Light industry companies of Ukraine: overview and analysis of baseline conditions

Abstract

The paper reviews and analyzes the baseline conditions of light industry companies: the nature and structure of the branch is covered, the economic downturn which is legacy of the economic complex of the Ukrainian Soviet Socialist Republic described, statistical key figures and other dynamic indicators of the current development of the industry reviewed, a complex of outstanding problems impeding its efficient development outlined. There are main constraints on the way to attraction of foreign and domestic investment in the branch identified.

It is indicated that since as long ago as the Soviet times the industry was structured in such a way that companies of the process chain "raw materials - products - sales" were located far from each other, in different republics of the USSR. After Ukraine had gained independence, there were companies of the final production cycle left in its territory. Since then the lack of raw materials and semi-finished products has become a chronic problem of the branch. The operational efficiency of companies gets also reduced due to the lack of manufacturers of specialized equipment and respective spare parts in Ukraine. As a result, today's production capacities of the branch are worn out by 70-80%.

Such a specific aspect of the investment environment of domestic light industry companies as the lack of their own capital gave rise to operation of most enterprises on a give-and-take basisс. On the one part, that allowed to retain the current key assets and personnel of the branch. On the other part, there are no more prospects for continued operation on the same basis as the global trend is to transfer a part of soft goods production to countries with cheaper labor. There is a tendency is observed to an increased production volume of soft goods worldwide owing to implementation of achievements of scientific and technological progress while the employment volume in this industry in highly developed countries is reduced; the share of states of the Asian region in the global production and export volume of soft goods is growing.

Extensive research and educational capabilities for training of skilled labor can not be considered today a competitive advantage of the branch because training programs for domestic specialists make no provisions for transfer of present knowledge regarding methods of procurement and merchandizing, approaches to research and details of designing competitive marketing strategies etc.

At present the state does not promote the development of the branch in any way, neither does it consider the branch a development priority. The author identifies the following major constraints for attraction of investment in the branch: the current taxation system and the state customs and tariff policy, though worn-out material and technical facilities also reduce its attractiveness to foreign and domestic investors, most light industry companies lacking raw materials and their own capital as well as great dependence on global economic processes and financial markets.