Despite a 20-year presence in the domestic economic discourse, Ukrainian clusters have not yet become a prominent subject of economic activity.. This is very dissonant with the economies of developed countries and does not meet the Ukrainian economic challenges of the last eight years, when the growing role of small and medium-sized enterprises (SMEs) and their associations in the EU is on the agenda. Now, during the war, our clusters are also mobilized and for the first time enter the economic arena as a separate entity.

Clusters are industrial territorial associations of organizations that work closely together in the value chain (VAC) to increase the competitiveness of products.

Labor productivity, new product release rates, competitiveness, the level of internationalization/export among cluster members is 10–50% higher compared to non-cluster actors. Therefore, governments pay attention to them, clusters are the engines of economic development in the EU. Today there are about three thousand of them in the European Union..

During the COVID-19 epidemic, clusters have proven themselves in counteracting crises, especially with regard to the sustainability of value chains. In a matter of months, developed countries managed to establish the production of personal protective equipment, oxygen equipment, and ventilators. And in Ukraine, several similar attempts to establish new cooperations were practically unsuccessful (analytics here).

The role of clusters during the COVID-19 epidemic was carefully analyzed by the relevant communities, in September 2020, the Industry4Ukraine platform released the “National Cluster Development Program until 2027”. The authors prove that clusters are a powerful tool not only in industrial policy, they play one of the key roles in regional and innovation policies and are the main tool for smart specialization of regions..

Even before the spread of COVID-19, in March 2019, the Association of Industrial Automation Enterprises of Ukraine (APPAU) substantiated the concept of IAM (engineering-automation-mechanical engineering) clusters and founded such clusters in Zaporozhye and Kharkiv.

In the summer of 2020, these developments and previous APPAU initiatives were converted into the ClusteRISE project (IAM cluster development), supported by the German society for international cooperation GIZ. Although the project only targeted Zaporozhye and Kharkiv, it contributed to the emergence of industrial clusters in Kyiv, Vinnitsa, Nikolaev and Sumy. GIZ stimulated the emergence of new clusters in Lviv, Rivne, Chernihiv, Donetsk and Luhansk regions. We are talking about the light, chemical, agro-food industries, the production of ceramics. In general, during that period, 16 clusters were registered in Ukraine, all production areas.

In March 2021, another work of experts from the Industry4Ukraine platform was released - “The best cooperation as a response to the challenge of deindustrialization of regions”. It sends a clear signal to a number of regional administrations that their regional strategies until 2027 do not contain any serious responses to the challenge of regional deindustrialization.. The report focuses on the fact that there is an analysis and fixation of mass deindustrialization in regional strategies, but there are practically no actions in response. Numerous requests from Industry4Ukraine to the Ministry of Economy, the Ministry of Strategic Industry, the Ministry of Digital Development and other ministries remained unanswered. Industrial and other policies were not formed that should have synchronized the actions of business communities with government ones..

Ukrainian cluster alliance. First results.

On March 24, 2022, at the general meeting of clusters, decisions were made to create the Ukrainian Cluster Alliance (UCA). This is the first formalized association of 30 clusters of Ukraine (1800 enterprises). The European Cluster Alliance (ECA) and representatives of the European Commission extended a helping hand to UCA. Together with them and representatives of the ENN-Ukraine network and the Chamber of Commerce and Industry of Ukraine, the Support Ukraine marketplace was created. UCA has developed and started to implement three main strategies.

Mobilization of SMEs around the common goals of the economic front.

Strengthening the value chain of critical industries.

Broad internationalization of clusters.

The main results of the Ukrainian Cluster Alliance for two months:.

to improve the stability of the value chain, the clusters launched several mini-projects: 110 jobs were created in the clothing industry in the Khmelnytsky region, and separately, the production of first-aid kits for the military;

expert groups were created to help SMEs with the organization of logistics, inclusion in critical imports, relocation, organization of export events, market analytics, etc..

in fact, in two months, the alliance has made significant progress in the field of internationalization:.

membership in the ESA has opened the doors of numerous European structures and business associations for UCA;

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APPAU joined the American-European CSIA, which opens its markets to Ukrainian engineering companies;

a systematic dialogue has been established with the national cluster associations of Poland, Romania, the Czech Republic, Lithuania - dozens of B2B meetings are held.

Thanks to the initiatives of the UCA and the Industry4Ukraine platform, a European network of Digital Innovation Hubs is developing in Ukraine, which now itself supports SMEs. The first grants (60 thousand. EUR) will be awarded to four SMEs in May, and UCA's potential to hundreds of such grants. Dozens of the best experts from associations, universities, research institutes of the country are already involved in the general tasks of fundraising in the development of an innovative ecosystem of industrial sectors.

The development of these areas continues in direct dialogue and with the support of representatives of the European Commission. But there is practically no government in this dialogue, and it is difficult to involve officials in our initiatives..

Government proposals.

Establishing a GR (Government Relations) function is on the UCA agenda. The subject of wide expert discussion should be systemic problems of state policies that have not been resolved for years. Let's formulate five general tasks.

The Government and the Verkhovna Rada this year should approve the regulatory and legal provisions for supporting industrial clusters of Ukraine at the level of industrial, innovation and regional policies.

Develop a special program to support industrial SMEs is a priority challenge for the Cabinet of Ministers. Today, the government offers many support measures, but there are several drawbacks: fragmentation, lack of priorities, ignoring value chain mechanisms. For example, there is rhetoric about post-war reconstruction, but how can SMEs survive until then Jobs and orders needed now.

UCA clusters are ready to take on most of the tasks of integrating light industry, furniture, food and processing industries, engineering and mechanical engineering into the EU. But we cannot develop this industrial dialogue without the government, consolidation is needed as soon as possible, it is also necessary to develop a state strategy for internationalization, integration of Ukrainian industrial sectors into European value chains.

Financial support for cluster organizations. Previously, our state has never focused on cluster development. Meanwhile, it was thanks to state support that clusters of neighboring European countries received the first impetus to growth.. That's millions of euros a year. In Ukraine, it seems that, except for the German GIZ, no one needs our clusters. The government needs to quickly correct this situation, primarily due to a significant increase in international financial assistance.

Accelerating the transition of industrial SMEs to the European principles of dual digital and green transition should also be among the priorities. This transition today takes on a new meaning - it's about the survival of SMEs. The state could not provide funding for R\u0026D in industry before, and now investments have fallen to zero.

Thus, several times more active participation of our SMEs in European grant programs is perhaps the only chance to keep the jobs of developers, scientists and researchers..

UCA is ready to contribute to the implementation of these initiatives with all its resources, expertise, and previous experience. But the government must also move towards business. Only together can we raise our cluster movement to a well-deserved European level.

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Read more articles by Alexander Yurchak at the link.