KHARKIVSHCHYNA
Sitting in the upper northeast corner of Ukraine, Kharkiv oblast straddles the middle of a wide expanse of steppe and farmland. Despite its relative isolation, Kharkiv oblast is unquestionably one of the most important regions in Ukraine for industrial development. This distinction, combined with developments on the oblast's political and economic fronts, has ensured that Kharkiv will remain a major player in any decisions made regarding the future of Ukraine. But this also makes Kharkiv one of Ukraine's most vulnerable areas when economic problems strike. The region has also played an important role in Ukrainian history. From December 1919 until June 1934, Kharkiv enjoyed a brief fling with glory when it replaces Kiev as the nations' capital. Ukrainian culture here experienced a renaissance in the 1920s and 1930s. One of its more famous native sons director and actor Les'Kurbas was shot during Stalin's 1937 purge. On the political front, Kharkiv itself appears to be fast becoming an influential center for a new crop of movers and shakers. For instance, Oleh Diomin, the current Oblast State Administrator, was formerly a Verkhovna Rada Deputy Speaker, while recently-appointed Presidential Chief-of-Staff Yevhen Kushnaryov served as city administrator until December 20. Volodymir Hrynov, who along with then-Premier Kuchma, ran the Ukrainian Union of Industrialists and Entrepreneurs, now heads the liberal Inter-Regional Reform Bloc. Along with Lugansk, Donetsk and Dnepropetrovsk oblasts, Kharkiv is among the nation's most powerful industrial regions. According to MinStat, the oblast annually produces about 6% of gross national income while its enterprise accounts for 9% of the total national enterprise profit. Kharkiv oblast is highly urbanized: its 31,400 square kilometers constitute 5% of the nation's territory and 3.18 million people or 6% of Ukrainians reside there - 80% of them in the urban areas. Productivity and Privatization Due to its status as one of the most strongly-developed industrial regions, last year Kharkiv oblast produced the fifth largest volume of industrial goods, constituting over 5% of total domestic industrial production and ranking third in the nation for the production of consumer goods. While this may seem like a relatively small percentage, it is important to consider that almost all of Ukraine's heavy industry is centered on the Dnipro River, located in the center of tile country, hundreds of miles from Kharkiv. Among the region's most developed sectors are machine-building, metallurgy food-processing, electricity and fuel production. Last year, Kharkiv oblast manufactured practically all of the steam turbines used at the thermo-electric stations, over 50% of the domestic tractors, 30% of the TV sets and electric engines, 25% of the washing machines and vacuum cleaners, and a large variety of construction materials. As of tile beginning of 1996, 40% of oblast enterprises remained state owned, a figure that is in line with the average figure for Ukraine. The remaining 60% of the non-state industrial enterprises produced Hr 960mn worth of commodities or 55% of the oblast total in the first half of 1996. This was almost entirely produced by Joint Stock Companies which constitute 75% of Kharkiv oblast's non-state sector. Privatization has been growing in Kharkiv, with over 1,500 properties privatized since 1993, more than half of them in 1995. The privatization of residences has proceeded at a slightly slower pace over the same period - in 1995, 43,000 apartments were privatized, which is 67.6% of the 1994 rate. Industrial Low Point In the last two years, however, Kharkiv oblast has experienced major decline in production, higher than the average for Ukraine. A 21% decline was recorded in 1995 over 1994, while industrial output for the first half of last year was 15% less than the corresponding figure for 1995. This sharply contrasts with the nation's average, which in 1995 stood at 11.5% and was only 3.4% in the first half of 1996. No Trade Deficit Yet The ongoing economic crisis has left its mark on Kharkiv's foreign trade. It has been significantly shrinking since 1991, especially in 1995 when the oblast's annual US $478.3mn foreign trade turnover was 30% lower than the previous year. Exports accounted for US $276.8mn, imports 201.5mn, and the total trade balance was a positive US $75.3mn. The largest foreign project currently involving Kharkiv oblast enterprises Is Ukraine's largest military contract, under which Kharkiv's Malishev Tank Plant will supply 350 T-80UD tanks to Pakistan. This deal should bring Kharkiv a total of US $450mn. The first batch is expected to be delivered to Pakistan the spring of 1997. Good News Coming But the oblast's share looks to be higher in 1997 with the addition of US $22mn invested by US tobacco giant Philip Morris in the Kharkiv Tobacco Factory since May 1994. The factory, in which Philip Morris holds a controlling stake, started producing two new brands of cigarettes in the second half of 1996. As the oblast's largest foreign investor, PM is expected to further expand its presence in the region in 1997 - a prospect seemingly assured by talks between Philip Morris Ukraine and the Oblast State Administration in November 1996. Other Kharkiv oblast sectors that have attracted a proportionately large share of foreign investment are food processing with US $4mn and machine building with US$2mn.
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