Only a few years ago it was widely believed that the global economy was at the close of the industrial era and moving on to the postindustrial information model. Now it is safe to say that this transition has not taken place and is not foreseeable in the nearest future. On the contrary, advanced tech countries have announced the Fourth Industrial Revolution marked by migration to a new technology level, creation of cyber physical systems, i.e. growth of industrial production through the use of R&D achievements in various sectors.
But there is another reason why even countries like Germany and the USA started to reclaim production capacities from China. At last year’s Kyiv International Economic Forum Harry Jacobs, CEO of the World Academy of Art and Science, stressed that the chief KPI changed for the modern global economy – it is employment of population now. If countries fail to assure global employment, the world will face migration challenges which governments can hardly manage.
Even the government of the United States – a country whose growth of information technologies outpaces the whole world – is fully aware that the number of employees in hi-tech companies is a dozen times fewer that those employed in machine building, aircraft manufacturing, construction etc. The idea of a new economic industrialization is one of the main economy-related tasks listed on the election campaign of a candidate for US President. As an example of development, we often refer to Booking.com not owning a single hotel or to Uber.com not owning a single taxi car. But they will not be able to evolve without automobile manufacturing and hotel construction.
With advanced technologies, Ukrainian agriculture, for instance, can provide about one million jobs at most. Even today’s rapid development in the IT sector will provide employment for a maximum of 200-300 thousand persons in the coming years. Only the processing industry and production are capable of giving jobs to tens of millions people. For that reason Ukraine must join the global fight for investments in the real sector of economy and industrial expansion.
Let us consider the weapons which other countries use in this fight. Poland set up 14 free trade zones and dozens of tech parks where companies are granted not only tax privileges but also project funding from European foundations. Turkey already has over 100 tech parks. Near 30% of Chinese economy operate in free trade zones. All of these countries realize that the prospects of industry and jobs are more important than tax collection today and migration of population tomorrow.
And what about Ukraine? With 13 industrial parks registered there is not a single one in operation. For apart from the title “Industrial Park” investors do not receive anything in Ukraine. In the meantime dozens of hi-tech plants are set up in Vietnam where new production is exempt from tax. However Verkhovna Rada is now considering two bills which would enable Ukraine to take a step to meet the investors – residents of industrial parks, and in particular give them the opportunity to import manufacturing equipment exempt from duty and with VAT payment deferred for five years, as well as release them from corporate tax payments and reinvest the profits into development. Although these incentives do not surpass the privileges created by our neighbors, I hope that this is only the first step of the state towards industrial recovery in terms of the Fourth Industrial Revolution.
Park establishment is widely supported by local authorities. For example, Lviv region allotted about 50 land plots for this purpose. Lviv understands that with these modern models of investor cooperation and with its geographic position it can plant itself in the avant-garde of the country’s economic growth. Local authorities also have a number of levers, including the capacity to reduce land and real estate taxes for the investors and to build the parks’ infrastructure at the cost of the local budget or regional development fund.
Further deindustrialization results in the migration of people and subsequently in the loss of sovereignty. Only one option is available – to make industrial development a national priority.