These proposals are prepared by the Association of Industrial Automation of Ukraine (APPAU) to Czech partners for the Ukrainian Cluster Allaince business misssion on October.
This document can be considered as a start of dialogue about the future collaboration projects between the Ukrainian industrial and high-tech clusters and EU partners. The proposals are consolidated inside of Ukrainian Cluster Alliance.
Eastern European initiatives
Initiative #1: Creation of new programs for Ukraine together with Eastern European and Baltic countries
Necessity: EU4xxxx programs (Business, Digital, Environment, etc.) are aimed at countries of the Eastern Partnership (EP), which, in addition to Ukraine, included Armenia, Moldova, Georgia, Azerbaijan and Belarus. From the point of view of APPAU, as a representative of industrial hi-tech sectors, these programs did not give significant results for development of industrial SMEs in UA even in peacetime. There are several reasons. First of all, it is weak efficiency for industrial hi-tech and insufficient governance on the side of the State institutions. The second reason is the significantly higher level of Ukraine’s maturity in innovation compared to 5 other countries. Now, political incompatibility (Belarus, Armenia…) has been added to this list.
Relevance to the war time challenges: taking into account numerous gaps in value added chains, geo-political challenges and the position of Ukraine in solving these problems, a shift in focus from EaP countries to Eastern Europe is necessary right now, because of almost evident reasons of economic integration (logistic, supply chain, value chains).
How it can work: Eastern European partners, together with Ukrainian partners, enlist support of their governments and come up with appropriate proposals for creation of Eastern European programs with inclusion of Ukraine at the European Commission level.
Initiative #2: Transfer of experience in Advanced Manufacturing policy-making by establishing regular exchanges on bi-lateral / multilateral level
Necessity: since 2016, APPAU, together with the Industry4Ukraine platform committees, has been cooperating with the country’s government to accelerate reforms in the key areas of industrial, innovation, digital and cluster policies. In 2018, we prepared a project of the Industry 4.0 strategy, and in the following years – up to a dozen more detailed proposals for changes in the specified policies and strategies. Unfortunately, most of them have not been considered by the Ukrainian government, and progress in these areas over the past 7 years is minimal. Eastern European countries have many times faster rates of change in the specified areas and their experience is very valuable for transfer to Ukraine.
Relevance to the war time challenges: In general, this initiative can be attributed to the post-war period. At the same time, taking into account rapid degradation of industrial high-tech sectors, we believe that it is now necessary to lay foundations for these changes. If the war drags on, many of them may cross the point of no return.
How it can work: Eastern European partners, together with UCA and Industry4Ukraine platform committees, form several working groups with inclusion of representatives of relevant ministries and parliamentary groups, which during 2023 will launch cycles of exchanges (online and offline) to transfer experience and knowledge to Ukrainian policy-makers.
Production cooperation / integration of VС / closing gaps in supply chains
Initiative #3: Programs for development of logistics-transport and integration into VC
Necessity: the war clearly showed dependence of supply chains of Ukraine and of exports on transport ways through Eastern Europe countries. Today there are many initiatives and ideas – from “dry ports” to logistics corridors (Solidarity lanes etc). UСA proposes to expand them also to programs of greater integration in EU value chains, which have already proven well, for example, in the automotive industry. Why can’t this example be extended to other industries, including the defense industry?
Relevance to the war time challenges: similar programs, designed to significantly improve industrial cooperation between neighboring countries and supported by governments of Poland, Czech Republic, Slovakia, and Romania, would lead to a significant improvement in trade with Ukraine, creation of new jobs in all partner countries, and most importantly, they would allow to keep alive Ukrainian SMEs in many industry sectors, which are currently in a critical state.
How it can work: obviously, it is worth distinguishing several sub-programs here, and not to confuse, for example, logistics corridors with issues of production cooperation in the defense industry. The main mechanism for integration into VC: partners create working groups that consider a complex of problematic issues to accelerate integration of Ukrainian enterprises into East European VC. Clusters and industry associations on both sides are key actors in developing these proposals.
Initiative #4: better integration of Ukrainian engineering potential – inclusion of a program for outsourcing engineering services
(industrial development, design, projecting, programming of Industrial Automation – IT, system integration).
Necessity: most engineering companies, SMEs from industrial high-tech sectors today have lost their markets in Ukraine by 50-90%. In the absence of government orders and exports, these enterprises will be forced to go bankrupt or completely change the field of activity. This means extremely negative consequences for a number of critical industries, first of all, the defense industry, whose personnel and production infrastructure are based on these sectors.
Relevance to the war time challenges: maintenance and survival of these sectors will mean maintenance of the domestic defense industry and other medium-high-tech sectors.
How it can work: it can be considered 2 big long-term goals – 1) common participation in Recovery program of Ukraine, 2) more integrated value chains in Advanced Manufacturing in Eastern Europe. The pathway go through main 3 stages, – 1) support of UA industrial developers & SMEs in surviving during war times by outsourcing their staff in own projects worldwide, 2) inviting of EU partners in projects of Recovery of Ukraine, 3) building together strong partnership in providing new innovation solutions across Europe.
Initiative #5: support of Ukrainian critical industries by providing international technical assistance in smooth operation of enterprises and closing gaps in internal supply chains.
These industries include production of medicines and medical equipment, food and processing, light industry, energy, critical infrastructure, construction, defense industry (including mechanical engineering).
Necessity: critical industries are the basis of economic and military fronts. The first months of the war showed vulnerability of certain infrastructure segments, energy and medicine – such as the need for faster recovery after emergency shutdowns, disruptions in supply chains and shortages of personnel.
Relevance to the war time challenges: critical sectors provide the population and the Armed Forces with basic necessities (food, clothing, medicine), living conditions (housing, energy, water). Defense industry is (should be) the basis for maintenance and self-support of the domestic armed forces in conditions of complete dependence on Western supplies of weapons and equipment.
How it can work: clusters and business associations of a partner country take over a specific branch segment of a critical industry, together with a relevant cluster or Ukrainian association consider a set of the most relevant priorities and propose solutions. These solutions include both mobilization of own resources and involvement of assistance at the level of one’s country or EU.
Innovative development. Digital and green transition
Projects announced in the “Recovery” program have already been declared by the government as innovative, green and digital. Meanwhile, Ukraine lacks a clear roadmap of a more thorough preparation of industries and innovation ecosystems for challenges of dual digital and green transition, as the EU does. After all, reforms in these areas and real sectors of economy were practically not carried out in previous years. Accordingly, the initiatives below are a guarantee that large-scale investment in the Recovery program will be successful.
Initiative #6: Accelerated integration of Ukrainian 4.0 Centers and DIHs into European DIH network
Necessity and relevance to the challenges of the post-war period: we are talking about a special EU program that supports transition of Centers 4.0 and a number of leading universities to DIH format and accelerates their formation as SME support centers through integration into the European DIH network (BOWI+). This program is necessary because the backlog of Ukrainian universities and centers of expertise in the field of industrial hi-tech is striking compared to the EU: they have 600 DIHs, UA has 3, but 2 are working. Functioning of our 4.0 Centers, as centers of enlightenment, training and innovation brokerage in Industry 4.0 for SMEs, is also under big question. There is a threat of further degradation of such centers during the war. If we do not form requirements now, and do not secure these sprouts of service, enlightenment and innovative fundraising for SMEs, destruction of industrial sectors’ innovative potential will grow rapidly.
How it can work: partners develop a joint program for creation and development of 5 to 10 DIHs network in Ukraine and will receive appropriate support from the European Commission. Czech, Polish, Lithuanian and Romanian eDIHs are becoming the main providers of knowledge and practices for Ukrainian DIHs.
Initiative No. 7: creation of Eastern European network of Industry 4.0-5.0 experts
Necessity and relevance to the challenges of the post-war period: a network of independent, qualified Industry 4.0 experts, able to diagnose enterprises according to the level of readiness and issue recommendations for development, is a key asset of most countries that are successfully implementing Industry 4.0 and 5.0 today. These experts are able to conduct audits of enterprises regarding the level of digital readiness and recommend them the first steps towards digital transformation. This practice was implemented by Western European countries, many Asian countries, today Poland is doing it. In Ukraine, such a network is completely absent. Big holding move in an ad-hoc manner, while SMEs simply ignore the challenges, confusing digital transformation with usual automation of production and business processes. APPAU proposes creation of such a network in Ukraine, as well as in other countries of Eastern Europe, where it is absent, based on the Singaporean government SIRI methodology, which is recognized as key by the EU today.
How it can work: APPAU proposes to create a joint committee with partners to consider best practices in this area in Eastern Europe and to create a single Eastern European project for preparation of such a network, including Ukrainian experts.
Initiative #8: creation of industry roadmaps of digital transformation
Necessity and relevance to the challenges of the post-war period: development of clear priorities for promotion of digital transformation to key economic sectors (energy, infrastructure, food, metallurgy, defense industry, construction, machinery – engineering). Individual attempts to build such roadmaps in Ukraine are known only at the level of large holdings (DTEK, MHP…), but are practically absent among SMEs. In 2019-2020, APPAU proposed its format for preparing construction of such roadmaps, which is focused specifically on SMEs and is based on 3 components (in stages): 1) development of an industry business cases, 2) their consideration and proposal of solutions by conducting trainings, hackathons and technological innovation days (TID), 3) creating catalogs of innovative solutions at industry level and launching series of trainings for SMEs.
How it can work: Eastern European countries already have considerable experience in digital transformation of individual enterprises and industries, including at the level of SMEs. APPAU proposes to introduce regular exchanges at bi- and multilateral level with definition of best practices in this area, followed by their wide distribution among countries participating in this project.
Initiative #9: Sectoral incubators and accelerators network in Industry 4.0-5.0
Necessity and relevance to the challenges of the post-war period: there are no modern incubators and accelerators of Industry 4.0-5.0 with a focus on production sectors and deep-tech startups in Ukraine. Their necessity is obvious in the post-war period, if we really want to make the most of domestic innovative potential, and not rely exclusively on imported solutions.
How it can work: in Ukraine, we have practically no experience in creating such accelerators with a focus on the traditional industries. Accordingly, any initiatives and assistance from Eastern European partners are welcome. Possibilities of common accelerators for the entire zone are also being considered.
Initiative #10: joint initiatives in the field of Circular Economy
Necessity and relevance to the challenges of the post-war period: Implementation of the EU-Ukraine Association Agreement in terms of implementation of the Green Deal in general and The EU’s Circular Economy Action Plan (CEAP) in particular. Separately, it is worth noting the need for Ukrainian companies to meet requirements of the new Ukrainian framework law 2207-1-д “On waste management”.
How it can work: Cooperation of APPAU participants with European companies in optimization of all the product life cycle stages. In particular, in terms of reducing use of primary resources, reducing greenhouse gas emissions, designing products in such a way that they can be reused, remanufactured, recycled or recovered and maintained in economy for as long as possible alongside resources with which they were created, and avoid or minimize generation of waste, especially hazardous waste, also promote sustainable consumption and production.
Possible interest of Eastern European / EU countries in implementation of these initiatives can lie in various areas – from financing their own institutions within the framework of EU funds, attracting business to implementation of projects in Ukraine and creating new mechanisms to professional assistance to Ukrainian industries and communities in these difficult times.
Each of mentioned initiative has a projects and several projects proposals, for more details, please contact email@example.com.