Over the past 30 years, the European electronics industry has allowed itself to become heavily dependent upon the Chinese supply chain. The coronavirus epidemic with the on-going global economic disruptions set to significantly accelerate the “decoupling” of China and the West into two geo-political and economic constellations, with dire consequences for the world’s existing supply chains.
This reality presents Ukraine with a unique opportunity to become a key Eurasian technology and manufacturing nexus, a critical link in the new 21st century global supply chain economy.
The European Bank for Reconstruction and Development, Ukraine’s biggest investor, believes that Europe’s companies should address these global supply chain disruptions by setting up “global value chain” supply capacity in countries like Ukraine. With its geographic location, 17 free trade agreements (FTAs) with 46 countries, including Deep and Comprehensive FTA with the European Union, combined with availability of skilled workforce and competitive production costs, Ukraine can become a major production platform for electronics manufacturing, focused on both domestic and export markets.
Moreover, Ukraine may emerge out of the global economic shutdown less impacted than most: the EBRD forecasts a proportionally shorter and less dire shock to Ukraine’s economy than other countries, since it has not yet fully completed the process of integration into the added-value global supply chain.
Nevertheless, with the EU consuming over 40% of Ukraine’s exports, Ukraine is already an integral component of the European supply chain. As a result of aggressive economic reforms and the implementation of the EU-Ukraine Association Agreement, even before the pandemic investors saw Ukraine as a stable and predictable emerging market for investment.
Indeed, a number of Ukrainian and foreign electronics manufacturers already established their production facilities in Ukraine, enjoying its competitive advantages. With much more companies to come, Ukraine has everything to become a key portal in the world’s post-coronavirus supply chains.