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The Economy of Ukraine and Ukraine in the Global Economy

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The economy of Ukraine and Ukraine in the global economy

Petrusha Helena

Ukraine’s economy has a great potential to perform successful in the world.
It can be characterized by such strong sides:
- well educated labour force,
- large domestic market,
- well developed industrial base,
- access to a variety of resources, including some of Europe’s best best agriculture land, significant coal and some oil and gas reserves,
- strategic location connecting Europe, Russia and Asian markets.
Nevertheless, Ukraine ended up among the least successful transition economies. The reasons for such a poor performance are different, but we should emphasize on the weaknesses deriving from overcentralised command economy during the Soviet period.
I’d like to draw your attention to the Ukraine economy past in order to understand its current situation. Large and often inefficient state-owned factories, enterprises and collective farms wasted resources and emphasized quantity over quality. Prices were fixed and consumer goods were often in short supply. Excessive spending on the military hurt the civilian economy.
For the last decades Ukraine is moving to market economy, where the forces of supply and demand and private ownership guide the allocation of resources. The transition to market economy is politically and socially difficult because of experience of rising inflation, unemployment and economic uncertainty before the long term benefits of market economy.
The next point of this topic is overview of Ukraine’s main directions of economic development.
The metal industry is Ukraine’s strongest sector of economic activity, accounting for 7% of GDP and around 40% of overall export. Before 2007 Ukraine was the world’s 8th largest steel producer. But it dramatically turned out to be the country’s disadvantage in the resent crisis, because of the sharp drop in the global trade, experienced by industry. But the country possesses a massive high-tech industrial base, including electronics, aviation, space program. Another important branch is chemical and petrochemical industries.
Ukraine is the Europe’s vitally important gas transfer, being transporting gas from Russia to Europe through its well-developed gas pipelines system. Ukraine is independent in its electricity supply, exporting it to other countries of Eastern Europe.
So we can see, that Ukraine relies heavily on its natural resources to drive the economy.
Being the part of the world economy, Ukraine is involved in the global processes of economic development and growth. Ukraine was admitted to the WTO on May 16, 2008 which dramatically opened the country’s opportunity to export. Record amounts of FDI (foreign direct investment) entered the country after this, but were slowed down by the financial crisis. Although some improvements in the business climate were made, particularly relating to the ease of starting a business as well as the ease of conducting business, the present investment and business climate is poor and the country remains in an economic crisis. Still, today, the country does not have a strategy for economic growth. It is critical, and time is of essence, that the country devise a strategy that includes legal reform, less egulation, less government interference and a simpler and less burdensome tax system. According to a rating system that investigates the ease of paying taxes the Ukraine ranks 180th out of 181 countries.
Ukraine is now waking to the fact it must work toward a more favorable business climate to not only attract FDI but also to allow businesses to operate without the bureaucratic and regulatory burdens they are presently faced with. Businesses must also face the fact they operate in a global environment and they need to be responsive to global markets. Similar to what companies are faced within other countries, companies within Ukraine must trim costs and improve efficiencies to be globally competitive. This often means downsizing and certainly means careful evaluation of the supply chain to eliminate all non- essential costs, all redundancies as well as maximizing productivity
Learning how to compete is probably the major challenge and that introduces the need to be efficient, productive and produce a quality product

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