Competitiveness and Private Sector Development: Eastern Europe and South Caucasus 2011

Competitiveness Outlook

image of Competitiveness and Private Sector Development: Eastern Europe and South Caucasus 2011

With a total population of over 75 million people and a strategic location between wealthy trading partners, with Russia to the east and a vast market of EU citizens to the west, the Eastern Europe and South Caucasus (EESC) region is attractive as a destination for investment and trade. It is endowed with significant human and resources ranging from the black soil in Ukraine that produces some of the best wheat in the world, to energy reserves in Azerbaijan and unexplored water resources in several countries. However, in spite of recent growth – an average of almost 8% of GDP during 1998-2008 – the region’s productivity levels remain 77% below the world average. The OECD Eastern Europe and South Caucasus Competitiveness Outlook examines the key policies that would increase competitiveness in the countries of the region through developing human capital, improving access to finance for SMEs and creating more and better investment opportunities.



Ukraine: A Case Study on Diversification and Sector Competitiveness

This chapter is a country case study. It looks at specific ways to enhance a country’s productivity levels through focusing on boosting the competitiveness of selected economic sectors. The chapter also looks at other elements likely to affect the general attractiveness of the business environment, such as a new Tax Code. Ukraine’s size, qualified labour force and natural endowments combined to make it one of the fastest growing economies in Europe between 2000 and 2008. Following its deeply-felt recession of 2009, Ukraine resumed positive growth in 2010. However, the recession exposed severe structural weaknesses in the economy, especially with regard to the underused potential of many of its economic sectors. Among the key challenges it must address to improve competitiveness and embed sustainable economic growth are: a low level of FDI per capita, an unfavourable business climate, high external debt, inadequate implementation of laws and the lack of a long-term strategy for investment policy and promotion. For optimum effectiveness of FDI it must be both diversified and its investment policies and promotion must be made sector-specific. Investment and promotion strategy and recommendations must focus on how to differentiate Ukraine and show its uniqueness for investment, how to identify sector-specific policy reforms, how to promote specific sectors, how to implement and monitor reform, how to evaluate progress and how to enhance its policy convergence with OECD investment instruments. The sectors identified for further study of their competitive advantage are Ukraine’s grain and dairy sectors, energy production based on biomass and the civil aviation manufacturing sector.


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