This issue of the Bulletin contains the results of the 13th quarterly survey on the enterprises in different economic sectors of Ukraine. The last three years provide ample findings to come to the conclusion that BTS system in our country has been established, its output can fit the requirements of international comparisons and in-depth economic analysis, and, besides, they can make a source of additional information for users as a basis for decision-making process in management and administration sphere.

This issue of the Bulletin contains comparisons on the basis of the information obtained from the surveys on industrial enterprises of Ukraine, Russia, Central and Eastern European countries, and EU Member States.

Basically, any variable applied in the surveys can provide output information about future movements earlier than the analogous data derived by traditional statistical methods. The reason why so, is that opinions and expectations precede business action plans, hence, any relevant information isn't available with the official statistics unless the plans are implemented in business practice.

The experts from the EC Commission apply a standard set of leading indicators. Their nomenclature covers qualitative data obtained from BTS on enterprises and consumer surveys. The leading indicators of the European Union, e.g. "confidence" indicator, in derived on the basis of the following indicators:

• "confidence" indicator in industrial sector;
• "confidence" indicator in construction sector;
• consumer "confidence" indicator.

Accordingly, each of the indicators represent a combined indicator embodying several indicators from the surveys.

"Confidence index" (or confidence indicator) in the industry (industrial confidence indicator) is derived as arithmetic mean of the indicators on expected production output, effective customer demand and stocks of finished products (with reverse sign).

"Confidence index" in construction sector is derived as arithmetic mean of the indicators on order books (or demand for construction works) and expected employment trend.

Regrettably, consumer "confidence" indicator cannot be derived since in Ukraine relevant surveys have never been practiced.

In addition to the integrated indicators, in the West essential ones for monitoring of business activity at industrial enterprises cover the following:

• expected changes in production output;
• trends in customer demand;
• changes in stocks of finished products;
• production capacities utilisation;
• expected changes in prices on central industrial products;
• current production output;
• current sales (customer demand).

The countries where industrial BTS experience covers several decades, it's industrial confidence index" that is applied in the first place to estimate industrial performance. The estimates on this integrated indicator derived for Ukraine indicate positive tendency in industrial production over the last year; thus, for the first time since the launch of BTS in Ukraine this indicator came to be positive and high in absolute terms (+12%).

It may be stated with assertion, that "confidence index" estimate for industrial enterprises of Ukraine seems to be on a par of the similar estimate in Member States. Thus, over the year of 1999 its estimates used to vary from -14% for Great Britain, Austria and Germany to +5% for Ireland. In Central and Eastern Europe the estimate looks somewhat lower, e.g. from minimal (-25%) for Lithuania to maximal (-3%) for Slovak Republic.

We believe such a marked growth in "confidence index" in Ukraine comes out of a large share of confidence coming from industrial management and related to production output and sales of finished products in forthcoming quarters.

In the relevant section of the bulletin it is said that expectation of managerial staff in respect of production output in II quarter 2000 are optimistic to the farthest possible extent (the balance being +41%). This indicator has never taken such value over the latest 10 years in any of the Member States: thus, its highest estimates were registered in Great Britain (+40%) over 1987-1991. in Greece (+33%) over II quarter 1999 and (+30%) over IV quarter 1999, and Ireland (+28%) over 1987-1991 and (+26%) over IV quarter 1999.

Actually, in Member States average value of this indicators over the latest 10 year (1989-1999) used to be +6% and varied from -20% to +17%.

According to the respondents, customer demand on industrial products in Ukraine is still being negative, however, its increasing tendency persists as can be clearly seen from the findings in each consecutive quarter. There's a persisting tendency towards reduction in the share of the enterprises who report on poor customer demand on their production, along with increasing share of those who are satisfied with the demand and even assess it as "high". In Russia the situation is quite similar: thus, there's a clear cut upward tendency, although the estimates of the indicator are tower than in Ukraine. As regards Western countries, over the latest 3 years the tendency has been quite common for these countries: thus, except for certain periods in some of the countries, negative estimates of the balance, varying from -30% to +6%.

According to the respondents, extra stocks of finished products at the Ukrainian enterprises have disappeared since long. The stocks of finished products have been even smaller. Unlike Russia, where extra stocks of finished products used to be registered at industrial enterprises long enough, e.g. throughout 1997-1998, in Ukraine the performance tended up. It should be added, that production output over the same period was nearly equal in both countries.

Industrial businesses in Member States are increasing residual stocks of finished products: thus, according to most of the respondents from the industry, they exceed normal level. For the year o 1999, the balances on the stocks are much more explicit in this respect in countries such as Denmark (+25%), Luxembourg (+22%), Austria (+19%), Great Britain (+25%) and Sweden (+24%).

Extra stocks of finished goods being too high at the industrial enterprises in Europe (added by rapid devaluation of Euro and national currencies), this nevertheless didn't led the respondent to expect a marked growth of prices: thus, at late 1997 - early 1999 decreasing of prices was expected by the respondents in a major part of Europe, In Ukraine, instead, upward tendency in respect of prices persists according to the respondents. In I quarter 2000 the balance of expectations on prices went up to the farthest extent over the whole observation period and reached 29%.

Production capacities utilisation in Ukraine has been increasing, although its estimate looks miserable in relation to Member States. According to economic theory, when an economy performs well, the capacities should be utilised by 90%. This seems to be quite true for Member States, and at the industrial enterprises of Ukraine the estimate is nearly twice less.

Another imperative of the further economic growth of Ukraine is heavy investment inflow in production sphere. On the one hand, this requires inviting of foreign investors, and employing of internal capabilities and resources available with the industry, on the other.

We are going to set out some of the findings from conjuncture surveys the concern investments advantages of the industrial enterprises in Ukraine.

According to the respondents, the most recent period features increasing investments inflow at the industrial enterprises: thus, the dynamics of the balance concerned looks as follows: -2% in IV quarter 1998; 0% in 11 quarter 1999; and as high as +1% in IV quarter 1999. Its by industry distribution is quite similar (see Table 1), e.g. upward tendency in respect of investments inflow at enterprises level registered in many of the industries.

Throughout the sector, quite favourable is investment inflow in fuel industry, non-ferrous metallurgy, timber industry, e.g. the industries that used to feature good performance in Ukraine. The enterprises in these industries used to market effectively own products abroad and a part of returns was streamlined to meet production needs. Although immediately after the August crisis of 1998 these industries were affected, too. Stabilisation tendency also occurs in ferrous metallurgy, machine building, consumer and foodstuff industries. We believe the situation is the most severe in printing and publishing industry.

Major investment ends at enterprises level, according to the data from BTS, cover acquisition and repair of equipment (22% and 30%, respectively, of those who practice investments) and introduction of new technologies (23% of the respondent enterprises). Far smaller is the share of the enterprises who forward their investments to reduce dangerous pollution and improve labour safety (5% of the respondents).

However, a large part of the Ukrainian respondent enterprises have never had investments over the latest 3 years (the share of these exceeds 70%), although only a small part of them (varying from 4% to 7% according to different surveyed) do not need investments in fact.

According to the data from EU, investment ends at the enterprises of Member States look as follows (European Economy, Supplement B, N2, 2000):

BTS on the industrial enterprises of Ukraine always pertain to the factors that effect investment policies pursued by enterprises as such. Of the factors limiting investments, respondent enterprises much more often emphasise upon shortage of own financial resources and exorbitant interest rates on bank loans, that stifle industrial production.

It should be noted, that shortage of own funds has been an explicit limiting factor over the whole observation period, whereas the tendency towards increasing impact of the other factor, e.g. impossibility to invest from internal sources, can be traced quite clearly.

Third in the rating of limiting factors come difficulties related to access of long-term loans Apprehension of incapability to return a debt to a bank is still persisting and quite significant factor that limits capital investments at the enterprises.

Basically, according to the respondents' expectations, main indicators of industrial performance in Ukraine tend up, which looks hopeful, indeed.


© Ukraine-Today.com