ZONES OF PREFERENCE: HOW INDUSTRIAL PARKS AND WAR ARE CHANGING UKRAINE

The war, on the one hand, caused significant damage to Ukrainian industry and economy, but, on the other hand, it became a powerful catalyst for the development of industrial parks. In three years, the number of officially registered parks has doubled, which indicates the active development of this market. Thanks to state support, innovations and environmental initiatives, parks are being transformed into modern clusters that combine production, technologies and “green” solutions, opening up new opportunities for business and export, and will also play an important role in the post-war reconstruction of Ukraine, emphasizes the CEO of the Industrial Parks of Ukraine Group, Valeriy Kyrylko.

Industrial parks are an important element of the country’s economic development, attracting investments and creating jobs. How do you assess the current state of industrial parks in Ukraine and what key factors influence their development?

Today, the industrial parks market in Ukraine is developing very actively, even more dynamically than before the start of the full-scale war.

The development of industrial parks can be divided into two stages: the pre-war period and the period after the full-scale invasion. What are industrial parks? They are, in essence, an analogue of free economic zones— specially prepared industrial territories where tax and technical preferences apply, as well as financial instruments aimed at attracting investments. Before the war, such conditions practically did not exist. There were no tax breaks or technical support from the state, so demand from businesses was minimal. Enterprises did not care where to build – on a separately purchased plot, in an old industrial zone or in an industrial park. This area did not offer any additional advantages.

The war changed everything. In 2022, a package of incentive laws was adopted, which introduced preferences for participants in industrial parks and their organizers. At the end of 2023, financial incentives were introduced into the budget, which were successfully implemented in 2024. In addition, there was strong demand from relocated enterprises looking for new sites. This became a significant impetus for the development of industrial parks.

Before the war, only four registered industrial parks were operating in Ukraine, three of which had only one resident, but now their number has increased to 25. I believe that by the end of 2025 their number will have reached 100, while the total number of registered parks will reach 100. In 2024,

31 industrial parks were registered this year, which is an absolute record compared to 13 in 2023 and 9 in 2022. This trend, in my opinion, will continue, as the number of initiatives to create new parks continues to grow.

Thus, the current state of industrial parks in Ukraine can be characterized as the most active in the entire history of their development, starting from 2012–2013.

 

World experience shows that industrial parks can become a locomotive of economic growth. Do you have examples of successful international models that could be adapted in Ukraine?

Different countries have historically developed different strategies for the development of industrial parks, and each of them takes into account local economic and social conditions. Can these models be adapted to Ukraine? Of course, but with the obligatory consideration of our specifics.

Before the war, I often gave an example of how foreign investors or operators treat industrial parks. They have an established approach: an industrial park is a prepared land plot with communications, a management company, divided lots, and infrastructure. An investor just needs to buy a lot and they will be offered a loan, technical support, and the opportunity to build a facility at their own expense. We still have examples where a potential resident is offered just a field with weeds and told: “Give me money, and we will bring everything up.”

Now the situation is gradually changing. European approaches have already appeared in some industrial parks. But most parks are still far from this ideal, even from the basic European standard.

As for development strategies, they are set by the state. We can borrow incentive tools that are already successfully working in our neighbors. In the world, these tools are quite universal: technical and financial assistance, tax breaks, favorable credit conditions, etc. The only thing we can do is increase these incentives to become more competitive.

For example, in Ukraine, participants in industrial parks receive exemption from income tax, import VAT on equipment, as well as the possibility of partial repayment of loans. However, this is not enough. In Poland, for example, after three years, the state can return up to 50% of investments if the resident has fulfilled his obligations to create jobs and pay taxes. In Turkey, local authorities can set additional incentives at the regional or community level, making their parks more attractive.

In Ukraine, local authorities can exempt residents from land tax or reduce the rental rate to a minimum, as well as exempt them from real estate tax. But this is not enough. For example, the compensation for connecting communications to an industrial park is 150 million hryvnia. This

is good, but for many projects where the cost of laying communications reaches 300–400 million hryvnias, this amount is not enough. This is especially true for communities where budgetary opportunities are limited.

Currently, there are very few foreign companies in industrial parks in Ukraine— they can be counted on the fingers of one hand. To change this situation, we need to strengthen incentives and make our country more attractive to foreign investment.

 

The war has made significant adjustments to the development of industrial parks. How do you assess its impact on the sector?

Paradoxically, the very beginning of the full-scale invasion became a powerful impetus for this sphere. For example, about one and a half thousand relocated enterprises immediately appeared, which began to look for industrial plots to transfer their production. It turned out that at that time in the Lviv region, where 13 industrial parks were registered, there was not a single free square meter for the placement of these enterprises. And this is not because all the areas were occupied, but because they did not physically exist — they were only plots on paper or parks that were still being built.

Relocated enterprises began to fill any available industrial zones or look for plots to create their own industrial parks. This situation was taken advantage of by some existing parks, such as the “Western Ukrainian Industrial Hub” or the industrial park in Bila Tserkva, which quickly filled their areas with relocated enterprises. This was the first effect of the war.

The second effect was that even those areas that were previously empty began to actively

develop. Landowners realized that they needed to build infrastructure, establish communications, and cooperate with potential residents. This sparked a wave of new initiatives, which forced the state to pay attention to this sector. In 2022, incentive laws were adopted, and in 2023, funds were allocated for the development of industrial parks.

As for changes in the demand structure, the greatest demand is currently observed from manufacturers of building materials, the agricultural sector, the military-industrial complex, and logistics.

 

The relocation of production facilities to the western regions has become a new challenge for business and the state. How successful was the relocation of enterprises and what are the key obstacles in this process?

Indeed, over a thousand enterprises decided to move their production to the central or western regions of Ukraine. At the beginning of the war, they faced a shortage of suitable areas for relocation. In such conditions, enterprises resorted to various strategies.

First, they looked for ready-made industrial zones with already built real estate. Second, many moved equipment to warehouses while they searched for or built new premises. Third, a new trend appeared— the creation of industrial parks for their own needs. Such initiators were called “industrial initiators”. For example, the industrial park “BF Terminal” in Transcarpathia wascreatedfor the construction of a large MDF production plant. This factory occupies two-thirds of the park’s territory, and the rest is planned to be given over to other enterprises related to furniture production or the use of MDF. This approach has become quite popular among relocated enterprises.

However, the relocation process is accompanied by a number of obstacles. First, there are practically no ready-made industrial real estate objects in Ukraine that could be occupied immediately. This means that relocated enterprises have to either build new premises or occupy old, often outdated industrial facilities.

Secondly, many industrial parks do not have proper communications. According to the Ministry of Economy, only 21 industrial parks in the country have electricity networks connected. This means that potential residents have to wait up to a year for their electricity networks to be connected. Electricity is the most painful issue, as it accounts for up to 70% of communications costs. Problems with gas, water, sewage and treatment facilities also often arise. For some enterprises, especially in the agricultural sector, the presence of a railway line is important, but this is a less common problem.

The third challenge is the lack of a full-fledged ecosystem in industrial parks. Res

entities want to receive not only premises, but also security, technical support, logistics services and other infrastructure that facilitates their work. Unfortunately, many parks are not yet ready to provide such a level of service.

Thus, although the relocation of enterprises has become an important step in preserving production capacities, it has revealed serious problems in the infrastructure and approach to the development of industrial parks. For further success, it is necessary to intensify efforts to bring communications, build modern real estate, and create a full-fledged ecosystem for residents.

 

Attracting foreign investors is important for the development of industrial parks. What are the main barriers facing international investors and how can they be eliminated?

Industrial parks in the economic policy of the state are often considered as a tool for attracting not only domestic, but also foreign investments. The success of this program can be assessed by the number of foreign companies that are part of such parks. Unfortunately, this indicator remains low in Ukraine. Before the war, foreign investors entered our industrial parks very limitedly – we can mention only 2-3 residents, and not all of them managed to launch their production.

The main barriers for foreign investors:

• War and uncertainty. Currently, foreigners are mainly “looking” at Ukraine, but their interest has not yet turned into real investments. Military risks, lack of reliable insurance and instability restrain their decisions.
• Imperfect legislation. Before the war, the main barrier was the lack of clear rules of the game that would protect the interests of foreign investors. Corruption, a complicated system of obtaining permits and non-compliance with European standards caused distrust.
• Lack of incentives. In many countries, foreign investors receive significant preferences: tax breaks, compensation for part of investments, export incentives, etc. In Ukraine, such conditions were practically non-existent before the war.

How to eliminate these barriers?

• Ensure security and stability.
• Improve the legislative framework.
• Introduce additional incentives.
• Develop infrastructure.
• Create an ecosystem.

Thus, to attract foreign investors, Ukraine needs to combine security policy, legislative reforms, financial incentives, and infrastructure development. This will turn industrial parks into real magnets for international capital.

Industrial parks can be a powerful magnet for investment, especially in the post-war recovery. What industries and types of businesses are currently most interested in cooperating with Ukrainian industrial parks?

First of all, it should be taken into account that the war and its consequences continue to affect the economy, and this is reflected in business demand. The following industries are showing the greatest interest in industrial parks:

• military-industrial complex (MIC)
• construction materials production
• agro-industrial complex
• elevators
• energy industry
• food industry
• classical warehouses and logistics centers.

Thus, Ukrainian industrial parks are currently the most attractive for the military-industrial complex, manufacturers of building materials, agricultural enterprises, logistics companies, and energy proprojects. These sectors will become key drivers of the country’s economic recovery and development.

International partners and financial organizations play an important role in the development of infrastructure projects. Are there prospects for attracting international grants or technical assistance programs to industrial parks in Ukraine?

Unfortunately, today’s opportunities for attracting international grants or technical assistance programs for the development of industrial park infrastructure are limited. The main reason is that international organizations and donors focus on supporting specific enterprises or residents who already operate or plan to operate in the parks, rather than on financing infrastructure projects, such as laying communications, building roads or railway branches.

Key points:

1. Grants for enterprises.
   Existing programs, such as European ones or, earlier, USAID, provide grants to already operating enterprises for the development of production, purchase of equipment, introduction of new technologies, etc. However, these grants do not cover the costs of industrial park infrastructure.
2. Limited technical assistance.
   Technical assistance from international organizations is usually aimed at supporting specific residents or projects, and not at developing the park infrastructure.
3. Infrastructure lending.
   Investments in industrial park infrastructure are risky for international financial institutions, as they do not have guarantees of repayment.
4. Example of Dragon Capital.
   The only known case is the Ryasne-2/M-10 Lviv Industrial Park in Lviv, managed by Dragon Capital. They received a loan from the European Bank for Reconstruction and Development (EBRD) for over $24.5 million, insured against military risks by MIGA. However, these funds were directed not only to infrastructure, but also to the construction of facilities for residents.
5. Prospects.
   Currently, the prospects for attracting international grants or technical assistance for the development of industrial park infrastructure remain vague.

Despite the fact that international grants and technical assistance programs can support individual enterprises or projects in industrial parks, they hardly cover the costs of infrastructure development.

Modern industrial parks are focused not only on production, but also on innovation, environmental friendliness, and technological sophistication. Do you see a trend in Ukraine towards the creation of “green” and high-tech industrial parks, and what initiatives are already being implemented in this direction?

Yes, the trend towards the creation of “green” and high-tech industrial parks in Ukraine is already gaining momentum. This is due both to global trends towards environmental friendliness and innovation, and to the requirements of foreign partners, who are increasingly paying attention to the ecological component of production. Here are the main initiatives and development directions in this area:

Eco-industrial parks:

• UNIDO support
  The United Nations Industrial Development Organization (UNIDO) has been implementing a program to create eco-industrial parks in Ukraine for the third year.
• Legislative changes
  In February 2024, amendments to the Law of Ukraine “On Industrial Parks” were adopted in the first reading, which introduced the concept of “eco-industrial park”.
• Energy initiatives
  Many industrial parks are already planning or implementing “green” technologies, such as solar energy, wind power plants and recycling systems. lang=”uk-UA”>water treatment.
• Export orientation
  Foreign partners are increasingly demanding compliance with environmental standards, so many Ukrainian parks include environmental friendliness in their development strategy.

Technological industrial parks

• Industrial technology parks
  This is a special format of industrial parks, where conditions are created for the development and implementation of new technologies. An example of the Volya industrial park — This park, focused on the food industry, plans to create a technological cluster. It will house business accelerators, light industry boxes for small businesses, and large production sites.
• Cooperation with science parks
  Some industrial parks cooperate with science park associations to integrate innovative developments into their ecosystem.

In the near future, we can expect the emergence of full-fledged eco-industrial and technology parks in Ukraine, which will combine production, innovation, and environmental friendliness. Ukraine is gradually moving towards the creation of “green” and high-tech industrial parks. Thanks to UNIDO support, legislative changes, and private sector initiatives, eco-innovative solutions are already being implemented. This opens up new opportunities for industrial development and investment attraction.

Your experience includes developing over 30 industrial park concepts and managing several such facilities. What do you think will be the next stage of development of this sector in Ukraine in the next 5–10 years?

In my opinion, the next stages of development of industrial parks in Ukraine will include several key areas that are already gradually taking shape. Here are the main trends that I see:

• increased government support and incentives;
• active attraction of foreign investors;
• ecologicality will become one of the main trends;
• industrial parks are increasingly focused on creating technological clusters;
• industrial clusters, where residentscomplement each other, will become more common;
• The number of network management companies specializing in the development of industrial parks is expected to increase;
• Foreign management companies, especially from Europe and Asia, will begin to enter the Ukrainian market more actively, bringing with them experience and investments;
• The creation of the All-Ukrainian Association of Industrial Parks will be an important step in uniting the efforts of market participants;
• Development companies will be increasingly interested in industrial parks, seeing them as a promising direction for investment.

In the next 5–In 10 years, industrial parks in Ukraine will developin the direction of greater specialization, innovation and environmental friendliness. State support, attraction of foreign investors and infrastructure development will allow creating powerful industrial clusters that will become the engines of economic recovery and growth of the country.

Source: https://chaspershykh.ua/zony-preferenczij-yak-industrialni-parky-ta-vijna-zminyuyut-ukrayinu/