Results of SEZ and TPD in Ukraine in 2002

In 2002, in FEZ and TPD Ukraine to attract investments totaling $ 297.4 million, representing 110.3% of 2001 goda.Vozrastanie volume of attracted investments occurred in five of the nine regions where introduced a special regime of investment and in six of the eleven SEZ. The most significant amounts of investment in general, arrived at special area with developed infrastructure: in Donetsk region – 109,1 million USD (36,7% of the total volume of attracted investments), Kharkov – 40,4 million (13,6%), Autonomous Republic of Crimea – 30,9 million (10,4%).

Since the introduction of special investment regime (period 1998-2002). trend towards an increase in formed on the TFT in the Autonomous Republic of Crimea and Kharkov, where the average annual growth rate of investment were respectively 310.5% and 261.4%, including in 2002 – 107.3% and 246.2%. In 2002, improvements were also obtained in an increase in the FEZ and TPD individual regions, where inward investment in recent years were minor – Kiev (growth rate – 223% share in total Investment Report 2002 – 4%), Zhitomir (respectively – 306% and 4%), Odessa (198% and 2%) and Volyn regions (174% and 1%).

Of the 3 SEZ and 23 TPA, on whose territories since the beginning of the introduction of a special regime investment was attracted investment, over the last year launched projects in the SEZ “Рені” 1 TPA – in Donetsk and 4 of the TPA – in Chernihiv regions. However, virtually launched projects in the most depressed areas, where prozhivaett 5,2% (0,5 million) of the total population in the territories of location of SEZ and TPD.

In 2002, for various reasons, primarily due to lack of effective work administration of FEZ and TPD, a significant reduction in inflows held at the TPD in Donetsk (on 46,9 million dollars, or 31.2%), Luhansk (7,8 million U.S. dollars, or 68.8%), Chernigov (1,6 million U.S. dollars, or 23.8%) areas and in the SEZ “Kurortopolis Truskavets” (1,6 million U.S. dollars, or 33.5%).

Compared with the previous year, slightly improved branch structure of investments: increased their share of mechanical engineering – from 10,6% (20,8 million U.S. dollars) in 2001 to 20,8% (61,8 million U.S. dollars) in 2002, the food industry – from 8,9% (24 million U.S. dollars) 12% (35,7 million U.S. dollars), the hotel business – from 5,8% (15,8 million U.S. dollars) to 10,6% (31,5 million U.S. dollars), transport – from 3,1% (8,5 million U.S. dollars) to 5,5% (16,4 million U.S. dollars), and the production of electrical and electronic equipment – from 1,6% (4,4 million U.S. dollars) to 4,6% (13,6 million U.S. dollars). However, the decreased percentage and absolute amount of investment in metallurgy and processing of metals – 16,2% (or 43.7 million U.S. dollars) to 10,7% (31,9 million U.S. dollars), mining – with 13,8% (or 37.1 million U.S. dollars) to 9,4% (28,1 million U.S. dollars) and the chemical industry – from 6,1% (16,3 million U.S. dollars) to 4,5% (13,5 million U.S. dollars).

Investing almost came to such economic activities as fisheries, Electricity, gas and water, health. The share of investment in fixed capital in the total amount of attracted investments of 80,1% (238.25 million U.S. dollars). 100% of the attracted investments invested in fixed capital for projects that are implemented on territory of FEZ “Nikolayev”, “Porto-Franco”, “Renee,” TPA in the Volyn region and Shostka.

Over the past year mastered 270.5 million, or 90.9% of the borrowed during the year investment. Their structure is dominated by the cost of equipment and equipment (48,2%), gradually increasing share of working capital (from 13,6% in 2001 to 20,4% in the year 20002).

The positive trends in the development of SEZ and TPD should also include an annual increase attracted investment per capita. Since the beginning of operation (1998-2002 Gg.) Average for all of FEZ and TPD, they accounted for 69,4 U.S. dollar, of which – U.S. $ 56.1 – Investments in fixed capital and 25.4 U.S. dollars – foreign investment. In certain specific areas to attract investment resources index per capita than the regional and national average figures. Thus, in 2002, per capita investment in fixed assets in U.S. dollar equivalent, in FEZ Slavutich 276.9 U.S. dollars, whereas in the Kiev region (Without Kiev) – 87,2 U.S. dollar, on special areas in the Lviv region – $ 100 (at the Lviv region 67,9 USD).

There is no tendency to increase and remain low in per capita the volumes of foreign investments attracted to the TPA in Zhytomyr (0,5 USD in 2002 and 0.4 U.S. dollar in 2001), Lugano (respectively 4.3 and 0.8 U.S. dollar) areas and investment in fixed capital – on the TPA in Shostka (respectively 0.97 and 0.94 U.S. dollar), Zhitomir (2,8 and 1 U.S. dollar) and Lugano (respectively 5.1 and 18.3 U.S. dollars) areas. That is, there is no positive changes in development mainly in areas which can be characterized as depressive.

The increase in income of investment resources in the FEZ and TPD is mainly due domestic investments – 74,3% (220,9 million U.S. dollars) of the total amount raised investment (in 2001 – 72,8% or 196.4 million U.S. dollars). Under the influence of positive trends in financial and credit sector, the share of loans of Ukrainian commercial banks in general amount of domestic capital more than doubled – from 10,4% (20,5 million U.S. dollars) in 2001 to 25,9% (57,3 million U.S. dollars) in 2002.

However, the volume of investment resources, which are involved in most of the SEZ and TPD in today do not meet the investment opportunities of the regions and did not significantly affect the investment processes. So, last year the total investment attracted in the framework of investment projects, provided the flow of less than one third (26,8%) of foreign investment and 11,8% of investment in the capital regions and their location and accordingly 10,8% and 6,4% in the country as a whole. The largest share of foreign investment in regions where established FEZ and TPD, constitute investment projects are realized in the SEZ Slavutich – 97% (5,7 million U.S. dollars) Transcarpathian region – 75,9% (14,9 million U.S. dollars) and Kharkov – 74,4% (10,3 million U.S. dollars). Slight impact on attracting foreign capital in regions have investment projects that are implemented on the TPA in Lugano – 3,4% (0,4 million U.S. dollars) and Zhytomyr – 8% (1,6 million U.S. dollars) areas. In Shostka and Chernihiv region, foreign investment during the introduction of a special regime of investment is not received at all. The largest share foreign capital in total investment is in the SEZ “Рені” – 93,8% (1,8 million U.S. dollars) TPA in the Volyn – 69,2% (2,1 million U.S. dollars) and the Transcarpathian – 66,6% (14,4 million U.S. dollars) areas.

With increase in the total volume of attracted investments has slowed the pace of their growth and lag indicators by region and state as a whole. Thus, the annual growth rate of investment in the FEZ and TPD decreased from 147.5% in 2000 to 110.3% in 2002, fixed capital – according to 145,2% to 105,3%, Foreign investments – from 117,4% to 104,4%. The share of investments in fixed capital and Foreign investment in the SEZ and TPD in the aggregate investment in the region of their location and in the whole country dropped from 13,9% and 36,2% in 2001 to 11,8% and 26,8% in 2002. This involves both objective and subjective factors. In particular, the instability legislation regarding the establishment and functioning of FEZ and TPD, the imperfection of individual standards of legislative and regulatory acts, which creates unequal conditions for business activities among the FEZ and TPD, as well as insufficient work of local authorities to introduce a special investment regime. The negative impact is the fact that the special investment regime was introduced in mainly in the depressed areas, which have low investment attractiveness, poor infrastructure and, consequently, high investment risks for investors.

One of the problems of development of SEZ and TPD is insufficient implementation of investment commitments, under agreements (contracts) with the administration of FEZ and TPD. In 2002, the commitments regarding investments in a variety performed on 61,1%, that somehow higher than previous years: in 2001 – 57,4% in 2000 – 52,5%. The relatively high rate of implementation of investment commitments (68-86%) have investment projects that are implemented on the TPA in the Autonomous Republic of Crimea, Zhytomyr and Chernihiv regions. However, in the Odessa region – 43%; Lviv – 31%; Nikolaev – 24%, and in Luhansk and Shostka – respectively 19% and 14%.

The reasons are mainly lack of control by local authorities for implementation of investment projects and, as a consequence – the low liability of investors for implementation of the planned investment commitments, as well as preparation of business plans.