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ECO-INDUSTRIAL PARK DEVELOPMENT IN UKRAINE

SITUATION REPORT

JULY 2022

Despite setting out an ambitious roadmap for sustainable development with a strong emphasis on sustainable industrial development, Ukraine had to rethink its plans and prioritise the needs of its defense after hostilities were initiated on 24 February 2022. The armed conflict has forced the country into a war economy, with an expected drop in output of almost half in 2022 . The direct and reverberating consequences having included lower economic growth and rising inflation far beyond Ukraine, with a significant impact on the global economy.

Despite extensive capital losses and damaged infrastructure, with millions displaced by the violence , Ukrainian businesses have found ways to survive and evacuate to safer locations. Industrial parks in western regions are providing a ready solution, offering connected infrastructure and opportunities for cooperation for enterprises sheltered from areas of intense hostilities.

The Global Eco-Industrial Parks Programme – Ukraine (GEIPP-Ukraine) stepped up its support to existing industrial parks, its resident companies, and potential investors upon the request of its main government counterpart – the Ministry of Economy of Ukraine. The Eco-Industrial Park model will be leveraged to help the industrial sector attract investments so that a rapid recovery with a green transition consistent with Ukraine’s sustainable development ambitions can be achieved.

Areas of military control in Ukraine as of 5 June 2022 (©BBC)

Conflict Economy: Reaction, Reconstruction and Resilience

By end of April 2022, the Government of Ukraine had created the National Board on the Reconstruction of Ukraine from Consequences of the War and began planning the post-conflict development of the country. The Government’s plans emphasize economic reconstruction, focusing on the creation of new jobs and exploring resilient sources and activities for revenue generation. Within this context, the development of industrial parks remains the priority for Ukraine in maintaining its economy during the conflict and in achieving its vision for post-conflict development.

“Before the war, we talked a lot about industrial parks. Now these plans and all the achievements in their development should become a favourable ground for enterprises” - the Prime Minister of Ukraine, Denys Shmyhal, said.

Inter alia, Government support to business includes the National Relocation Programme of enterprises from the areas of intense fighting to safer regions of Western Ukraine. The national programme is implemented by the Ministry of Economy. The Ministry of Economy officially requested assistance from the GEIPP-Ukraine project in April 2022 to aid the scale-up of the National Relocation Programme in its support to industrial parks and to shift the project`s focus towards the western regions of Ukraine.

To date, more than 1600 applications for relocation have been registered on the programme's digital platform, and over 600 out of those applications have been processed and companies have already relocated.

Read more about the businesses relocating to Zakarpattia here.

Further assistance in supporting Ukraine’s economy

Future activities under GEIPP Ukraine will include the identification and mapping of existing industrial parks in western Ukraine with the development of an interactive map on the composition and specialization of enterprises located in their respective territories. This exercise will support the Ministry of Economy in its decision-making framework on where to relocate businesses to maximise synergies and industrial symbiosis between companies. GEIPP-Ukraine will also select two of the identified parks and their tenant companies and assess them against the International EIP Framework and Resource Efficiency and Cleaner Production (RECP) standards respectively to identify upgrading opportunities for future implementation.

Data on the relocation of enterprises. Data source: the Ministry of Economy of Ukraine

In June, GEIPP National Project Coordinator, Mr Anton Kleshchov, visited one of the industrial parks in the Zakarpattia oblast (region) as a potential candidate to be included in the project. The visit was organized and facilitated by local authorities with the participation of local media. While the park is not classified as an industrial park, it operates according to the principles of industrial parks. It has welcomed relocating enterprises and specializes in furniture production. The park is keen to support, develop and attract investments, while creating quality workplaces for the local community, including for internally displaced people.

At the same time, GEIPP-Ukraine will continue supporting the industrial parks that were selected as pilot parks at the beginning of the project – BVAK Bila Tserkva IP and Agromash Zaporizhzhia IP. Moreover, the work on the policy level will continue and aim to support the development of a cohesive EIP Vision and roadmap for Ukraine. The project expects that the definition and criteria of EIPs will be incorporated into the Law “On Industrial Parks”, and the appropriate incentives for EIPs will be developed in by-laws.

Pre-conflict prospects for EIPs remain

Before the outbreak of the full-scale conflict, the Government recognized industrial parks as an effective tool for inclusive and sustainable industrial and economic development. In 2021, amendments favoring the development of effective industrial parks were adopted and introduced into the law “On industrial parks” and draft laws 5688 – 5689 on tax and customs incentives for the development of industrial parks. As the result, Ukraine planned to assist 25 parks with establishing its vital infrastructure and was set to attract around EUR 2.3 billion of additional investments from the development of industrial parks in the near future.

Before the outbreak of the full-scale conflict, the Government recognized industrial parks as an effective tool for inclusive and sustainable industrial and economic development. In 2021, amendments favoring the development of effective industrial parks were adopted and introduced into the law “On industrial parks” and draft laws 5688 – 5689 on tax and customs incentives for the development of industrial parks. As the result, Ukraine planned to assist 25 parks with establishing its vital infrastructure and was set to attract around EUR 2.3 billion of additional investments from the development of industrial parks in the near future .

Pre-conflict aspirations towards eco-industrial parks remain strong

In Ukraine, GEIPP-Ukraine commenced its activities in 2020 in close cooperation with the Ministry of Economy. Several significant policy changes have already taken place, including the introduction of the eco-industrial parks model in the 2030 National Economic Strategy and the draft National Industrial Parks Strategy. The newly formed Intergovernmental Working Group, comprising fourteen key national stakeholders, is now meeting regularly to discuss further amendments. To read more about Ukraine's progress towards creating an enabling environment for eco-industrial parks, click here.

At the level of the parks, the project selected three pilot parks to demonstrate the viability of eco-industrial park approaches– “Agromash” in Zaporizhzhia, “Bila Tserkva Cargo and Aviation Plant (BVAK)” in Bila Tserkva, and “Patriot” in Sumy. The project facilitated resource efficiency and cleaner production (RECP) assessments for the resident companies of BVAK IP in Bila Tserkva. As a result of the assessments, 82 options to improve residents’ savings were identified. Once the recommended options have been implemented, the companies will be able to cut electricity consumption by 15%, natural gas by 20%, solid fuels by 17%, and water by 12%. Eleven identified RECP options have already been implemented through some of the companies' own investments. The annual reduction in carbon dioxide associated with these options is 365.27 t СО2eq/year, and savings amount to 67,418 euro/year.

Ukraine took significant steps towards the circular economy and sustainable development. The priority now is to help businesses survive. At the same time, we are already looking towards future post-conflict reconstruction and a green transition of Ukrainian industries. The development of eco-industrial parks can help in relocating enterprises and become an accelerator for economic growth and recovery” says Anton Kleshchov, National Project Coordinator.

Having accumulated experience providing technical assistance, the GEIPP-Ukraine project intends to support the Government in its steadfast commitment to industrial park development and their future transformation into eco-industrial parks. “Ukraine took significant steps towards the circular economy and sustainable development. The priority now is to help businesses survive. At the same time, we are already looking towards future post-conflict reconstruction and a green transition of Ukrainian industries. The development of eco-industrial parks can help in relocating enterprises and become an accelerator for economic growth and recovery” says Anton Kleshchov, National Project Coordinator.

For more information on GEIPP Ukraine, contact us at GEIPP-Ukraine@unido.org

Nataliia Shkvarok, National EIP Promotion Expert

This project is funded by the State Secretariat for Economic Affairs of the Government of Switzerland.

Credits:

Created with images by Iuliia Sokolovska - "Aerial top view of industrial park zone from above, factory chimneys and warehouses, industry district in Kiev (Kyiv), Ukraine " • Cavan - "Professional furniture production factrory worker using pneumatic hammer" • 安琦 王 - "Steel production at the metallurgical plant"