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Development of Ukraine: High Tech as a solution

Those hoping for a better future for Ukraine will be disappointed, unless the economy focuses on high tech industry. Ukraine’s economic downfall – the industrial East of Ukraine is devastated, while Russian market has been closed at once – assures that Ukraine can no longer afford its economy the way it is now. It urgently needs revitalization and high tech is a key to kick-starting it.

The debt relief negotiated by Natalie Yaresko and her team laid down a macrofinancial foundation for economic recovery and growth. Ukrainian government focuses on undertaking a series of economic reforms aimed at privatization and macroeconomic stabilization, the quick path of which impressed the IMF Chief Christine Legarde during her visit in Kyiv.  Alongside the Verhovna Rada, Ministry of Economic Development and Trade has set out a plan of radical regulatory reform, while a number of NGOs are working closely to facilitate the liberalization of business practices in Ukraine. Although some programmes remain declarative, the overall goal is to ease the life of the private sector. Conditional programmes with a ‘more for more’ approach from the EU and other donors facilitate sustainable economic reforms.  However, to be successful and cost-effective, the regulatory work shall be complemented by ‘bottom-up’ entrepreneurial culture and business-enabling infrastructure.  

“High Tech Ukraine”

Despite harsh economic environment in the last two years, agile high tech companies survived, either by relocation to other oblasts, or by prompt market re-orientation. A number of investment deals have been closed, while more to come later this year, which shows that the military conflict in the East does not prevent the development of high tech industry that has high added value. Following the first US-Ukraine business Forum in Washington, Horizon Capital announced major investment in Ukrainian Amazon – Rozetka.ua – e-commerce leader in the country.

Now is a momentum for Ukraine to kick start the economy by boosting its high tech industry to create growth and employment.
 Salaries in IT industry remain rather stable in dollar equivalent (although went down by 10% contrary to previous year), while cumulative number of new employees in top25 companies totals some 1,500, contrary to a general trend of downsizing. Thus, while the most of economy stagnates, innovative, flexible, globally-focused high tech SMEs shall be the engine of Ukrainian economy for prosperous future of one of the largest nations in Europe. Now is a momentum for Ukraine to kick start the economy by boosting its high tech industry to create growth and employment. Simply, Ukraine has no other choice. Supporting small and medium-sized high tech business in Ukraine can turn Ukraine’s potential into social and economic value both for Ukraine and worldwide.

And Ukraine has the most valuable resource – rich human capital! Ukraine was ranked the 4th most educated nation in the world, over 99.7% of Ukrainians are literate and over 70% have a secondary or higher education according to World Economic Forum. More than 40% of Soviet R&D was located in Ukraine while currently a number of global industry leaders, including Samsung and Boeing, have R&D centres operating in Ukraine. In addition to that, around 550,000 engineering, manufacturing and construction students are currently undergoing educational training, mainly in Kyiv, Lviv, Kharkiv, Dnipropetrovsk and Odesa. Just imagine, this equals to almost the half of population of Estonia, one of the most technologically savvy nations in Europe! This magnifies the incredible untapped potential of Ukrainian high tech that is hidden but ready-to-thrive!

Challenges and Solutions

The difference though with Estonia, another post-Soviet state, is enormous: Ukraine has low entrepreneurial culture and literacy and lack of quality business advice services, no access to state-of-the-art infrastructure with modern equipment, and restrained access to global markets and financial instruments. These are the key challenges faced by Ukrainian business, entrepreneurs and innovators.  Thus, to create competitive, innovative high tech enterprises Ukraine currently needs:

  • building economic foundations including access to finance;
  • opening easy-to-access laboratories with modern technological facilities and cutting-edge equipment available to Ukrainian entrepreneurs, developers and innovators;
  • growing businesses through tailored mentorship and Incubators and investing in people via inclusive vocational business training that ensures skilled, diverse and qualified workforce aware of local needs and challenges;
  • integration into global markets.

These are the top-priority, feasible steps to ensure rapid development of high tech industry in Ukraine. Opening the laboratory with modern equipment provides access to cutting-edge facilities for entrepreneurs and innovators, engineers and researchers to meet together, invent, advance or pilot new disruptive technologies, and, after all, create a “builders” community. In addition to that, business training (especially in regions) and business incubation programmes, including mentorship and coaching, tailored to the needs of high tech SME will increase business literacy in Ukraine that, in turn, will lead to new economic, financial and business opportunities for Ukrainian men and women. Such comprehensive approach will also allow Ukraine to shift from being just an IT outsourcing destination to a country where ground-breaking products and technologies are developed and commercialized.

Poroshenko during his visit to Canada. Credit:rian

Specific attention shall be given to integration into global markets, given the recently signed DCFTA with the EU (it will come into power in 2016) and Canada-Ukraine Free Trade Agreement expected to be ratified soon (and this allows to get experience in NAFTA area). In fact, Canada may and shall play a key role in development of Ukraine, being its advocate and supporter at a global stage and having the largest Ukrainian diaspora in the world. Community of 1.3 million of Ukrainian Canadians that are genuinely interested in developing Ukraine are united by Ukrainian Canadian Congress, who plays key role bridging the countries. The Ukrainian Canadian community includes top-managers, entrepreneurs, investors and business associations that can and are willing to provide invaluable advice for Ukrainian innovators and entrepreneurs. Furthermore, prominent Ukrainian Canadians, as Bohdan Kupych, Vice President of Borsch Ventures and KM Core, Lenna Koszarny, CEO of Horizon Capital, Mychailo Wynnyckyj, professor of Kyiv-Mohyla Academy and Kyiv-Mohyla Business School and many others have spent most of their professional lives in Ukraine, exploring it, getting hands-on experience,  and, finally, knowing Ukraine inside out. Fortunately, these people are on the ground, with extensive expertise, and well-prepared to tackle the challenges Ukrainian high tech industry is facing.

Boosting High Tech industry in Ukraine will lay down the necessary foundations for long term inclusive economic growth. As a result, Ukraine will increase competitiveness and finally trigger foreign investment avalanche. Eventually, Ukraine will restore its economy and become prosperous member of the global society, with high standards of living and well-being, and limited brain drain.

 

p.s. if you want to assist Ukrainian high tech in its development, please, drop me a few lines at s.sviatnenko[at]beyondthe.eu