What is ‘Ukraine 4.0’?

A lot of buzzwords surround Industry 4.0 today worldwide. One of my colleagues was inspired by Japanese concept ‘Society 5.0’ and proposed a new movement ‘Ukraine 4.0’) 

But, Ukrainian professional communities have no doubts that we’re still too far away from developed countries to talk about the same level as they do. Our GDP, investments into hi-tech segments and any innovation indexes lag far behind many countries, including our neighbors.

So, in this context what does ‘Ukraine 4.0’ mean?

In our Association of Industrial Automation of Ukraine we rather discuss opportunities on global world transition through the 4th industrial revolution, where each country defines its place and its perspectives.

Opportunities in hi-tech segments already exist for our internal and, on a bigger scale, for external stakeholders. Let’s take a closer look at them:

1. Ukraine’s technical education is the foundation of Ukraine’s hi-tech ecosystem and this is true for all hi-tech sectors. Every year the country graduates over 150,000 students, among which 36,000 are with degrees in technical studies, including some 15,000 IT specialists. This takes place every year! That is the main reason why our IT-industry is so strong and fast growing. Ukrainian workforce of 90,000 IT professionals is a direct consequence of IT industry being the first in using this basis of any hi-tech ecosystem.

By the way, these numbers are the highest in Central and Eastern Europe. It’s absolutely clear that current capacities of our Education System significantly exceeds demand of local market. Ukraine continues to be a donor of well educated young people for wealthier countries. This is the price for having non-effective governments during two decades. But by taking a more pragmatic approach, it’s easy to conclude that this creates great opportunities for international companies searching for young talents, as well as for neighboring European countries. Poland was the first who took advantage of this situation, launching large plans of engaging Ukrainian students into their schools. And we know that only 30% of these students return home.

Excellent ratio of quality/price of workforce

2. The second reason of Ukraine’s attractiveness for global value chains is, of course, excellent ratio of quality/price of workforce. We know that following hryvnia’s dramatic fall against the dollar in 2014-2015 Ukraine became one of the cheapest countries to live and operate a business in. Salaries or IT professionals start at $400/month, QA specialists at $300/month, while those of project managers may be above $1,000/month. And when you go to other hi-tech sectors, less globalized compared with IT, it will be even less.

(Data has been taken from the excellent report of Ukrainian IT-industry, you can download here)

R&D and production centers in Ukraine

3. The next reason is more geopolitical. After a final turn towards Europe and continuous sanctions against Russia many analysts say that it is more promising to set-up R&D and production centers in Ukraine compared with other countries in the region. Many global brands have already determined that, and that is why we have more than 100 R&D centers here (picture at the top of article). Or, let’s consider a new challenge everybody talks here – cyber-security. Ukraine is #1 target for Russian haсkers, but the country is first as well to define the right set of measures on coping with this new threat. And the recent Global Cyber Security Summit 2017 (held in Kiev on the 14-15th of June 2017, you can find a lot of article about that on TechRepublic), with strong leadership from US experts is a good sign that the world understands this.

Speed and flexibility

4.   The Ukrainian State is very weak, and everybody here complains about that. But the reverse side of that lies in a high activity of many professional communities and their creativity. Surviving 2 revolutions in 10 years Ukrainians know how to quickly adapt to new situations in a rapidly changing world. Many IT, OEM and industrial manufacturers lost export to Russia. It was dramatic drop for many of them.

Many companies closed but others survived and became even stronger. If you take our IT & Industrial Automation companies, you will notice that they are very flexible, adaptive, ambitious and with good English proficiency. So, speed and flexibility are self-sufficient values in modern world and Ukrainians demonstrates their abilities in that. Finally, our Association is also a good example, we’re the first to push the government and challenge other industries & communities with 4.0 issues, and with combining our initiatives in the 4.0 national movement.

 Poor state of manufacturing facilities

5.  Last but not least, poor state of many Ukrainian manufacturing facilities create good opportunities for western capital. Many workshops, territories and even plants are cheap to buy and deploy your own manufacturing. Last month I was surprised to see how fast Dutch Banke Electromotive started its manufacturing in Lviv (Western Ukraine). Rasmus Banke, CEO said that they looked through many countries in Eastern Europe but finally stopped on Ukraine.

To finalize, when we talk about ‘Ukraine 4.0’, we do not have ambitions to be on the same level as US, Germany, or even China. This is not realistic at all. But we should be aware of our strengths. We have an impressive workforce of qualified developers and our target is to double this number by 2020 in many sectors – including industrial hi-tech. So, the right positioning for Ukraine now would be to find its niches and to integrate into global value chains. And we work hard to prepare our ecosystem to that.

Article by- Yurchak Alexandre, CEO of Association of Industrial Automation of Ukraine

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