Rivne region is a leader of the cluster movement in Ukraine

The international conference “UkraineInvest Talks: Rivne” held in Rivne on September 20 was another event in a number of events aimed at promoting investment opportunities in the regions of the country and in particular the investment attractiveness of the Rivne region, its economic potential. And not only the potential, but also a certain experience, as evidenced by the development of the furniture cluster of Rivne region, which was optimistic in particular in the speeches of investors who are already working in the Rivne region. Particular attention was paid to investment opportunities for economically significant projects under the Law “On state support of investment projects with significant investments.”

In general, the speakers of the international conference were the Executive Director of the Government Office for Investment Attraction “UkraineInvest” Serhiy Tsivkach, the Head of Rivne Regional State Administration Vitaliy Koval, the People’s Deputy of Ukraine Oleksandr Kovalchuk, the President of the Ukrainian Association of Furniture Manufacturers Volodymyr Patis, the Executive Director of Kronospan Rivne LLC Pavlo Piltyai, co-owners of Morgan Furniture LLC Lorraine Isabelle Marie McMahon and Franklin McMahon, director of Hjort Knudsen Ukraine LLC Laursen Steen Levring.

 

The investment climate in Ukraine is favourable for business

The investment climate in the regions is largely determined by the investment attractiveness of the country as a whole. The fact that it is improving is evidenced by the rate of foreign direct investment in Ukraine’s economy, which in the first quarter of the year amounted to 51.1 billion dollars with the dynamics of its growth, which was even more significant in the second quarter.

These statistics, presented by government representative Serhiy Tsivkach, became reassuring again, in part due to the fact that the already mentioned law on state support for large investment projects has been enacted. Since its entry into force and due to the development of the necessary by-laws for its implementation, the government has already received about thirty investment project large-budget applications worth almost two billion dollars.

This will be facilitated by the government-developed program “MAKE in UA”, which will be presented soon and which aims to consolidate the funds of domestic and foreign investors to implement projects in the regions in those areas that will be identified as strategic, leading to them given individual specifics Each. An example of this is the Rivne region, which has identified woodworking as the leading industrial direction of the region’s development, and the furniture cluster, which has already been created here, is a landmark investment project. According to the official, the fact that the cluster business in the region is succeeding is also evidenced by the fact that there are people willing to invest even more investment funds in the region’s economy. The government is already analyzing such applications.

The state will also be a reliable investor for ineffective industrial innovations. The draft budget includes more than two billion hryvnias specifically to support the industrial parks that are operating and will be created in the country. Rivne, Vinnytsia and Dnipro are now an example in this process, but Kharkiv is already starting to catch up, and other regions will master the mechanisms of economic breakthrough, including the creation of industry clusters and industrial parks.

In his introductory speech, the head of the regional state administration Vitaliy Koval, of course, spoke primarily about the investment climate of the Rivne region. And there was really something to tell him. For example, in the last two years, since the region set a course for the establishment of industrial centres, foreign investment inflows from $ 134.8 million in 2019 have increased to $ 400 million. “But this is not yet an indicator that satisfies us. This is just a good starting point. “

Forty percent of the region’s territory is covered by forests, so it is natural that the woodworking industry has become dominant in the industrial sector of the economy. And as a result: 67 percent of Ukrainian plywood is produced by enterprises of the region, 22 percent of particleboard – as well. The first half of this year showed a record export of furniture produced in the region – and increase in volume is 163, 3 percent.

Today, two officially recognized and supported by the authorities industrial parks are implementing their innovative opportunities in the region: the 125-hectare Rivne Industrial Park and the first in Ukraine private industrial park Kropospan Rivne on 85 hectares, which operate on the basis of Rivne Region – Territory of Equal Opportunities.

Oleksandr Kovalchuk, a People’s Deputy of Ukraine, has set himself an ambitious task in terms of increasing the region’s investment potential: by 2030, increase investment revenues in the region’s woodworking and furniture industries to one billion euros, creating an additional 10,000 jobs.

Furniture cluster: a success story

The furniture cluster, which until recently was only an ambitious project, is now a reality for the Rivne region. Its creation is not only an accomplished fact, its successful development is already filled with sufficient experimental content to be shared with others who intend to follow the cluster practice of the Rivne region. That is why those entrepreneurs whose companies are the foreign investors who became the pioneers of the cluster movement in Ukraine were invited to participate in the conference.

Pavlo Piltyai (Kronospan Rivne LLC) is a representative of a powerful world manufacturer of wood-based panels, which has 40 factories around the world. They are in Ukraine and in the Rivne region. The products of the plant in Novovolynsk have been known to Ukrainian furniture makers and builders since 2004. Therefore, Pavlo spoke more about the new Kronospan facilities, the construction of which was generously invested by an international board concern and which will soon produce the first products in the Rivne region. The new plant near Rivne, which in addition to particleboard will also produce OSB, is the largest investment project in Ukraine in recent times ($ 400 million). “We are increasing the production of board materials because we see in the country’s furniture industry the potential and desire to move to the furniture level of neighbouring Poland. To consolidate efforts to achieve this goal, the first private industrial park in Ukraine was created. “

Morgan Furniture has been present in Ukraine since 2006. During this time, it has strengthened its furniture business here, feeling its prospects in Ukraine, and intends to resort, as reported by Lorraine Isabelle Marie McMahon and Franklin McMahon, to further powerful (billions of dollars) investment to expand its presence in our country. . In particular, it is about investing in the production of woodworking tools and foam. A 100% export-oriented company that supplies its products to the EU and US markets. Participation in the furniture cluster is important for the company in several aspects. Last but not least, due to the need to obtain qualified personnel who will be trained by the cluster, which includes the relevant vocational schools. There will always be a need for raw materials on time, from the shortage of which – in quality and at an affordable price – will ensure cluster cooperation. Problematic for the company is the annual permit restrictions from foreign countries on the import of trucks produced and sold Ukrainian products on their territory or the transit of Ukrainian goods on their roads. And there are cluster advantages in overcoming such limitations. Ms Lorraine Isabelle Marie noted that the company did not go head-to-head in the Rivne clustering, but weighed and analyzed everything in detail. And I came to the conclusion: there is meaning and benefit in that.

The Danish company Hjort Knudsen has its furniture production and related facilities in several western regions of Ukraine. Now the Danes, as Laursen Steen Levring noted in his speech, were also attracted by the Rivne region. Last but not least, due to the practice of synergizing business through the creation of an industry cluster. The company is completing the second stage of construction of its enterprise here, which will occupy an area of ​​47 thousand square meters with all ancillary facilities. This required $ 80 million in investment.

Clustering in furniture will not develop, will not be a breakthrough for the industry, a good example for other industries in the country, where the furniture industry will be in the backyard – such a message was addressed to the conference by UAFM President Volodymyr Patis. Therefore, the Ukrainian Association of Furniture Manufacturers has its strategic task – to make Ukraine a furniture-producing state, that is, to make furniture one of the leading, priority sectors of the economy for the country. There is a clear understanding that without large volumes of furniture exports the country will not become a powerful furniture manufacturer. In turn, the experience of countries that have already become “furniture states” (including neighbouring Poland) shows that the country will not raise the furniture industry to the leading level, will not increase the export of domestic furniture, without its own industry exhibition of international weight and importance. UAFM has been concentrating its efforts on the creation of such an exhibition in Ukraine for the last three years and this year has received a significant and promising result – such an exhibition in B2B format took place in the summer. 37 retail chains from different regions of the world became interested in the FURNITURE OF UKRAINE BUSINESS EXPO, sending their trade envoys to Kyiv. During the three-day exhibition, preliminary furniture agreements were signed between Ukrainian furniture makers and foreign furniture retailers for $ 10 million, and now a significant part of them has grown into a long-term production and trade partnership. Undoubtedly, there is a direct relationship between the new furniture exhibition and the fact that exports of Ukrainian furniture increased this year by a record 62 and a half percent and reached $ 600 million in monetary terms.

The wood market: another attempt at reform

The issue of providing them with sufficient volumes of wood raw materials – high quality and at a fair price – remains problematic in Ukraine as a whole and directly for its furniture and wood processing industries. The formation of the domestic market of unprocessed wood, which would equally suit those who grow, harvest and sell it, and those who need it as a raw material for the final product, will not end. Every government team, every government undertook to put an end to this problem but failed. Therefore, stable and mutually acceptable provision of domestic enterprises with domestic wood has not been achieved. The current ruling team has also set out to find a middle ground for the mutual satisfaction of the parties to the timber market. Another bill has been developed, which, according to Alexander Kovalchuk, a representative of the majority in parliament, is planned to be considered in the session hall in the first reading this week. The Servant of the People acknowledged that this document was not perfect either, so he called on the participants of the conference, all its virtual participants, all interested persons and institutions to actively participate in its improvement between the first and second readings.

Needless to say, further hanging of this problem with the Domok sword over furniture and woodworkers will put in a difficult situation not only the existing industry clusters and industrial zones but also, in general, can become a serious obstacle to further development of the furniture clustering movement in the country.