Home » Sports and Politics

Your Cheat Sheet to the Industries of Ukraine

11. January 2013 by Lorena 0 Comments

As part of the Soviet Union, Ukraine was second only to Russia in production of goods. More than a quarter of the food eaten in FSU countries came from Ukraine’s fertile soils. They also provided materials from rich mineral mines and created materials used in construction.

 

Ukraine has an export economy, largely as a result of poverty within the country. About a third of GDP comes from exports. It’s also a highly entrepreneurial country. Around half of all Ukrainians own a small business or are self-employed.

 

Some of the industries that are important to Ukraine’s economy:

 

Agriculture

Ukraine has some of the best dark soil in Europe. The climate is a lot like that in Kansas. At one time, Ukraine was considered the Soviet Union’s bread basket. The country is one of the top producers of wheat in Europe, and is also the world’s top exporter of sunflower oil. Other plants grown for use in Ukraine and for export to other countries are rye, potatoes, beet sugar, corn and barley.

In 2000, the state and collective farms leftover from the Soviet era were dismantled, replaced by a free market system. There have been both benefits and disadvantages to the move. On one hand, farmers are free to choose their crops based on market conditions; on the other, the loss of state subsidies for seed and fertilizer has hurt. About 15% of the people in Ukraine work in agriculture. By contrast, only about 3% of Americans do. 42 million hectares of the country’s 60 million hectare area are dedicated to agriculture

 

Mining

Ukraine is rich in natural resources. They once produced half of the Soviet Union’s iron output, and the land is still rich in mineral ores. Other mineral wealth includes manganese, coal (the country supplies almost all of its coal domestically) and natural gas. About 600,000 people work in Ukraine’s coal mines. In Ukraine’s three coal-mining regions, there are about 300 active mines

 

Ukraine currently produces only about 20% of the natural gas used domestically; the balance comes from the Russian Federation.

 

Steel

Going hand in hand with its iron-mining industry is Ukraine’s steel production. Steel exports make up about 40% of Ukraine’s economy. Ukraine is the world’s eighth largest producer, making steel, cast iron and metal pipes. However, the country has struggled with an aging industry for years; the existing refineries were resource-hungry and expensive to run as prices of Russian gas increased. The first new steel mill in Ukraine in 40 years was built in 2011. The $700 million factory is the largest new investment in the country since Ukraine achieved independence in 1991. 

 

Weapons

Ukraine was the Soviet Union’s top arms producer; when the USSR was dismantled, the country inherited all of those factories and technology. The armaments they could produce far exceeded the small country’s own needs, so, they began selling the surplus. Over the last 10 years, Ukraine became one of the top 10 arms dealers in the world. They specialize in inexpensive and reliable equipment, leaving the high tech stuff to other producers. Armaments is a sector that continues to grow, with war ships and aircraft carriers being the biggest sellers.

 

Tourism

Tourism is a small but still important part of the Ukrainian economy. The country was host to 21 million visitors in 2011. People come there to enjoy the culture of Lviv, the bustle of Kyiv, the beaches of Odessa and natural and manmade wonders throughout Ukraine. As a bonus, Ukraine’s prices are relatively cheap compared to other European countries. It’s hoped that more travelers will discover the attraction of Ukraine, and will continue to come there in larger numbers. In the words of one industry expert, 20 million travelers a year spending just $200 each could mean an extra $4 billion in Ukraine’s economy. 

 

 

Issues that Hinder Ukraine’s Economy

When Ukraine left the Soviet Union in 1991, it took some time for them to find their footing. Their economy started to get legs in 2000, but was hamstrung toward the end of the decade by rising gas prices and the international economic crisis.

 

Additionally, corruption is an ongoing issue in the country. As much as half of all transactions in Ukraine occur in what’s known as a “shadow economy.” Things are bought and sold in cash to avoid taxes and fees. This, in turn, means that there are fewer government funds available for infrastructure. A number of reforms have been suggested; one plan involves requiring that all large financial transactions be performed electronically. It’s hoped that this will provide a paper trail, reduce corruption, and increase tax revenues. However, there are disagreements on how to implement a system like this. Some plans support building an e-payment system from the ground up; however, critics of the plan say that this could lead to security flaws.

 

Complicating things further for Ukraine is an expensive and restrictive natural gas contract with Russia.  High gas prices have damaged the steel industry, which relies heavily on natural gas. The contract with Russia will not allow Ukraine to cut expensive imports. And, the gas subsidies which many citizens rely on are a drain on the country’s economy. 

 

Future Outlook

Ukraine’s goals include full integration into the European Union. There are a number of pitfalls on the way, but also signs of light at the end of the tunnel. Luxury goods have come to the country as incomes rise and domestic markets grow. Ukraine has begun some forays into renewables that may help wean them from their dependence on Russian natural gas. With an array of factors at play, it’s hard to predict where things will go for this unique economy.

 

Photos: sugar beets, coal mine, steel