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Building markets in Ukraine

March 1st, 2017 / By: / Business, Sustainability

Ukraine plans to attract $300 million for the development of domestic technical textiles and nonwovens industries.

dt_48773976According to recent statements from the Ukrainian Cabinet of Ministers, Ukraine plans to attract up to $300 million USD worth of investments for the development of the domestic technical textiles and nonwovens industries over the next several years. This comes in response to recently announced plans by the Russian government to invest heavily in the development of its national technical textile sector, with the majority of production being supplied for the growing needs of the Russian defense sector.

An official spokesman for Vladimir Groysman, Ukraine’s Prime Minister, says the majority of funds for the implementation of these plans will be provided by private investors, including foreign investors, while the remaining amounts will be allocated from state sources.

Over the years, U.S. businesses have significantly increased the volume of investments in different sectors of the Ukrainian economy, including the technical textiles industry.

Ukrainian government officials recently visited the U.S., where they discussed
the opportunity of the provision of funds for the development of the Ukrainian technical textiles industry.

The national government and Ukraine’s President, Petr Poroshenko, have begun design on a special agreement with the U.S. in the field of technical textiles, planned through 2030. The agreement will help the U.S. to better protect its investments and interests within the territory of Ukraine.

The Ukrainian government has already completed the design of a roadmap, aimed at increasing investment attractiveness of the Ukrainian technical textiles and nonwovens industries, implementations of which will be evaluated by the U.S. government and the country’s business by the end of the first quarter of 2017.

Funding for facilities

According to the Ukrainian Ministry of Industry and Infrastructure, the state agency responsible for the attraction of investments in the Ukrainian technical textiles industry, the majority of allocated funds will be used to establish production facilities that will specialize in the production of technical textiles and products. The majority of these facilities will be located in the central part of the country at the initial stage, as well as western Ukraine,  where the production of textiles has never been a core activity in the local industrial complex and business.

Traditionally, the majority of Ukrainian technical textiles and chemistry productions have been concentrated in the eastern part of the country, mainly in the Donbass region. However, due to its current control by pro-Russian rebels, the majority of pre-existing production facilities have been lost.

New enterprises

According to plans of the Ukrainian government, between 2017 and 2018, up to $300 million USD will be invested in the establishment of at least five to six enterprises that will specialize in the production of technical textiles of large and medium sizes.

In exchange for investments, the Ukrainian government intends to provide investors with significant stakes in the newly established enterprises. The Ukrainian government hopes that U.S. President Donald Trump will support the approved agreements between the leaving presidential administration and the Ukrainian government.

Analysts believe that Ukraine has conditions favorable for the development of the domestic technical textiles industry, taking into account its high-quality raw material base; the USSR was one of the world’s leading producers of technical textiles, nonwovens and related products.

Payback periods for the planned projects are expected to be short, as the government plans to ensure a stable portfolio of orders for the newly established plants. Similar to neighboring Russia, the majority of production from future plants will supply the needs of the Ukrainian defense sector and will be used for military uniforms, ammunitions and accoutrements.

The Ukrainian army is expected to be the major consumer of future production. This has been confirmed by the Ukrainian General Staff, which is projecting that a total value of orders may reach $200-250 million USD per year, with the possibility of increases in the coming years.

At the same time, there is also the ever-growing need for technical textiles from the Security Service of Ukraine which is Ukraine’s special-purpose law-enforcement agency and main government security agency in the areas of counterintelligence activity and of combatting terrorism.

Defense sector needs

Overall, according to calculations of the Ukrainian Ministry of Industry and Infrastructure, the defense sector will consume approximately 65 percent of the technical textiles that will be produced at the newly established plants, while the remaining will be supplied for the needs of the local construction, automotive and other industries.

At the same time the attraction of foreign investors in the Ukrainian technical textiles and nonwovens industries will also take place through the privatization of some of the country’s already existing producers, many of which are currently experiencing serious financial problems caused by the consequences of the financial crisis in Ukraine.

It is planned that expansion of the U.S. and other Western investors to Ukraine may take place through the acquisition of some of Ukraine’s leading meat processing enterprises or the establishment of new companies on the basis of existing facilities.

According to a spokesman of the Ukrainian Ministry of Trade and Infrastructure, in order to attract foreign investors, the Ukrainian government may consider selling some of its largest technical textiles enterprises at prices that are significantly lower than their average market price. In exchange, investors are expected to pour funds in the development of their newly-acquired assets in Ukraine.

In addition to a rich raw materials base, the main advantages of the Ukrainian technical textiles sector are cheap labor and low rent.

According to analysts of the Ukrainian Ministry of Trade, the acquisition of Ukrainian technical textile producers may provide an opportunity to Western investors to start shipping regular supplies of finished products to the EU and the U.S. markets.

Eugene Gerden is an international freelance writer based in St. Petersburg, Russia.

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