chapter  4
19 Pages

The evolution of the industrial structure in Donetsk region: Macroeconomic, microeconomic and institutional factors

ByALEXANDER LYAKH

Donetsk oblast is currently one of the most politically and economically influential regions in Ukraine. Occupying 4.4 per cent of the territory of Ukraine and accounting for 10 per cent of the population, this old industrial region provided 12.5 per cent of the country’s gross value added in 2000 and 12.7 per cent of the gross industrial output in 2001 (Donetsk Oblast Department of Statistics 2002: 19, 24). However, the region has its socio-economic and political problems. The economic power of the region is built on the hollow foundations of heavy industries whose prosperity in the long term is very doubtful. The first sign of the weakness of the heavy industries was the dramatic restructuring of the coal mining industry, which in reality primarily involved mine closures. Donetsk region faced the inevitability of following the same difficult path followed previously by old industrial regions in Western countries. However, the conditions for restructuring in old industrial regions in Ukraine and other CIS countries are different from those in advanced countries. These differences include the structural reform of sectors that are technologically connected, the peculiarity of transforming the economy of Ukraine into a market economy, and processes of regional elite forming (see Chapter 3). This chapter considers the current situation and outlook for economic restructuring in Donetsk oblast in the context of internal mechanisms of structural change and institutional factors.