KSE Supported the Discussion on Proposals from the Sectoral Working Group on Critical Materials as Part of the Work on the Ukraine Facility Plan

20 November 2023

The discussion was held on the proposals received from businesses as part of the work of the Sectoral Working Group on Critical Materials, established under the Ministry of Economy of Ukraine, organized by the Kyiv School of Economics and moderated by EY Ukraine as part of the work on the Ukraine Facility Plan. More than 100 participants joined the sectoral group,  proposing 29 policy changes, with 19 of them submitted to the Government for potential implementation.

Creation of the sectoral working groups is one of the activities under the Good Governance Fund Project “Economic Hub: Sound PFM Policies and Vision for Growth,” which is supported by the UK government (UK Aid). The project delivery partners are Abt Britain and Kyiv School of Economics.

The majority of the proposed policies were related to future subsoil users’ access to geological resources and production sharing agreements (14 proposals), access to infrastructure and government financial incentives for new projects (11), as well as mining policies (4).

The policy changes include the definition of critical raw materials, information transparency, obtaining special permits, production sharing agreements, access to land, “investment nannies” and industrial parks, financial incentives for investors in the industry, sources of financing for the development of the raw material base, and human capital.

“Business proposals help us define priorities for the Plan. Since the document aims to strengthen the macrofinancial situation, the measures outlined in the Plan are also designed to promote growth in macroeconomic indicators. The critical materials sector has significant potential for this,” said Deputy Minister of Economy of Ukraine Oleksii Sobolev. 

He also added that part of the received proposals have already been included in the Ukraine Facility Plan. These include measures to ensure the attractiveness of tenders under the terms of the Production Sharing Agreement, revaluation of critical raw material reserves using international classification systems, development of the National Geological Program until 2030, and continued work on improving the functionality of the subsoil user’s online portal.

Businesses proposed investment projects with a total budget of $800 million. The proposals were related to the extraction of critical raw materials, their processing, and the production of end-use products. In total, the investment potential of the industry is estimated at $12-15 billion by 2033.

“The critical materials sector holds significant investment potential to ensure macroeconomic stability. Ukraine not only ranks among the top 10 countries for the production of titanium, zirconium, graphite, and manganese but also possesses deposits of 22 out of the 34 minerals recognized as critical by the European Union. The results of the sectoral group’s work show that these factors create favorable conditions for the development of the critical materials extraction and processing sector in Ukraine, as well as the production of end products based on them,” said Maksym Fedoseienko, Head of Strategic Projects at KSE Institute.

While the format of the Ukraine Facility Plan does not foresee investment projects, their analysis is important for identifying priority sub-sectors for development. The relevant proposals will be submitted to the Ministry of Environmental Protection and Natural Resources of Ukraine, the Ukrainian Geological Survey, and the Ministry of Economy of Ukraine for consideration and may be included in the long-term sectoral development strategy.