The discussion was held on the proposals received from businesses as part of the work of the Sectoral Working Group on Mechanical Engineering, established under the Ministry of Economy of Ukraine, organized by the Kyiv School of Economics and moderated by Kearney as part of the work on the Ukraine Facility Plan. 100 market participants joined the group, which introduced 54 proposals for policy changes, with 26 of them submitted to the Government for potential implementation and 20 required further discussion and revision.

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 International Development). The project delivery partners are Abt Britain and Kyiv School of Economics.

The majority of the proposed policies were related to the areas of improving the investment climate, restricting imports from sanctioned countries, access to finance and markets, human capital development, and support for modernization and innovation in the industry.

The participants also showed interest in such issues as  war risk insurance, long-term budget planning and procurement programs, the life cycle cost of equipment in procurement, speeding up the procedure for connecting to utility networks, reforming tariff regulation in the energy sector, creating a program for the development of production clusters, and supporting the program for the development of industrial parks in Ukraine, among others.

Some of the proposals received have already been included in the Plan, such as strengthening the capacity of domestic exporters, specifically in terms of financing operations through the Export Credit Agency, war risk insurance, and the creation of an SME affordable loan program. The Plan also includes entrepreneurial education, the implementation of industrial parks, and the regulation of connection to utility networks.

“The mechanical engineering sector is a crucial but underestimated segment of the national economy. In view of the goals set by the Government in the Ukraine Facility Plan, the development of the industry will allow us to establish new high-value production facilities and overcome the chronic shortage of devices and machinery by localizing production within the country.  I appreciate the proposals from sectoral group members, which have played a key role in forming a clear vision for industry development in the interests of the state and business,” said Deputy Minister of Economy of Ukraine Oleksii Sobolev. 

He also added the opportunity for investors to receive financing through the EBRD, EIB, and other international financial institutions will be an additional driver for development. For this purpose, the Plan provides for a special investment instrument to cover risks in priority sectors worth EUR 8 billion. The overall expected investment effect could be more than EUR 30 billion.

Businesses submitted 28 proposals for potential investment areas related to the electronics and instrumentation sector, railway engineering, automobile manufacturing, shipbuilding, electric transport production, and other areas of engineering. The total budget of the proposed policies amounted to $1.1 billion. 

“The development of the machinery engineering sector is a prospective industry for enhancing Ukraine’s economic capacity, particularly in the areas of post-war reconstruction and increasing the production of high-tech products. These proposals are crucial for fostering a constructive dialogue between the Government and the private sector. Following a series of expert discussions, 26 policy proposals were submitted to the Government for potential implementation,” 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 Government for consideration and may be included in the long-term sectoral development strategy.