Top Ukrainian economist warns of potential huge hit to industry from coronavirus

The president of Ukraine’s International Chamber of Commerce has warned of the potentially dire economic impact of the Coronavirus pandemic on his country.

Speaking exclusively to this website, Volodymyr Shchelkunov said, “The effects are extremely negative and every effort should be made to ensure that economic problems do not turn into a deeper social crisis, which will then have to be resolved over the years.”

His comments come with most countries now bracing themselves for significant economic losses as a result of the global pandemic, including falling oil prices and collapse of energy markets.

Addressing the possible consequences of the pandemic, he noted, “The fact is that several million Ukrainians have worked abroad in the recent years, primarily in EU countries".

Shchelkunov, a leading Ukraine economist, told EUToday, “Each year, these migrant workers send about $12 billion in official money transfers to Ukraine. For the Ukrainian budget this is a colossal sum. But the fate of these people will depend on anti-crisis measures by the Ukrainian government as well as the governments of the EU.

“They will either return and stay home, continue to shuttle labour again or leave Ukraine for good. This should be taken into account when developing national anti-crisis measures and support for export-oriented industries that are the source of foreign currency inflows into the country.”

Asked if the policy for overcoming the crisis in Europe should be European and liberal or nationally oriented and protectionist, he said, “Open markets and liberal economy are perfect but unfortunately just in a theory.”

He added, “In the era of distress, such as a Coronavirus pandemic, borders are closed without any explanation and foreign labour is released as a matter of urgency and sent home. Everyone behaves as a hard pragmatist.”

At this point, the future of the Schengen area is uncertain. The Coronavirus pandemic forces national governments to seek new solutions to the question of the balance between freedom and control in emergencies. To my mind, national governments ought to resort to protectionism since they are completely dependent on their constituents.

Volodymyr Shchelkunov

However, some Ukrainian companies have not been as badly affected as others, usually because “they were integrated most into the global economy and not dependent on the commodity market.”

One example he cites is “Duglas Alliance”, a company which designs and constructs industrial sites in different parts of the world. One of its projects is Sendje Hydroelectric Power Station, a hydroelectric plant on the Wele River in Equatorial Guinea mainland, which will be the country’s largest in terms of generating capacity. The project started in 2012 and, at the start of 2020, was 70% complete.

To realise the high-tech project Duglas Alliance engaged not just experienced Ukrainian professionals but also contractors and suppliers from France, Switzerland, Germany, Bulgaria, Vietnam. The Ukraine ICC says it is one of the best examples of successful globalization and external business expansion. The ICC entered into partnership with the company, based on a mutual understanding that the African market is highly promising for Ukrainian business.

Industry in Ukraine is oriented towards foreign markets. Currently, though, Ukrainian-Russian relations are frozen and Europe is mainly recognised by Ukrainian producers as a competitor.

When asked the “recipe” for saving the Ukrainian industrial sector and moving to the next level of development, he said, “The benefit of our industry is in the markets of dynamically developing economies. First of all, it is Asia, then the Arab world and Africa. Our professionals started to absorb these markets during Soviet times. In 1970-80s, our specialists supplied machinery and equipment there, built dams, factories, taught the local political and engineering elite. Then, in the 1990s, these ties largely collapsed but contacts remained and the business elite of the countries often graduated from our educational institutions and learnt our mentality.”

He believes that, despite the crisis, the example of Ukrainian industry, in providing consulting, design and construction services in a global construction and energy market, provides some hope for the future.

He added “So, in these regions, the future of Ukraine industry and our industrial exports remains bright.”

Sendje hydroelectric plant factbox:

Design capacity: 200 MW; Power supply voltage: 220 kV; Average annual productivity: 1.402 million kWh; Design head: 67.5m; Reservoir area: 21.57km2; Retaining level of reservoir: 88 m; Volume of reservoir: 60.2million m3; Power line connection:230 kV.Constructed by Duglas Alliance Ltd and commissioned by the Government of the Republic of Equatorial Guinea.

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Martin Banks

Martin Banks

Martin Banks is a highly qualified journalist with many years experience of working within the EU institutions. He is an occasional, and highly valued, contributor to EU today, writing on a wide variety of issues.

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