Modern economic POTENTIAL OF UKRAINE

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Investment portrait of Odessa region

Industry

The positive trend in production increases continued in the region’s industry over 2005. Production volumes increased by 6.8% in December compared to November 2005. However, the shutting down of OJSC Lukoil’s Odessa refinery in August 2005 for upgrades resulted in a drop in production volumes over January-December 2005 by 0.5% year-on-year. This is because the refinery contributes to 24.5 % of the region’s industrial production. Meanwhile, production volume growth in the region was 14.3% if the petrochemical production at the refinery is not taken into account.

Such industries as food and processing sectors (15.7% growth), wood processing industry (74.5%), pulp, paper, and printing sectors (10.4%), production of construction materials, chemical industry (10.7%), and machine building (21.5%) showed the most dramatic development.

Railroad freight carriage volumes diminished over 2005 in the region due to external factors. The total loading constituted 24.7 mn tons of freight, that is by 3.8% less than in 2004. The decline took place because a drop in oil and petrochemical loading (by 56.9%), iron ore (by 11.5%), ferrous metals (by 30.2%), and ferrous metals scrap (by 4.1%). At the same time, grain and milled product loads increased by 12.8%, timber freights by 12.9%, chemical, and mineral fertilizers by 13.0%. Qualitative indices regarding railway operation, specifically the use of rolling stock (average daily productivity of locomotives and freight cars), have improved correspondingly by 7.3% and 10.2%.

Agriculture

The region managed to maintain growth its main agricultural production yields, as it has since 1999. In particular grain crops increased by 8.7%, sunflower (16.6%), vegetables (36.8%), potatoes (62.4%), fruits and berries (63.2%), grape (13.5%), eggs (1.0%), and wool (9.3%).

Gross agricultural produce in 2005 was worth approximately UAH 3,219.8 mn or 102.6% of the average annual level over 1999-2004 and 111.0% of the index of Program of Social and Economic Development of Odessa Region for 2005 (PSEDOR 2005). Of this, 43.7% of the gross agricultural produce was grown in 2005 on commercial farms and 56.3% on personal farms.

Gross crop yields amounted to UAH 2,295.5 mn in 2005 or 117.1% of the average annual level over 1999-2004 and by 26.1% more than the PSEDOR 2005 index. Of this, 52.2% of the gross agricultural produce was grown on commercial farms and 47.8% on personal farms.

Gross cattle breeding output amounted to UAH 924.3 mn in 2005 or 78.5% of the average annual level over 1999-2004 and 85.6% of the PSEDOR index for 2005. Of this, 22.5% of the gross agricultural produce was raised in 2005 on commercial farms and 77.5% on personal farms. Cattle breeding accounts for 28.7% of all agricultural produce.

Foreign economic activities

According to preliminary information, the volume of foreign economic turnover of the region in both commodities and services totaled USD 3,930.4 mn by the end of 2005. This figure is USD 854.9 mn or 27.8% more than the level of 2004.

Export volumes amounted to USD 1,863.2 mn, which is USD 152.4 mn or 8.9% more than in 2004 and import volumes constituted USD 2,067.2 mn (by USD 702.5 mn or 51.5% more than in 2004).

The negative balance in regional foreign economic trade ran USD 204.0 mn. The balance in 2004 was positive (USD 346.1 mn).

The export of goods amounted to USD 1,032.7 mn, a drop from the 2004 figures by 2.0%. The import of goods totaled USD 1,942.9 mn, outpacing the 2004 results by 1.5 times, or USD 657.7 mn. The negative balance of foreign trade activities in goods in the region constituted USD 910.2 mn, vs. USD 231.6 mn in 2004.

According to operational data from the Main Department of Statistics in Odessa region, the export of services rose by 26.4% and the import of services by 56.4% over 2004. The positive balance of foreign trade in services in the region made USD 706.2 mn. It improved by USD 128.5 mn when compared with the figures from 2004.

A negative balance in foreign trade turnover occurred for the first time since Ukraine’s independence. It was triggered by a significant hike in import growth rates over export due to the implementation of a number of measures to reduce the elements of the state’s shadow economy in general, and in particular to legalize imports, as well as an increase in prices for oil imported to the region from USD 185.5 per 1 ton in January 2005 up to USD 360 per 1 ton in July 2005.

The volume of Russian crude oil in 2005 equaled USD 413.6 mn over the 7 months of the Odessa refinery’s operations in 2005. In fact it exceeded the annual indices of 2004 in the aggregate.

The region contributed roughly 5.4% to the foreign economic turnover of Ukraine in 2005 in goods and services. This consisted of 3.4% of total Ukraine's imports and 6.0% of total imports in 2005.

Foreign trade in the region is rapidly growing with the countries to which the regional administration pays a special attention. In particular, volumes of foreign trade in goods in 2005 expanded with Belarus, Georgia, the Russian Federation, Belgium, Poland, France, and China. At the same time, volumes of mutual trade with Moldova, Bulgaria, Lithuania, and Romania decreased by 2.1%.

Inorganic chemistry (ammonia) and fertilizers constituted 29.9% of the region's exports; mineral products, including oil and petrochemicals, were 29.4% of the total; machines, equipment and devices - 5.6%; agricultural produce and food industry - 14.3%; ferrous and non-ferrous metals and articles - 14.1%, and vehicles made 1.8% of the total in 2005.

Mineral products, including crude oil, were 21.3% of imports; machines, equipment, devices, and vehicles - 16.8%; textiles and garments- 14.5%; as well as foodstuffs and raw stock for their production represented the main articles of regional commodity import in 2005.

Investments

Companies and organizations of all property forms inputted UAH 3,013.5 mn of capital investments over January-September 2005 from all sources of financing. Investments to fixed assets such as capital construction and purchasing of machinery and equipment constituted the overwhelming share of investments (85.9%).

Companies and organizations of different ownership forms inputted UAH 2,589.9 mn of investments to fixed assets from all sources of financing. It was 21.6% less than the corresponding period of 2004. The share of state budget resources dropped 2.9 times from this total, and local budget resources diminished 2.5 times. Simultaneously, developers’ resources from foreign investors increased by 11.0%.

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