Ukraine Growth Study Final Document : Faster, Lasting and Kinder

Like the East Germany's Trabant, the Ukrainian-made Zaporozhets was meant to be the people’s car, and as such it was the most affordable vehicle of the Soviet Union.In Western Ukraine, manufacturers from Japan and Germany stepped up production of auto parts and components, turning the region into an integral part of Europe’s vehicle industry. These companies have formed a wave of new investment in Western Ukraine that primarily involves producing automotive parts for global manufacturers. Today, nearly every car made in Germany is made with parts from Ukraine.Today, Ukraine is at a crossroads: despite impressive success in some sectors, the foundations of the emerging new economy are still fragile, and the old economy is still having a strong negative effect on growth.Many young Ukrainians have opted to emigrate, attracted by higher expected earnings in neighboring countries and elsewhere.Ukraine’s economic transformation has been held back by the legacy of underpriced energy that provided short-term benefits to select sectors, but delayed much needed industrial restructuring toward developing high-value added export-oriented industries.This report argues that achieving high, inclusive and sustainable growth will require higher productivity of the economy at home, more benefits from trade and integration into the global economy, and stronger domestic economic institutions to withstand pressures from vested interests. At the center of these goals, the strength and durability of the transformation will depend critically upon the pace and depth of structural reforms and the long-term commitment by political leaders in the coming years. These will be discussed in length in this study of Ukraine growth—past, present and future. The Ukraine Growth Report focuses on the following questions: 1. What would make a difference going forward?; 2. What has been holding back Ukraine’s prosperity? and 3. How can Ukraine raise its economic growth rate?