October 1998

by Shawn Levsen

Kharkiv is known as one of Ukraine's industrial and research centers. Like many other regions in Ukraine, it has suffered enormous setbacks since independence. Kharkiv, however, boasts a strong production and research foundation that if rebuilt could bring back many of the losses sustained over the last six years.

Geography and Resources

Kharkiv is located in eastern Ukraine on the Russian border. Its territory is not overly large at 14,300 square kilometers, but with 3 million people, Kharkiv is the third most populous region in Ukraine. The region is rich in natural resources: natural gas and oil deposits are located at Shebelinka, Krestyshchivka, and Kegychivka, and sand, clay, and limestone deposits support a hearty construction materials industry.

Kharkiv produces almost half of Ukraine's natural gas output. Firms such as Kharkivtransgaz, Shebelinkagazprom, Kharkivoblenergo, Zmiivka SRPP, Kharkiv Heat Networks, and Kharkivteploenergo tap into the estimated 2.7 billion cubic meter natural gas reserves during production.

Industry

Kharkiv's heavy industrial plants play an important role in the region's activity. The Malyshev Plant produces improved military tanks and has recently completed a major deal with Pakistan. The Kharkiv Tractor Plant is outfitting its tractors with motors from Sweden and Germany and is still making sales internationally. The turbine manufacturer Turboatom continues to resupply its past customers worldwide.

Research facilities play a major role in the region. Much of the Ukrainian aerospace industry is also located in Kharkiv. The Monolit company produces circuitry, while the Kommunar enterprise supplies control systems for Russia's Soyuz and Proton programs, as well as the Ukrainian Zenit rocket. The Kharkiv Aviation factory is designing aircraft upgrades, including the AN-74 passenger jet.

While these gigantic companies are striving to find direction, many smaller companies have sprung up in the region. Since 1992, about 3,000 enterprises have been privatized. The region has been rated fifth in privatization among the Ukrainian regions, and second in privatization of medium and large enterprises.

Agriculture

Kharkiv Oblast has 490 collective agricultural enterprises and 1,160 private farms. Output in the region is fairly evenly split between crops and livestock. Arable land accounts for 1.9 million hectares in the region, with outputs as follows: grains, 30 percent; sugar-beets, 33.4 percent; sunflowers, 14 percent; and vegetables, 5.3 percent. Meat ouput consists of 80 percent cattle, 9.6 percent pork, and 7.9 percent poultry.

Foreign Business Activity

In 1997, the region ran an international trade deficit, exporting US$402 million and importing US$582 million. The region's major exports are machines and equipment, most of which goes to Asia. Machinery is also the region's major import, followed by minerals and fuel. Seventy-seven percent of imports come from Europe.

Foreign investment in Kharkiv over the last six years totals US$50.4 million. U.S. companies registered in the region are involved in casein production, foreign trade, and car sales. American companies are also involved directly with Ukrainian firms, such as the Ukrainian-Russian-U.S. company Spets (consumer products), the KarMa joint venture (manufacturer of bicycles), Kharkivyuvelirtorg (jewelry), and Interior International (furniture and wood).

Restructuring of major firms and the development of smaller, more consumer-oriented companies must take place for the region to flourish to its potential. Regardless, Kharkiv is a region full of possibilities, given its resource base and head start in attracting foreign investment.

For more information about Ukraine, visit BISNIS OnLine at www.mac.doc.gov/bisnis/country/wstnis.htm.

Shawn Levsen formerly covered Ukraine for BISNIS.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)