Industry overview pdf download


  1. Executive summary
  2. Industry overview
  3. Trends and developments
  4. Leading players
  5. Legislation
  6. Organizations and associations of the industry
  7. List of references

1. Executive summary

Machine-building is one of the leading industries of Ukrainian economy. The companies of the industry are engaged in manufacturing of machinery and equipment for virtually all types of industrial activities, contributing 10% of GDP in 2011. The most developed sub-industries are railway machine-building, heavy machine-building and machine- building for agriculture.

The majority of manufacturing companies are situated in the East of Ukraine, which is within short distance from raw materials supply base, mainly steel. The country has significant reserves of iron ore being among top-10 world countries by iron ore reserves with total amount of 27 bn tons. Also Ukraine is well supplied with educated labor force as domestic universities and colleges graduate c. 10,000 students from machine-building faculties, annually.

Major machine-builders purchase raw materials directly from local or regional suppliers. Few plants are self-sufficient being part of large vertically-integrated industrial holdings.

The sector’s output is mainly export-oriented with Russia and other CIS states being the principal markets. However, a significant portion of export goes to the CEE, Middle East, Africa, China and India. A few players sell machines globally. The key export products are railway cars, locomotives, turbines and engines. Domestic market consumes substantial part of machines for agriculture, metallurgy and mining.

Leading market players are mainly controlled by local and Russian business groups, while a few companies are state-owned.

Currently Ukrainian machine-building industry is characterized by the following:

  • One of the strongest manufacturing performances during 2010-2011 (annual industrial index grew by 36.1% in 2010 and 17.2% in 2011) due to steady economic recovery (GDP enjoyed 5.2% growth in 2011 vs. 4.2% in 2010);

  • Domestic manufacturers contracted stable list of orders in the medium- to long-term horizon supported by significant level of wear and tear of machines in metallurgy, mining, oil & gas industries and recently commenced new projects together helped by substantial economic recovery and sustainable growth of demand on main export markets;

  • Railcar production enjoyed rapid increase in demand posting the highest sub-industry growth of 132% in 2010 based on the extensive modernization programs being undertaken in Ukraine, Russia and Kazakhstan;

  • Consumption of heavy machine-building products remains high mainly driven by increased demand for energy and mining machinery, and supported by strong market position of Ukrainian companies on focus markets. Moreover, the sub-industry has a solid potential for development of domestic energy sector infrastructure with estimated investments of c. USD 74 bn until 2030 and probable privatization process of state coal mines, energy distribution and power generation plants;

  • Although agricultural machine-building remains underdeveloped, it has a large room for prospective development as Ukrainian agricultural industry is growing consistently operating the largest arable lands in Europe and accounting for 2.4% of the world’s total arable land; Slow application of contemporary technologies and modernization of machine-builder’s fixed assets. The main problem of the industry remains the depreciation rate of fixed assets, which equals c.70%;

  • Leading players have been negotiating deliveries on the new markets of Asia and Africa which may increase diversification of sales geography and support long-term growth.

To summarize, the post-crisis period brought favorable market conditions to the industry and leading players started to increase their profitability.

2. Industry overview

2.1. Current situation and potential for development

Machine-building is one of the leading industries in Ukraine which comprised 10% of GDP in 2011 in monetary terms. The industry is mainly developing in the following sectors:
  1. Railway machine-building
  2. Heavy machine-building :
    • metallurgy machinery;
    • mining machinery;
    • oil and gas, chemical machinery;
    • engines and turbines;
    • machinery for other industries.
  3. Machine-building for agriculture.

  4. Other transportation:
    • automotive;
    • aircraft;
    • ship-building.
  5. Other (manufacturing of electrical, electronic and optical equipment).

For the purpose of this overview Ukrainian machinebuilding industry is analyzed in respect of the following segments: railway machine-building, machinebuilding for agriculture, and heavy machine-building, which comprised 64% and 69% of total machinebuilding industry output (excluding automotive) in 2010 and 2011, respectively.

Turnover of products manufactured in Ukraine by selected machine-building categories, USD bn

Turnover of products manufactured in Ukraine by selected machine-building categories

For the last decade machine-building showed excellent results and production volumes increased by 2.5 times compared to 2000, despite significant (45%) volume decrease during financial crisis in 2008 and 2009.

Sales of machine-building products vs. GDP

Sales of machine-building products vs. GDP
Machine-building industry showed one of the strongest manufacturing performances during 2010 and 2011, with annual industrial index growth of 36.1% and 17.2%, respectively, while real GDP increased for the same period only by 4.1% and 5.2%. Sustainable growth of demand for machinery and equipment in Ukraine as well as in main export markets (Russia and other CIS countries) led to 23.9% CAGR in post-crisis period.

Ukrainian machine-building is characterized by following specifics:
Strengths and opportunities:
  • long historical ties with large clients, firm position on CIS markets;
  • great degree of wear and tear of production and transportation facilities;
  • developed metallurgy industry together with significant reserves of raw materials that satisfy production needs;
  • significant potential of scientific development based on educational level of staff.
Threats and weaknesses:
  • significant part of sales is to Russia, which makes the viability of the industry dependent on political relations between two countries;
  • increase of components and raw materials cost.

Railway machine-building
Railway machine-building market in Ukraine can be divided in to two main categories:
  • railcars;
  • diesel and electric locomotives.

Railcar production
The railcar production industry may be divided in freight and passenger railway cars production. Freight cars production market is divided among four biggest producers with total share of 90% and 88% of total production in 2009 and 2010, respectively. “Kryukiv car building works” is the only plant operating in passenger railway cars production with 25 and 38 cars produced in 2009 and 2010, respectively.

Freight cars production, thsd units

Freight cars production, thsd units

Diesel and electric locomotives production

Luganskteplovoz is the leader of locomotive production in Ukraine and is CIS export oriented (more than 95% of sales are directed to Russia and Kazakhstan).

Locomotives export sales of Ukrainian producers

Locomotives export sales of Ukrainian producers
Majority of purchases are made by state companies Ukrzaliznytsia (Ukraine), Russian Railways (Russia) and Kazakhstan Temir Zholyetc (Kazakhstan), which are monopolists in respective countries.

In 2010 and 2011 the industry increased its output significantly. The great demand for railway machinebuilding products was caused by the following reasons:

  • the ongoing boom in regional demand for railroad rolling stock which is expected to continue in the medium term due to massive replacement and renovation programs, growing railcar prices, increasing rail freight rates;

  • obsolete locomotives and railcars park at home (c.90% of electric locomotives, 99% of freight diesel locomotives and 88% of railcars of Ukrzaliznytsia are fully depreciated), as well as in Russia and Kazakhstan;

  • delayed demand during 2008-2009, when state and private companies postponed purchases due to crisis;

  • renewal of railway system due to preparation for EURO 2012 in Ukraine, Olympic Games in Sochi and 2018 FIFA World Cup, both in Russia.

Ukrainian railway system suffers not only from lack of fleet (estimated daily deficit of wagons is about 6-8 thsd units) but also from significant physical obsolesce (per estimates the obsolete rate is close to 60%).

Machine-building for agriculture

Leading producers of agricultural machines in Ukraine are Kharkiv Tractor Plant (KhTZ), Agro- Soyuz, Khersonskiy and Chervona Zirka machinebuilding plants. From 70% to 90% of the domestic park of agricultural machinery is fully depreciated or obsolete.

In recent years demand for agricultural machinery increased significantly due to fast development of agricultural sector (increase in arable land and crops production) and significant obsolescence of existing agricultural equipment. Major part of demand is satisfied by imports while domestic equipment does not always meet needs of agricultural producers.
During 2010 the imports of agricultural machinery comprised about USD 425 m, out of which 70% was second-hand equipment. Even due to stagnation in all segments of Ukrainian economy during financial crisis of 2008 and 2009 imports of agricultural machines showed CAGR of 14.6% starting from 2006, booming in 2011 by 89.2%.

Currently Ukraine exports tractors, majority of which is produced in Kharkiv, and other agricultural equipment such as seeding, fertilizing and disc harrowing machines to Russia, Kazakhstan and other CIS countries.

Machine-building for agriculture

Heavy machine-building

Heavy machine-building sector in Ukraine provides a wide range of equipment for mining, chemical and petrochemical industries, metallurgy, metal treatment, energy, construction and other industries.

The industry is highly involved in the projects in Russia, Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan. Long-term business relations have also been established with Middle East, African and Asian states. Export of heavy machinery equaled USD 3.2 bn in 2011. The biggest importer is Russia consuming 62% of Ukrainian heavy machine-building exports.

Machine-building industry sales by main aggregated categories within Ukraine, USD bn

Machine-building industry sales by main aggregated categories within Ukraine
The sector is steadily developing in the post-crisis period and its future growth to large extent depends on the level of usage of the following opportunities:

  • Modernization and development of Ukraine’s energy sector infrastructure. Under the National Energy Strategy of Ukraine until 2030, investments of c. USD 74 bn are envisaged for modernization and development of such industries as power generation, mining, oil & gas, including modernization of National Gas Transit and Storage system with up to USD 10 bn of anticipated investments;

  • Modernization prospects in metallurgy, mining, oil & gas, and other industries in Ukraine as well as the CIS. In accordance with the National Energy Strategy of Ukraine the majority of state mines and power generation companies deemed to be attractive for investors will be privatized. As overall level of depreciation and obsolescence of fixed assets of these companies equals c. 86%, it creates a great opportunity for potential investments in modernization;

  • The level of wear and tear of equipment of metallurgical companies in Ukraine, Russia and Kazakhstan is high. The owners are considering modernization and investments in the basic equipment for the industry such as molding and casting equipment which is traditionally produced at Ukrainian plants;

  • Construction of numerous energy plants in the world with total anticipated capacity of 4,800 GW until 2030 (International Energy Agency forecast).

Half of these projects relate to emerging markets where Ukrainian machine-builders are leading players; Russia – the major consumer of Ukrainian machinery – is planning to have 20 nuclear power plants units constructed in ten years time.

Similar programs will provide heavy machine-building industry with stable list of orders in the middle and long-term perspective.

However, in order to benefit from favorable market conditions the industry should focus on such areas for development as equipment modernization, application of new technologies and implementation of fundamental government support programs.

2.2. Capacity and production volumes in 2001-2011
Railway machine-building

Industry boom in the last two years was led by scarcity of rolling stock and level of its wear and tear in CIS.

Production of locomotives (units) and wagons (thsd units)

Production of locomotives (units) and wagons (thsd units)

After decrease in production levels in 2009 industry rapidly recovered in 2010-2011 and even outperformed pre-crisis level of locomotives produced showing railway machinery index growth by 136% and Industry boom in the last two years was led by scarcity of rolling stock and level of its wear and tear in CIS. 28% in 2010 and 2011, respectively. Ukrainian producers of railway machine-building are now running at almost 100% of their capacity and most of them have portfolio of orders till the end of 2012.

Machine-building for agriculture

Ukrainian producers do not have enough production volumes and necessary machinery quality to satisfy increasing demand. Such situation leads to significant imports by leading agricultural players, while products of Ukrainian producers, with a few exceptions, are not technologically competitive compared to foreign analogues and are mainly purchased by small and medium companies with limited funding.

Production volumes of major machine-building for agricalture products, units

Production volumes of major machine-building for agricalture products, units

Production of high value added machines for agriculture showed positive tendency in 2011, the production of tractors increased by 22% to 6.4 thsd units and combines by 311% to 399 units. Despite positive changes Ukraine still needs to increase production capacity of high value products, as in 2011 the imports of tractors (22.7 thsd) again significantly exceeded exports (1.3 thsd).

In Ukrainian market operate nearly 40 plants that manufacture agricultural machinery, which generally run at 15-30% of their capacity. This is explained by lack of working capital, poor financial situation, and a lack of new technologies. Though the production increased by 19% in 2010 compared to crisis 2009, and became stable further in 2011. But even after slight increase in 2011 the domestic agricultural machine- building may provide only 10% of total needs for equipment.

Heavy machine-building

Production of heavy machine-building includes machinery for metallurgy, mining, oil & gas and other industries. The sector’s production dynamics depend on the general business environment and desire of the potential customers to invest in the renewal of the equipment.

Production of main heavy machinery equipment in 2003-2011, thsd units

Production of main heavy machinery equipment in 2003-2011

In the post-crisis period the sector experiences growth as customers are interested in development and increase of the production volumes and investing in modernization and re-equipment. Enterprises highly exploit their capacities with some Ukrainian heavy machine-building companies enjoying near 100% capacity usage due to recent surge in demand and strong positions on traditional markets. Many machine- builders have significant number of contracted orders for the current period and in the medium-term which support production volumes at a solid level.
Despite strong capacities utilization and stable profits, many enterprises are limited in external funding and are not able to expand their capacities and implement modernization programs, remaining with high wear and tear fixed assets. The issue may be partly resolved with implementation of a proper integrated government support programs, which are now focused only on aircraft- and shipbuilding sectors.

2.3. Availability of raw materials and human resources
Availability of raw materials

Ukraine has enough reserves of main resource for steel production – iron ore. The country is among top world countries by iron ore reserves with total amount of about 27 bn t (located in Kryvorіzkiy (18 bn t), Kremenchutskiy (4 bn t), Bіlozerskiy (3.2 bn t) and Kerchenskiy (1.8 bn t) iron ore basins).

Ukraine also has well developed steel production industry with total output of 34.9 m t in 2011. Major part of steel products (65.9% in 2011) is exported, but domestic producers have enough capacity to meet increasing demand for metal products. During 2010 and 2011 steel production showed positive trend, increasing by 10.8% and 6.7%, respectively. Machinebuilding is one of the major internal consumers of steel products in Ukraine consuming about 12% of total domestic steel production in 2009.

Production of steel in Ukraine and export demand for rolled metal products

Production of steel in Ukraine and export demand for rolled metal products

Machine-building industry significantly depends on metal products manufacturers as significant part of cost is raw materials (steel products). Consequently, predominant part of machine-building producers is located near iron and steel works. As of now considerable part of raw materials, but not all, are supplied by domestic steel producers.

Production of steel in Ukraine and export demand for rolled metal products

The main raw materials suppliers are Arcelor Mittal Kryvyi Rih, Azovstal, Interpipe, Illich, Yenakiyeve, Dniprovskiy and Alchevskiy iron and steel works, Azovelektrostal, Kremenchug Steelmaking Plant and others. The majority of suppliers are located in Ukraine which enables prompt supply.

Educational level

A number of domestic scientific institutes and organizations work to develop new technologies, and prepare high skilled staff: Physical-and-Technological Institute of Metals and Alloys, G.Pysarenko Special Design and Technology Bureau Institute for Problems of Strength of the National Academy of Science of Ukraine, Paton Electric Welding Institute of National Academy of Science of Ukraine, etc. Also producers such as Azovmash, Motor Sich, Mining Machines, Turboatom, Dniprovagonmash, etc. have their own R&D departments engaged is specific products development and staff tutoring.
There are many universities where students get relevant education needed for the machine-building industry. Among the technical institutions the following occupy leading positions: Kyiv National Taras Shevchenko University, National Technical University of Ukraine “Kyiv Polytechnic Institute”, Donetsk National Technical University and National Technical University of Ukraine “Lviv Polytechnic Institute”. In spite of all mentioned positive factors technological level of the sector requires significant R&D contributions and innovations.

2.4. Export/import dynamics per every sub-industry
Railway machine-building

Railway machine-building

Ukrainian railway producers are in great demand on domestic market as well as on foreign markets. After decrease in export sales of railway machinery products in 2009 by 71% Ukraine experienced sharp export increase by 390% till 2011. The main export markets are Russia and Kazakhstan, taking 84% and 10% of total exports of railway machinery products, respectively.

Import of railway machinery, USD m

Import of railway machinery

TOP-5 countries for import of railway machinery in 2011, USD m

TOP-5 countries for import of railway machinery in 2011, USD m

Ukraine mostly meets its own demand for railway machinery except for some spare parts for locomotives which are predominantly supplied by Russia (58% of total imports of railway machinery products in 2011).

Machine-building for agriculture

Ukraine is a net importer of almost all types of agricultural machinery, importing nearly 70% of agricultural equipment (e.g. share of imported tractors out of total purchased tractors in Ukraine in 2010 was 79%). During the last couple of years agricultural sector observed a stable increase, which led to increasing demand for machinery.

Import/export of tractors, thsd units

Import/export of tractors

Top countries of export/import of tractors in 2011, USD bn

Top countries of export/import of tractors in 2011

As domestic production is insufficient, the internal demand is mostly met by foreign suppliers. For example, during 2006-2011 imports of tractors increased 2.4 times. Another large part of import is combines. There are almost no export sales of such machines, as domestic equipment is of unsatisfactory quality.
While there are some producers whose equipment possesses the adequate quality to be able to compete on export markets. One of those is KhTZ one of the biggest CIS manufacturers of universal wheeled and track-type agricultural tractors (total share in export of tractors equaled 72% in 2010).

Machine-building for agriculture foreign trade, USD m

Machine-building for agriculture foreign trade

The leading positions in import of grain combines are divided between international brands, such as John Deer, Claas, New-Holland, etc. As for tractors, Belarus producers hold the leading position (37% of total import of tractors in 2011); almost all of them are made at Minsk Tractor Plant. China is a leading importer of small machinery. Nearly 70% of imported equipment was already in use for c. 3 years.
Generally high value added agricultural equipment prevails in import (mainly from Germany, USA, France, Belarus), while in export (mainly to Russia and Kazakhstan) - low added value machinery (mostly items without engines such as seeding, fertilizing and disc harrowing machines).

Heavy machine-building

Export/import of heavy machinery for 2006-2011, USD bn

Export/import of heavy machinery for 2006-2011

Import structure by countries, 2011

Import structure by countries, 2011

Export structure by countries, 2011

Export structure by countries, 2011

In 2011 the main elements of export of heavy machine- building in Ukraine were engines and turbines (USD 964 m or 30.6% of total export of heavy machinery) and specialized pumps (USD 540 m or 17.1%). Ukraine imported pumps (USD 397 m or 9.4% of total import of heavy machinery), engines (USD 370 m or 8.8%), cranes and valves (USD 257 m or 6.1%) and other products.

3. 1. Consumption trends
Railway machine-building

Railway machine-building has been showing positive trends in all sub-sectors since 2010 driven by aftercrisis recovery of CIS countries, significant level of obsolescence of rolling stock and increase in both passenger and freight traffic.

Freight cars:
1.Coal transportation companies and CIS state railway operators are the largest buyers of freight cars. The drivers of freight cars consumption in 2012 will be the following:

  • Russia’s largest state-owned freight company, Freight One, is planning to increase its fleet by 15 thsd units in 2012;

  • Russia’s company Freight Two also intends to purchase around 8 thsd freight cars in 2012; Ukrzaliznytsia announced intended purchase of 10 thsd freight railcars for 2012;

  • The European Bank for Reconstruction and Development provided USD 75 m loan to private Ukrainian company InterLeaseInvest to purchase freight railcars. InterLeaseInvest plans to purchase 3 thsd freight railcars in 2012;

  • A newly created joint venture between Russia’s ICT investment group and Japan’s Mitsui, an international rail industry leasing company, intends to purchase 20 thsd freight cars over the next three years.

2.Passenger railway cars:
  • Ukraine’s national railway operator Ukrzaliznytsia has an acute need to replenish its passenger railcar fleet. Over the last 10 years total passenger fleet in Ukraine fell by nearly 33%, or 3,620 units, 200 of which were removed from service in October 2011. At the same, during the last decade Ukrzaliznytsia bought just 550 passenger railcars. As a result, the total passenger cars fleet in Ukraine now comprises about 7,025 units, 17% of which are being repaired;

  • Future demand for passenger railcars produced in Ukraine will come from Ukraine, Belarus and Kazakhstan.

3. Locomotives:
  • According to the Cabinet of Ministers of Ukraine renovation program, approved in August 2011, it is planned to purchase 509 locomotives with total approximate value of USD 3,6 m during 2012- 2016;

  • If Russian economy develops according to the optimistic scenario the demand for locomotives should reach 7,8 thsd units till 2015, out of which 51.4% diesel locomotives and 48.6% electric locomotives.

Machine-building for agriculture

Steady growth of agricultural products consumption and rise of food prices drive development of agricultural sector as a whole and machine-building for agriculture in particular. The lack of new arable land and soil emaciation force agricultural producers to implement modern technologies and purchase machines with higher productivity levels. Ukrainian producers mostly do not satisfy market needs, thus demand of large agricultural companies is fulfilled by international producers. Almost 38% of tractors produced in Ukraine are the Ukrainian assembly of Belarussian tractors.

The majority of Ukrainian producers, such as Chervona Zirka, Agro-Soyuz and Khersonskiy Machine- building Plant, are mostly specialized on production of agricultural machines with low technological level, while combines, tractors and other high value added machines are mostly imported.

From 2009 to 2011 export of agricultural machinery fluctuated from 33.5% to 15.9% as part of import, consequently Ukraine is a net importer of agricultural machinery. Mentioned trend is also supported by CAGR, from 2006 till 2011 this indicator increased for export by 6.1% (for USD 127,6 m; the peak in exports of agricultural machinery was in 2008, USD 227,9 m), while for import by 14.6% and in 2011 comprised USD 804,7 m (the peak was in 2008, USD 978,8 m).

Heavy machine-building

Consumption of heavy machine-building products remains steadily high in the post crisis period and is mainly driven by:

  • Strong market position of Ukrainian companies on focus markets;

  • High oil & gas prices, which stimulate demand for energy machinery, promising a steady inflow of new contracts in the short- and medium-term;

  • Rising domestic demand due to development of the National Energy Strategy of Ukraine and announced modernization of the National Gas Transit and Storage system;

  • Adoption of the law on privatization of state coal mines, which stipulates the modernization of mining equipment;

  • New markets exploration (Eastern Africa, Central Asia, India, Iran, Pakistan etc.) and new contracts signing;

  • Preferential tax regime for aircraft- and shipbuilding industry.

3.2. Level of saturation and competition in specific markets
Machine-building for agriculture

Machine-building for agriculture

Ukrainian market of the agricultural machinery is mainly divided between the international producers and Belarus’ MTZ.

Top-3 positions in the tractors’ market are held by MTZ (24%), John Deere (19%), and Case (13%). MTZ is gradually losing leading position to nearest competitors.
Leading positions on the grain combines’ market are held by Claas (21%), John Deere (19%), and Case (11%).

According to the Ministry of Agricultural Policy and Food the average annual demand for agricultural equipment is about 40 thsd of tractors and 7,5 thsd of combines.

Railway machine-building

Railway machine-building market in Ukraine

Railway machine-building market in Ukraine

Ukrzaliznytsia made supply agreements for locomotives with Uralsk locomotives, Novocherkassk electric locomotive plant, and Elektrovozostroitel for the planned renovation of the hauling stock. According Ukrzaliznytsia, Luganskteplovoz is not able to satisfy all domestic needs as it is busy with foreign orders.

Production of passenger railcars in Ukraine does not completely meet internal needs. Kryukiv Car has the production capacity of 200 cars which is insufficient volume compared to the demand to replace nearly 2,000 cars. In preparation for EURO-2012 Ukrzaliznytsia made agreements for purchase of 12 inter-regional trains from Hyundai Rotem and Skoda Vagonka.

The demand for freight railcars is met by local producers but is expected to grow further, due to increase of freight transportation and shortage of own freight cars.

Heavy machine-building

As for heavy machine-building industry many of the Ukrainian producers are either monopolists in their specific markets or produce the exclusive equipment demand for which is stable. Thus, Mining Machines Holding includes Druzhkivskiy engineering factory which is the monopoly holder in Eastern Europe as for automatic roof supports, mining cars, etc. Turboatom is almost a monopolist in modernization of hydro and nuclear power plants in CIS.

4. Leading players

After the crisis leading market players have been benefitting from steady demand for their core products. Top Ukrainian machine-building companies are traditionally export-oriented with Russia and other CIS states being the key markets. However, a significant portion of export goes to the Central and Eastern Europe (CEE), China, India with a several players selling machines globally.

Major machine-builders purchase raw materials from local or regional suppliers. Few plants are self-sufficient being part of large vertically-integrated industrial holdings.

Leading players in Ukrainian machine-building industry

Leading players in Ukrainian machine-building industry

Leading market players are mainly controlled by local and Russian business groups. The only two state owned enterprises among top players are Zorya- Mashproekt and Turboatom.
Companies, presented in the table below, are considered public as their shares are actively traded at the national stock exchange.

Companies, potentially interesting for investments

Companies, potentially interesting for investments

Investments in machine-building for agriculture could be performed by establishment of new plants, over the counter shares purchase or debt financing as domestic companies are not actively traded on the stock exchange (both locally and abroad).

5. Legislation

5.1. General regulations, current legislation

Most of activities related to machine-building do not require a license. However, special licenses are obligatory for production of rockets, space crafts and their spare parts, as well as for production of weapons.

Obtaining several permits from authorities controlling labor, fire, sanitary and ecological safety issues is obligatory prior to opening of a production plant.

Machine-building industry is generally regulated by the Cabinet of Ministers of Ukraine and the Ministry of Economic Development and Trade of Ukraine.

There are no special laws regulating machine-building industry. However, there are legislative acts envisaged to provide support to the industry. For example, the Law of Ukraine “On stimulation of the development of native machine-building for the purposes of agricultural complex” adopted in 2002. The law stipulates certain measures to support Ukrainian enterprises (with no limitation of the foreign capital or control) producing vehicles and machines designed for agricultural activities. The supportive measures include: partial compensation of (i) interest paid for loans and (ii) of the cost of equipment designed for agricultural activities for the purchasers, as well as direct purchases of agricultural equipment by the government. However, the volume of such support depends on the funds envisaged in the State Budget for a particular year. There are also other laws of similar nature, such as Laws of Ukraine “On measures of state support for the shipbuilding industry in Ukraine” and “On development of aircraft industry”.

With regards to corporate income tax (hereinafter referred to as the “CIT”) there is no special treatment of machine-building activities. CIT is currently calculated at a flat rate of 21%. CIT rate will be reduced to 19% from 1 January 2013 until 31 December 2013 and 16% from 1 January 2014 onwards.

Value added tax (hereinafter referred to as the “VAT”) currently levied at a rate of 20% of the taxable value of domestic supplies, imported goods and auxiliary services. The VAT rate will be reduced to 17% from 1 January 2014.

5.2. Government support – programs, state projects

Machine-building is one of the key industries of state interest in Ukraine. According to the “State program of economic and social development for 2012, and general objectives for development in 2013 and 2014”, the major objective for machine-building industry development is to increase production of exportable products by introduction of modern advanced technology. State support program for 2012 includes:

  • State compensation of the interest expenses on loans obtained for implementation of high-technology manufacturing;

  • Promotion of domestic industrial products in domestic and foreign markets (diversification of foreign markets and a wider representation of domestic industrial products in the markets of North Africa and the Middle East);

  • State support of the domestic producers of solar cells and solar power systems.

Among the instruments of state support there will be state guarantees and state insurance for exporters. In 2013-2015 further harmonization of the regulatory environment and customs procedures will be undertaken, in accordance with EU regulations, in order to realize a free trade zone with the EU. However, as of now the state policy is of a reasonably protective nature.

One of the main goals of Ukrainian government for 2012 is technical re-equipment of agricultural sector, which is an important incentive for domestic agricultural equipment manufacturers. Along with it, quite a few state support programs are currently exercised within the associated sectors:

  • State support of the purchase for new railcars (USD 1,2 bn planned for 2010-2015);

  • 30% compensation of costs of agricultural machinery of domestic production;

  • Financial support provided to agricultural enterprises through the mechanism of loan cost reduction;

  • Purchasing of domestic machinery and equipment for agriculture under national financial lease program.

Among projected measures to be taken by the government in 2014 are: development of innovative infrastructure, establishment of industrial parks and development of their network.

6. Organizations and associations of the industry

There are several organizations aimed to contribute to the development of machine-building industry. They provide protection of members’ interests, lobby legislative initiatives, etc.

Ukrainian League of Industrialists and Entrepreneurs

Goal: representation and protection members’ interests in relations with state and local authorities, other institutions and organizations, as well as in the courts of any authority and jurisdiction, disputes resolution.
Number of members: more than 38,000 members.
Established: 1992.


Goal: representation of members in relationships with governmental institutions, other Ukrainian and foreign organizations, providing information support and professional development opportunities for members, assistance in entering foreign markets.
Number of members: 19.
Established: 2010.
International Machine-building Union

Goal: fostering cooperation between scientists, experts and representatives of industrial enterprises of different countries to assist in development of machine- building worldwide, protection of members’ rights and interests.
Number of members: N/A.
Established: No data.

Association of Technologists and Machine -building specialists of Ukraine

Goal: scientific research work, arrangement of scientific seminars and conferences dedicated to machine- building, protection of members’ rights and interests in relations with authorities.
Number of members: more than 60.
Established: No data.

7. List of references:

  1. Statistical information // Ukrstat, 2004-2012 -
  2. Ukrainian Strategy 2011 // Dragon Capital, 2011 -
  3. News // Unian Economics, -
  4. Price index (Индекс цен) // UGMK, 2008-2011 -
  5. The situation on the steel and raw materials market. Forecasts for 2012 // Ukrpromzovnishexpertyza, Nov- 2011 (available only in Ukrainian) -
  6. AGRI-FOOD SPECTRUM OF UKRAINE: PERSONAL PROFILE” // Association Ukrainian Agribusiness Club, 2011 -
  7. Farm Machinery Market. Ukraine. 2011. / / UCAB, 2011 - Rating TOP-100 (available only in Ukrainian/Russian)
  8. Ukraine Equity // Astrum Investment Management, 40737 -
  9. Country Reports // Economist Inteligence Europe, 40969 -
  10. Status and prospects of innovation and technological cooperation between Ukraine and the Customs Union: potential of an engineering industry / / CPP Mining machines, (available only in Ukrainian) 40835 -
  11. Articles for 2011-2012 (available only in Russian) //, 2011-2012 -
  12. The development strategy of Russia`s Transport Machinery in 2007-2010 and for the period until 2015 / / JSC “Russian Railways”, 2007 (available only in Russian) -
  13. Railway machine-building market in Ukraine // Alliance Capital Management, - enterprise?id=203826
  14. Section: About Ukrzaliznytsya (Розділ: Про УЗ) // Ukrzaliznytsia -

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