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Localization of production - a world practice and conclusions for Ukraine

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  • I. Shovkun

Abstract

Despite the prevalence of localization measures in the practice of countries with different levels of development, localization requirements in Ukraine are still rare. Meanwhile, the dependence of Ukrainian economy on imports increases and acquires threatening dimensions. The expansion of imports begets weakening of country's economic stability, nourishes the structural crisis, impedes the development of industry, and causes a situation where imports suppress production instead of complementing it. These problems represent the focus of the present study, which deals with theoretical and practical aspects of production localization. The study aims at determining the essence and forms of the requirements for localization, generalizing the world experience in applying such requirements with identifying their effectiveness, analyzing the specificity of such requirements in individual sectors of economy, and substantiating the economic necessity of their use in Ukraine. The estimation of the import dependence of Ukrainian economy and, in particular, its industrial sector, based on data of the input-output tables allows detecting an excessive level of import dependence of Ukrainian economy and industry. It is proved that the proportions in which imports are involved in the economic processes are extraordinary, and hence a corresponding regulation with the application of systemic measures for production localization is required. The author identifies the areas of desirable application of the localization requirements for those industries that are critically dependent on imports by intermediate consumption, final consumption and gross capital formation, as well as various promising types of production with a solid scientific and innovation base.

Suggested Citation

  • I. Shovkun, 2017. "Localization of production - a world practice and conclusions for Ukraine," Economy and Forecasting, Valeriy Heyets, issue 2, pages 31-56.
  • Handle: RePEc:eip:journl:y:2017:i:2:p:31-56
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    File URL: http://eip.org.ua/docs/EP_17_2_31_uk.pdf
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    References listed on IDEAS

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    1. Berezinskaya, Olga & Vedev, Alexey & Larionova, Dina, 2015. "Production Dependence on Imports of Russian Industry and Mechanism of Strategic Import Substitution," Published Papers mak11, Russian Presidential Academy of National Economy and Public Administration.
    2. O. Berezinskaya & A. Vedev., 2015. "Dependency of the Russian Industry on Imports and the Strategy of Import Substitution Industrialization," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    3. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2008. "Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 347-368, May.
    4. Lawrence Asekome Atsegbua, 2012. "The Nigerian Oil and Gas Industry Content Development Act 2010: an examination of its regulatory framework," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 36(4), pages 479-494, December.
    5. Gary Clyde Hufbauer & Jeffrey J. Schott & Cathleen Cimino & Martin Vieiro & Erika Wada, 2013. "Local Content Requirements: A Global Problem," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 6802.
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