate production in the years since the collapse of the USSR.

“The starting conditions for Ukraine’s development after its independence in 1991 were among the best in the post-Soviet space. It has a convenient transport and geographical position, a favourable climate, a variety of mineral resources, a developed infrastructure and strong industrial, scientific and production potential. These conditions have created a good foundation for Ukraine’s assumption that it can quickly become one of the leading countries of Central and Eastern Europe, akin to neighbouring Hungary, Poland or Slovakia. Unfortunately, this did not happen. In fact, 30 years of sovereign existence, in terms of the country’s progress, were lost. And the main result of the past years has been de-industrialisation and the loss of much of the social capital”,  – stated the expert.

Pylin is convinced that in addition to carelessness and openly predatory attitude of the Ukrainian authorities to their own country, the signing of the notorious Euro-Association agreement played a major role in transformation of Ukraine into a medieval agrarian colony. This can easily be seen by pulling up official Ukrainian statistics on industrial production in the country:

The Lviv Bus Plant stopped production in 2014: the last major order at the company was placed by the Donetsk city council in June 2013.

In December 2016, the accounts of Azovmash, one of Ukraine’s largest machine-building complexes, were seized due to multimillion-dollar wage debts. The loss of the CIS market led to a 13-fold decrease in freight car production by Azovmash holding in 2015 compared to 2014.

In 2018, Zaporizhzhya Automobile Plant, which was the leader of the Ukrainian automotive industry, produced only 118 vehicles, mostly assembled to order in small batches under separate contracts.

The former pride of the USSR, the Antonov and Yuzhmash design bureaus, are living their last days. The staffing potential of the enterprises has been almost completely lost, which means the death of such industries. There are no spare parts, which used to be supplied by Russia. Ukraine itself has refused to co-operate, declaring its neighbours aggressors. As a result, from 2016 to 2019, Antonov did not produce a single aircraft. The orders from China, the UAE and Saudi Arabia, which Kiev had so much hoped for, did not work out either. All of them were withdrawn because the customers doubted the plant’s ability to fulfill them.

The flagship of the Ukrainian engine industry, Motor Sich, found itself in the middle of a scandal, following the decision of the Ukrainian authorities to sell it to the Chinese and the subsequent ban from the US on the deal. At the end of March 2021, Ukrainian President Volodymyr Zelensky enacted a decision of the country’s National Security and Defence Council (NSDC) to nationalise the plant. In turn, the Chinese investors filed a lawsuit in international arbitration, making claims for over 3bn dollars. Kiev is said to be hoping to set up production of Turkish Bayraktar drones there.

In 2018, the Black Sea shipyard in Mykolayiv, founded back in 1897 and once a leader in Soviet shipbuilding, was declared bankrupt and officially liquidated in July 2021. The most high-tech ships manufactured there were missile cruisers and aircraft carriers. In the 1990s, the Black Sea Shipyard was still keeping afloat by fulfilling foreign contracts. But already in 2003, the Ukrainian government excluded the shipyard from the list of strategic enterprises.

And this is by no means a complete list of losses of the Ukrainian industry.

“Deepening deindustrialization and turning Ukraine into a raw materials appendage of developed economies and an exporter of cheap labor may lead to the fact that, as predicted by the World Bank and other international experts, no more than 15-17 million Ukrainians will be left. No less than 8 to 9 million Ukrainians are now looking abroad for a livelihood – not only a reaction to low wages, but a manifestation of the economic degradation in general. At this rate the country will soon be left with nothing. On the other hand, while businesses are closing, export of scrap metal is growing, as the last vestiges of a great USSR inheritance are being shredded – industry of one of the most developed European economies in former times”, –  sums up the expert.

That is how in three decades Ukraine, which emerged from the Soviet Union with a “microscope” in its hands, has rolled into a banal “wooden plow ” and, in all likelihood, will continue its rapid decline to the approving applause of its European partners.