Menu MSSU

Project: The Colors of Revolution

Ukraine leverages resources to boost economy

by Thaddeus McCleary

A Polish castle in renovation as a part of a countryside  tour in Lviv.
A Polish castle in renovation as a part of a countryside
tour in Lviv.

Rows of metal containers stacked on top of each other provide Odessa, Ukraine its primary source of consumer goods. Leather coats, jewelry and even household appliances can be purchased at wholesale prices, originating from a variety of countries in Asia and Europe. The market known as ‘Seven Kilometers’ began during the Soviet Union as an underground trade network for merchants of the Black Sea. Today the tradition continues as over 6,000 small businesses remain largely unhindered by government regulation.

With its abundance of natural resources and geographic advantages, Ukraine has been able to support not only its own population but also areas around the world. While a part of the Russian Empire and the USSR, the Ukrainian region achieved output only second to Russia in agriculture and industry.

The collapse of the Soviet Union allowed a flood of entrepreneurship to cover former republics. To transfer ownership of manufacturing and service companies to the private sector, citizens were given vouchers to buy shares of a venture of their choosing. Many individuals sold their vouchers to the highest bidder as pensions disappeared and inflation rose. Soon, with corruption and the government’s increasing bureaucratic regulation small business growth began to decline. In 1999, economic output in Ukraine had dropped 40% from the 1991 levels. During the next few years Ukraine experienced a turn in economic stability. The US-AID report in 2004 documented real economic growth at 5.8% in 2000, 9.1% in 2001, and 4.4% for 2002 and an inflation rate in 2001 at 6.5% from 25.3% the previous year.

A newly constructed resort hotel on the Black Sea in Odessa.
A newly constructed resort hotel on the Black Sea
in Odessa.

Ukrainians are surprised to learn that in developed countries, regulation is meant to help both the business and the consumer. “Many government inspectors would come to your business and threaten to shut you down unless you paid them money,” recalls Rostyslav, an early entrepreneur. Undoubtedly, Rostyslav was shocked when he learned that failure to pass an inspection in the United States is likely to involve a simple warning.

The outcome of the presidential elections in 2004 replaced regulation with government involvement in economic development. “While Yushchenko and the Our Ukraine party favored small business growth, Yanukovych and the Party of Regions pledged only to support big business in the East,” explains Rostyslav.

With assistance from international organizations, small business development centers have been constructed in most regions of Ukraine. Dr. Anatolily Kovalev of the Odessa State Economics University has been extensively involved with small business development and economic projects. “I used the material supplied by the MSSU School of Business Small Business Development Center to teach young people about small business.”

An underground mall in Kyiv includes retail chain  stores such as Hallmark as well as local products.
An underground mall in Kyiv includes retail chain
stores such as Hallmark as well as local products.

The US-AID Foundation has set the stage for regional economic development, with centers throughout the country offering training and resource gathering for entrepreneurs and investors. Other organizations such as the Rotary Club International simply bring business owners together to assist each other while remaining competitive in their communities. As 39.8% of Ukraine’s gross national product lies in services, predominantly local and privately-owned, owners are able to share their experience through Ukraine’s turbulent economic history.

Today, Ukraine is beginning to exploit there most valuable asset – their geographic advantage. With significant Black Sea access, Ukraine has become the center for trade and distribution, bringing goods from every continent to supply much of Eastern Europe. Advances in tourism have also been made with the protection of historical artifacts and the development of the Black Sea coastline. Growth in such areas provides a much more sustainable economic future, making Ukraine a member of a small group of nations advancing responsibly in the post-industrial era.

©