Natalia Zinets

KYIV (Reuters – Oleg Alvanov’s fire truck factory employed 600 workers until it was shut down by a Russian invading force.

The 44-year old is now preparing to start some plant operations 700km (435 miles) from Lviv. He has already moved 20 railway cars and some employees, as well as equipment and production lines that were hundreds of tonnes in weight.

It was impossible to imagine that this would happen. However, the war started and we decided that diversifying the risks would be a good idea. We also moved part of our production line to the western Ukraine,” he said to Reuters via phone.

Averyanov joins a growing number of entrepreneurs who are taking up government programmes to move businesses from war-ravaged regions west to help protect and safeguard the economy from future crises.

As the conflict in Ukraine severs export routes for Ukrainian grain and metals, raises inflation and increases unemployment and decimates heavy industry in areas south and east, where there has been the most fighting, the economy will contract by 35 to 45%.

This is changing the geographic landscape of industries.

Economy Ministry data shows that more than 600 businesses have moved to Ukraine’s Western Regions. 390 of these companies had resumed their work in June.

The regional administration stated that 150 companies from these firms have relocated to Lviv, which borders Poland. It has survived the war relatively unaffected.

Yulia Svyrydenko, Economy Minister of Ukraine wrote that “large-scale business relocation to safer areas will help Ukraine preserve production, jobs, and meet the demand for the army and civilian populations for many goods and services necessary to defeat enemy.” She posted the following on Facebook (NASDAQ 🙂 March 29.

TWO FACTORIES

Averyanov intends to keep some of his operations in his Chernihiv plant, which was taken over by Russian troops during the initial phase of war.

Averyanov declared that the war would end, and there will be two factories in Ukraine – one in Chernihiv and one in Western Ukraine.

The only Ukrainian producer of vital fire engine and equipment, his company hopes to begin operations in the Lviv area by June.

    He plans to recruit and train about 100 local residents or internally displaced people this summer.

Although he was grateful, he wants his government to support him with procuring orders. He also criticised the import preference.

    “We have retained our manufacturing capabilities… and our team of employees. Averyanov stated that if the government does not consider how to order enterprises moving to west Ukraine like ours, we won’t survive.

Kyrylo Shychenko, the Governor of Central Bank, shared his sentiments. He urged that government scrap import tax exemptions and add taxes to non-vital imported products.

    “The incentives created for imports in the form of the abolition of import duties and value-added tax deprive Ukrainian producers of an advantage,” he wrote in a column on the ZN.UA news website.

    RUINED INDUSTRY   

According to Andriy Yarmak, the head of the presidential offices, 200 factories were destroyed in Ukraine during World War II.

    In the east, the war has brought operations to a standstill at the Azovstal and Illich metallurgical plants in the city of Mariupol, the chemical Coke and Chemical Plant in Avdiivka and the Azot chemical plant in Sievierodonetsk.

    “The government is doing a good job helping to evacuate businesses, it would be much worse without it,” said Mykhailo Kolisnyk, a professor at the Kyiv School of Economics.

    But with their share of gross domestic product at no more than 1-2%, the number of relocated enterprises is not enough to noticeably improve the economy, he said.

    A few large agricultural and metallurgical enterprises make up a sizeable chunk of Ukrainian gross domestic product but their production facilities cannot be relocated, he said.

    “There is a number of such conglomerate enterprises in the east, and most of them have stopped making their contribution to GDP,” Kolisnyk said.

    “Russia, the invaders, are deliberately destroying these enterprises and taking away their products.”