Dependence of ukrainian economy on industrial import and prerequisites of forming effective industrial specialization

Inna A. Shovkun

Abstract


The relevance of the research theme is conditioned by deepening of the Ukrainian economy deindustrialization and its import dependence. The key feature of high import dependence is the huge deficit in the balance of foreign merchandise trade, which has already existed for a long time.

 The article surveys the theoretical foundations of the study of economy import dependence. It also represents an overview of the current realities of import substitution policies applied in different countries.

The main source of information for the study was the statistical data of the input-output tables. The level of dependence of the Ukrainian economy on import of industrial goods was estimated by the directions of its use – in intermediate and final consumption, gross accumulation of fixed capital. Calculations showed that a significant part of the functions in servicing of the consumer and investment market is performed by foreign manufacturers, whereas the country's manufacturing sector is mainly engaged in the production of intermediate products, which also remains the basis of its export (metals, raw mineral products, inorganic chemistry, wood and wood products).

An analysis of the level of dependence of various types of manufacturing in the processing industry on import showed that since recently the overwhelming advantage of import, especially products of the chemical industry, mechanical engineering, and light industry, has consolidated in the domestic market of intermediate goods.

As the result of the research there been made conclusion that priority activities (in the context of effective production specialization) are those that have a high level of intersectoral production relations. This role is primarily suitable for mechanical engineering and chemical industry. Another prerequisite for successful import substitution is the diversification of export based on the modernization of production in the processing industries. It is also required to create innovative industrial clusters of the network type where production companies and research organizations are combined in a joint scientific and production process. The development of the raw material base and mining from Ukrainian deposits will also favor self-sufficiency of economy and transition to efficient production specialization.


Keywords


import consumption, input-output tables, commodity structure of foreign trade, manufacturing, import substitution policy, effective specialization

Full Text:

PDF

References


Berezinskaya, O., & Vedev, A. (2015). Dependency of the Russian industry on imports and the strategy of import substitution industrialization. Voprosy Ekonomiki, 1, pp. 103-115. doi: https://doi.org/10.32609/0042-8736-2015-1-103-115 [in Russian].

Volchkova, N.A., & Turdyeva, N.A. (2016). Microeconomics of Russian Import Substitution. Journal of the New Economic Association, 4 (32), pp. 140-146 [in Russian].

Gazeta "Kommersant" (2019, October 29). Economists calculated the losses of Russians due to food countersanctions. Gazeta "Kommersant". Retrieved from https://www.kommersant.ru/doc/4141653 [in Russian].

Hirschfeld, A., Salikhova, O. (2019a). German Love. LB.ua. Retrieved from https://en.lb.ua/economics/2019/10/29/440825_lyubiti_ponimetski.html. [in Ukrainian].

Hirshfeld, A., Salikhova, O. (2019b). Wagon disputes. LB.ua. Retrieved from https://en.lb.ua/economics/2019/07/02/431000_vagonni_superechki.html [in Ukrainian].

SE "Ukrpromzovnishekspertiza" (2019). Mechanical engineering industry in Ukraine: potential and opportunities for expanding exports by 2021. Kyiv [in Ukrainian].

Economic truth (2020, February 26). Naftogaz estimates how much Russia has stolen Ukrainian gas after the annexation of Crimea. Ekonomichna pravda. Retrieved from https://www.epravda.com.ua/news/2020/02/26/657511/ [in Ukrainian].

Zagashvili, V. (2016). Foreign experience of import substitution and possible conclusions for Russia. Voprosy Ekonomiki. Vol. 8. pp. 137-148. doi: https://doi.org/10.32609/0042-8736-2016-8-137-148 [in Russian].

Kramar, O. (2019, February 6). Not in the minor. Ukrayinskyy tyzhden. Retrieved from https://m.tyzhden.ua/publication/226048 [in Ukrainian].

Lir, V.E. (2018). Imperatives and Determinants of Sustainable Energy Policy. Kyiv: NAS of Ukraine, State Institution «Institute for economics and forecasting [in Ukrainian].

Oleida, Z. (2020, March 31) Who won the wagon disputes? Dzerkalo tyzhnya. Ukrayina. Retrieved from https://dt.ua/promyshliennost/hto-peremig-u-vagonnih-sporah-343176_.html [in Ukrainian].

Omelchenko, O. (2020). The business case is to protect the domestic market from import. Yurydychna hazeta, 11 (665). Retrieved from https://yur-gazeta.com/publications/practice/zovnishnoekonomichna-diyalnist/sprava-biznesu--zahist-vnutrishnogo-rinku-vid-importu.html [in Ukrainian].

Ostashko, T., & Olefir, V. (2019). Prospects of free trade with China: development of domestic export and risks of import dependence. Ekonomika i prohnozuvannya, 1, pp. 128-155. doi: https://doi.org/10.15407/eip2019.01.128 [in Ukrainian].

Reinert, Erik (2016). How Rich Countries Got Rich ... and Why Poor Countries Stay Poor. Kyiv: Tempora [in Ukrainian].

Romanenko, V.A. (2013). Development of ukraine’s mechanical engineering: a system approach. Ekonomika Ukrayiny, 10 (623), pp. 56-66 [in Ukrainian].

Falko, Y. (2019, February 22). Khimprom of Ukraine: in the zone of turbulence, or Who is our “responsible” for food security of the state? Holos Ukrayiny. Retrieved from http://www.golos.com.ua/article/314057 [in Ukrainian].

Tsukhlo, S.V. (2019). Problems of import dependence of Russian industry and import substitution in 2014-2018. Neftegaz.RU, 4. Retrieved from https://magazine.neftegaz.ru/articles/rynok/386953-problemy-importozavisimosti-rossiyskoy-promyshlennosti-i-importozameshcheniya-v-2014-2018-gg/ [in Russian].

Shapovalov, A. (2019, October 29). Proud pay everyone. Gazeta "Kommersant, 198. pp. 2. Retrieved from https://www.kommersant.ru/doc/4141418. [in Russian].

Shovkun, I. (2019). Investment climate as a factor of industrial development in Ukraine. Ekonomika i prohnozuvannya, 4, pp. 70-103. doi: https://doi.org/10.15407/eip2019.04.070 [in Ukrainian].

Shovkun, I. (2017). Localization of production - a world practice and conclusions for Ukraine. Ekonomika i prohnozuvannya, 2, pp. 31-56. doi: https://doi.org/10.15407/eip2017.02.031 [in Ukrainian].

Aregbeshola, Rafiu Adewale (2017). Import substitution industrialisation and economic growth - Evidence from the group of BRICS countries. Future Business Journal, 3, pp. 138-158. doi: https://doi.org/10.1016/j.fbj.2017.06.001

Bataa, E., Osborn, D.R., & Sensier, M. (2018). China's increasing global influence: Changes in international growth linkages. Economic modelling, 74(C), pp. 194-206. doi: https://doi.org/10.1016/j.econmod.2018.05.014

Bodomo, A. (2019). Africa-China-Europe relations: Conditions and conditionalities. Journal of International Studies, 12(4), pp. 115-129. doi: https://doi.org/10.14254/2071-8330.2019/12-4/8

Borojo, Dinkneh, & Jiang, Yushi (2016, November). The Impact of Africa-China Trade Openness on Technology Transfer and Economic Growth for Africa: A Dynamic Panel Data Approach. Annals of Economics and Finance, 17(2), pp. 403-431.

Bouët, A., & Laborde, D. (2018). US trade wars in the twenty‐first century with emerging countries: Make America and its partners lose again. The World Economy, 41 (9), pp. 2276-2319. doi: https://doi.org/10.1111/twec.12719

Cantore, N., Clara, M., Lavopa, A., & Soare C. (2017). Manufacturing as an engine of growth: Which is the best fuel? Structural Change and Economic Dynamics, 42, pp. 56-66. doi: https://doi.org/10.1016/j.strueco.2017.04.004

Congress.gov (2009). Buy American Improvement Act of 2009. Congress.gov. Retrieved from https://www.congress.gov/bill/111th-congress/senate-bill/2890/titles

Diawara, Barassou, & Hanson, Kobena. (2019). What Does the Evidence Say about Contemporary China-Africa Relations? doi: https://doi.org/10.2307/j.ctvnp0kv2.14

European Commission (2020, March). A European Industrial Strategy. A new Industrial Strategy for a globally competitive, green and digital Europe. European Commission. Retrieved from https://ec.europa.eu/commission/presscorner/detail/en/fs_20_425

Foray, D., Morgan, K., & Radosevic, S. (2018). The role of smart specialization in the EU research and innovation policy landscape. European Commission. Retrieved from http://ec.europa.eu/

Foster, K. (2016). A Prediction of US Knit Apparel Demand:Making the Case for Reshoring Manufacturing Investment in New Technology. JTATM, 10(2), pp. 1-10.

Fukuyama, F. (2016, January 12). Exporting the Chinese Model. Project Syndicate. URL: https://www.project-syndicate.org/commentary/china-one-belt-one-road-strategy-byfrancis-fukuyama-2016-01#PGF36SQ2Lci55eMT.99

Fung, K. (2017). How Economic Dependency Was Created Through the WTO: A Case Study of South Korea. Journal of Develo-ping Societies, 33, pp. 469-487. doi: https://doi.org/10.1177/0169796X17738586" target="_blank">https://doi.org/10.1177/0169796X17738586

Ghosh, B. (2001). Dependency Theory Revisited. London: Routledge. doi: https://doi.org/10.4324/9781315187389

Gianelle, C., Kyriakou, D., Cohen, C. & Przeor, M. (Eds). (2016). Implementing Smart Specialisation: A Handbook. Brussels: European Commission. Retrieved from https://publications.jrc.ec.europa.eu/repository/bitstream/JRC102764/jrc102764_s3p-fromdesigntoimplementationfinal(16-12-016)web.pdf

Gingrich, N. (2019). Trump vs. China: Facing America's Greatest Threat. Hachette UK.

Günlük-Senesen, G., & Senesen, Ü. (2001). Reconsidering Import Dependency in Turkey: The Breakdown of Sectoral Demands with Respect to Suppliers. Economic Systems Research, 13(4). pр. 417-428. doi: https://doi.org/10.1080/09535310120089798

Huang, Y. (2020), Comment on “The China‐U.S. Trade War: Deep‐Rooted Causes, Shifting Focus and Uncertain Prospects”. Asian Economic Policy Review, 15, pp. 73-74. doi: https://doi.org/10.1111/aepr.12290

Jesus, Felipe, & Aashish, Mehta (2016). Deindustrialization? A global perspective. Economics Letters, 2016, № 149, pp. 148-151. doi: http://dx.doi.org/10.1016/j.econlet.2016.10.038

Koomson-Abekah, I., & Nwaba, E. Ch., (2018). Africa-China investment and growth link. Journal of Chinese Economic and Foreign Trade Studies, 11(2), pp. 132-150. doi: https://doi.org/10.1108/JCEFTS-11-2017-0034

Korteweg, R. (2018, April). Energy as a tool of foreign policy of authoritarian states, in particular Russia. European Parliament's Committee on Foreign Affairs. Retrieved from https://www.europarl.europa.eu/RegData/etudes/STUD/2018/603868/EXPO_STU(2018)603868_EN.pdf

Kosatka, Media (2020, April 2). Oil refining in Ukraine is the most vulnerable sector, the expert said. Novyny enerhetyky. Retrieved from https://kosatka.media/en/category/neft/news/neftepererabotka-v-ukraine-naiboleeuyazvimaya-otrasl-ekspert [in Ukrainian].

Kwan, C.H. (2020). The China-US Trade War: Deep-Rooted Causes, Shifting Focus and Uncertain Prospects. Asian Economic Policy Review, 15, pp. 55-72. doi: https://doi.org/10.1111/aepr.12284

Luedde-Neurath, R. (1986). Import controls and export-oriented development: A reassessment of the South Korean case. Routledge. doi: https://doi.org/10.4324/9780429035609

Mlambo, Courage, Kushamba, Audrey, & Simawu, More Blessing (2016) China-Africa Relations: What Lies Beneath?, The Chinese Economy, 49:4, pp. 257-276. doi: https://doi.org/10.1080/10971475.2016.1179023

Moradlou, H., & Backhouse, C. (2016). A review of manufacturing re-shoring in the context of customer-focused postponement strategies. Proceedings of the Institution of Mechanical Engineers. Part B: Journal of Engineering Manufacture, 230(9), рр. 1561-1571. doi: https://doi.org/10.1177/0954405415623486

Moradlou, H., Backhouse, C.J., & Ranganathan, R. (2017). Responsiveness, the primary reason behind re-shoring manufacturing activities to the UK: an Indian industry perspective. International Journal of Physical Distribution & LogisticsManagement, 47 (2/3), pp. 222-236.

Moradlou, H., Sawhney, R., Backhouse, C.J., & Mountney, S. (2017, July). Investigation on Additive Manufacturing as an enabler for reshoring manufacturing activities. EurOMA Conference. Edinburgh, Scotland. Retrieved from: http://shura.shu.ac.uk/id/eprint/16265

Moseley, W.G. (2017). Dependency Theory. In International Encyclopedia of Geography: People, the Earth, Environment and Technology. doi: https://doi.org/10.1002/9781118786352.wbieg1086

Müller, Julian, Dotzauer, Verena, & Voig, Kai‐Ingo (2017). Industry 4.0 and its Impact on Reshoring Decisions of German Manufacturing Enterprises. Supply Management Research. doi https://doi.org/10.1007/978-3-658-18632-6_8

OECD (2013). Innovation-driven growth in regions: the role of smart specialisation. Retrieved from https://www.oecd.org/sti/inno/smartspecialisation.htm

Radosevic, Slavo, Curaj, Adrian, Gheorghiu, Radu, Andreescu, Liviu, Wade, Imogen, & eds. (2017). Advances in the Theory and Practice of Smart Specialization.

Rogers, H. V (2011). The Impact of Import Dependency and Wind Generation on UK Gas Demand and Security of Supply to 2025. NG 54. Oxford Institute for Energy Studies.

Senesen, U., & Gunluk-Senesen, G. (2003, December). Import dependency of production in Turkey: structural change from 1970’s to 1990’s. Tenth Annual Conference of the Economic Research Forum (ERF), pp. 16-18.

Simachev, Y., Kuzyk, M., & Zudin, N. (2016). Import Dependence and Import Substitution in Russian Manufacturing: A Business Viewpoint. Foresight and sti governance, 10(4), рр. 25-45. doi: https://doi.org/10.17323/1995-459x.2016.4.25.45

Simola, H. (2016). Economic relations between Russia and China - Increasing inter-dependency? BOFIT Policy Brief, 6. Retrieved from https://www.bruegel.org/wp-content/uploads/2016/06/Heli-Simola-Russia-China-presentation.pdf

Stone, S. (2010, May 14). Gas & Geopolitics: The Foreign Policy Implications of Energy Import Dependency. Center for International Security and Cooperation. Retrieved from https://cisac.fsi.stanford.edu/publications/gas__geopolitics_the_foreign_policy_implications_of_energy_import_dependency

Štreimikienė, D., Strielkowski, W., Bilan, Y., & Mikalauskas, I. (2016). Energy dependency and sustainable regional development in the Baltic States - a review. Geographica Pannonica, 20(2), pp. 79-87. doi: https://doi.org/10.18421/GP20.02-04

Titiloye Ademola O., Bankole A., Adewuyi A. (2009). China-Africa Trade Relations: Insights from AERC Scoping Studies. The European Journal of Development Research, 21, pp. 485-505. doi: https://doi.org/10.1057/ejdr.2009.28

Tsugami, T. (2020), Comment on “The China - U.S. Trade War: Deep‐Rooted Causes, Shifting Focus, and Uncertain Prospects”. Asian Economic Policy Review, 15, pp. 75-76. doi: https://doi.org/10.1111/aepr.12291

Phuluwa, Simon, Mpofu, Khumbulani, Ramatsetse, Boitumelo, & Tshawe, Chris (2013). Role of Reconfigurable Manufacturing Systems in Minimizing Import Dependency in the South African Press Tool Enterprise. M.F. Zaeh (ed.), 5th International Conference on Changeable, Agile, Reconfigurable and Virtual Production (CARV 2013), Munich, Germany. doi: https://doi.org/10.1007/978-3-319-02054-9_17

Fung, K. (2017). How Economic Dependency Was Created Through the WTO: A Case Study of South Korea. Journal of Developing Societies, 33. pp. 469-487. doi: https://doi.org/10.1177/0169796X17738586

Veugelers, R. (Ed.). (2017, September 26). Remaking Europe: the new manufacturing as an engine for growth. Bruegel Blueprint Series. Retrieved from: https://www.bruegel.org/wp-content/uploads/2017/09/Remaking_Europe_blueprint.pdf

Wailerdsak, N., & Siengthai, S. (2017). Chapter 10 - Business Networks in Thailand: Import Substitution, Export Oriented, and Expansion in AEC. In J. Nolan, C. Rowley, M. Warner (Eds.). Business Networks in East Asian Capitalisms (pp. 211-233). doi: https://doi.org/10.1016/B978-0-08-100639-9.00010-4.

World Bank (2020, March). Exports of goods and services (current US$). World Development Indicators. Retrieved from https://data.worldbank.org/indicator/ne.exp.gnfs.cd

World Trade Organization (2020, March). Trade in value-added and global value chains: statistical profiles. Retrieved from https://www.wto.org/english/res_e/statis_e/miwi_e/countryprofiles_e.htm

Zhai, Weifeng, Sun, Shiling, & Zhang, Guangxing (2016). Reshoring of American manufacturing companies from China. Operations Management Research, 9, pp. 62-74. doi: https://doi.org/10.1007/s12063-016-0114-z

Zhironkin, S., Gasanov, M., Barysheva, G., Kolotov, K., & Zhironkina, O. (2017). The innovative development of machine building as a driver of import substitution. E3S Web of Conferences, 15, 03012 (2017). doi: https://doi.org/10.1051/e3sconf/20171503012

Zobov, A.M., Degtereva, E.A., Chernova, V.Yu., & Starostin, V. S. (2017). Comparative Analysis of the Best Practices in the Economic Policy of Import Substitution. European Research Studies Journal, XX (2A), pp. 507-520.




DOI: https://doi.org/10.15407/econindustry2020.03.005

Refbacks

  • There are currently no refbacks.