Denys Kostrzhevskyi – Industrial Parks in Ukraine: A Strategy for Economic Revival During Wartime

Author: Denys Kostrzhevskyi, Chairman of the Board of Directors, Kyiv International Airport

The development of industry and effective attraction of investments, including foreign ones, are critically important for ensuring stability and growth of the national economy. From my experience managing a vital infrastructure project like the Kyiv Sikorsky International Airport, I am convinced that the establishment of industrial parks in Ukraine can catalyze the development of Ukrainian industry. Industrial parks, successfully operating in industrially developed countries, can be a driving force for attracting foreign investment, fostering innovation, and economic revival in Ukraine’s post-war period.

What are Industrial Parks?

Industrial parks are specialized zones designated for the development of new enterprises and industrial complexes. Located on Production complexes, they are equipped with everything necessary for efficient operation—from specialized facilities to advanced infrastructure, including electricity. Industrial parks accommodate warehouse, production, and administrative facilities, significantly simplifying logistics and reducing the costs of organizing production, thereby enabling enterprises to operate with maximum efficiency and coordination.

Objectives of Creating Industrial Parks

The primary goal of Industrial clusters is to promote the sustainable development of a region’s industrial potential, enhancing its investment attractiveness and overall prosperity. This is achieved by creating new jobs and elevating the intellectual and technological potential of the region. Industrial parks also contribute to reducing import dependency and increasing export potential, leading to increased tax revenues. All these factors jointly influence the country’s economic development, stimulating industrial revival and ensuring long-term stability.

The Role of Industrial Parks in a Wartime Economy

The creation of Industrial clusters can be an integral part of supporting the economy both during wartime and in the post-war reconstruction phase. High levels of innovation, foreign investment attraction, technological advancements, new job creation, the restoration of production and export potential, and enterprise tax contributions are vital for maintaining economic stability during war and essential for rapid economic recovery and national rebuilding post-war, aiming for European-level competitiveness.

From personal experience, I see that during war, Industrial clusters play a critical role, not only in maintaining stable economic activity but also in providing production and logistical stability. They facilitate the effective relocation of productions to safer regions, preserving and creating new jobs, which is crucial for the rapid recovery of our economy and further national development, preparing us for a new level of European competitiveness.

Current State of Industrial Parks in Ukraine

The creation and development of industrial parks is a relatively new phenomenon in our country. Although the Law “On Industrial Parks” was adopted on June 21, 2012, No. 5018-VI, this sector did not develop due to the lack of stimulating factors, financial, fiscal, and technical support from the state. High taxes and lack of affordable loans and incentives for enterprises significantly hindered the development of this promising sector.

Since 2021-2022, changes in state policy regarding Industrial clusters have spurred the development of existing and the opening of new Industrial centers. In 2022, several legislative changes and regulatory acts regarding clusters significantly impacted the development of this sphere.

Particularly important were the regulatory acts that provide preferences and incentives from the state, among them:

• Law of Ukraine “On Amendments to the Law of Ukraine ‘On Industrial Parks’ and Some Other Legislative Acts of Ukraine Regarding the Attraction of Investments in the Industrial Sector of the Economy by Stimulating the Creation of Industrial Parks” No. 1710-IX;
• Law of Ukraine “On Amendments to the Tax Code of Ukraine Regarding the Creation of Favorable Conditions for Attracting Large-Scale Investments in Industrial Production” No. 2330-IX;
• Law of Ukraine “On Amendments to the Customs Code of Ukraine Regarding the Creation of Favorable Conditions for Attracting Large-Scale Investments in Industrial Production” No. 2331-IX and a series of resolutions by the Cabinet of Ministers of Ukraine.

Significant changes include exemption from VAT, customs duties on equipment, profit tax for a period of 10 years, and provision of preferential loans, compensation of expenses, and allocation of funds on a non-repayable basis from the state, local budgets, and other legal sources for initiators of Industrial clusters to implement measures for the arrangement of Industrial centers and/or ensuring the construction of necessary engineering and transport infrastructure.

Moreover, the Cabinet of Ministers of Ukraine approved the Strategy for the Development of Industrial Parks for 2023-2030 on February 24, 2023, No. 176-r, aimed at enhancing the institutional capacity of industrial parks to develop production and scientific-technical potential as a basis for achieving the maximum level of economic activity efficiency, balanced and sustainable socio-economic development of the state, its regions, and individual territories.

Another important step was the allocation of 1 billion hryvnias from the budget for the development of IPs. As Deputy Minister of Economy Vitaliy Kindrativ notes, “The trend shows an increasing business interest in operating within parks. Also, local authorities understand the additional opportunities for the regional economy created by the operation of parks. The development of industrial parks is part of the economic policy ‘Made in Ukraine,’ so the state will provide comprehensive support to this direction. In particular, this year’s state budget includes 1 billion hryvnias for the development of industrial parks.”

Challenges and Prospects for Development

In the future, IPs will become an important and necessary tool for the state’s economic recovery in the post-war period thanks to the creation of new jobs, replenishment of the budget, and attraction of investments, which will allow Ukraine to quickly reach the level of an industrially developed country. The impact of industrial parks on economic development, GDP growth, and export volumes is significant. For instance, according to the Deputy Chairman of the Committee of the Verkhovna Rada of Ukraine on Economic Development, Dmytro Kysilevskyi, industrial parks in China account for about 20% of the country’s GDP, more than 60% of production and exports of South Korea, and in some regions, the impact of industrial parks on GDP is up to 90%.

The main challenges for IPs in Ukraine include ensuring safety from Russian aggression during the war, issues of proper funding, granting incentives and credits from the state, and improving legislative regulation. Since 2022, thanks to legislative changes, Industrial clustershave opened up new development prospects, significantly simplifying their operations in Ukraine. However, the state and international community continue to work on ensuring security and adequate legal and financial bases for improving this sector according to the Strategy for the Development of Industrial Parks for 2023-2030, which will ultimately bring Ukraine to the level of industrially developed countries.

Conclusion: Industrial Parks at the Heart of Ukraine’s Economic Reconstruction

Based on my extensive experience in managing large-scale projects and understanding economic processes, I am firmly convinced of the strategic role of industrial parks in developing Ukrainian industry, especially in the context of wartime and post-war recovery. Utilizing the potential of these parks is indispensable for sustaining production activities, innovations, and attracting investments, which are vitally important for the restoration of the national economy.

Effective interaction between the state and business sector, which includes developing favorable conditions for the functioning of industrial parks and stimulating domestic and foreign investment activity, is key to achieving sustainable economic development. These actions will not only allow Ukraine to withstand contemporary challenges but also rapidly restore its economy, enhancing its competitiveness on the international stage.

Thus, ensuring the expansion and modernization of industrial parks and establishing productive cooperation among all stakeholders will guarantee not only economic revival but also the strengthening of Ukraine’s statehood overall.