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Ukraine is reshaping the game: how the war is rebooting the economy and what manufacturers are complaining about – an interview with Dmitry Kisilevsky.

A lawmaker outlined the conditions under which entrepreneurs in Ukraine would refuse to relocate abroad.
Ukraine is reshaping the game: how the war is rebooting the economy and what manufacturers are complaining about – an interview with Dmitry Kisilevsky.

The Great War has resulted in significant losses for the Ukrainian industry, but at the same time, it has prompted a reevaluation of our approach to domestic production and manufacturers. What prospects await Ukraine in the post-war period, and what issues are domestic producers already facing? These and other questions were addressed in an interview with the chief editor of "Telegraph" by Ukrainian people's deputy and deputy head of the committee on economic development, Dmitry Kisilevsky.

On the key components of the economy

Let’s start with some fairly simple but broad questions about the economy. What three words would you use to describe the state of our economy at the beginning of 2025?

– The first word is resilience. It is hard to argue against the fact that Ukrainian entrepreneurs, particularly our manufacturers, have shown remarkable resilience. In those frontline cities where industry exists, it remains almost the only center of normalcy and life. While industrial workers labor there, life continues in those cities. Industrial workers from such cities are often the last to leave.

Despite shelling, power outages, staff shortages, and other factors, our economy is stable and has demonstrated recovery growth for the second consecutive year.

Not many countries in the world can show a 5% GDP growth during a full-scale war, as was seen two years ago, and around 3.6%, as expected for the past year.

The second important word is processing. Unfortunately, our economic structure is resource-based.

We purchase a lot of finished imported goods, high-tech products, while primarily exporting raw materials that we either extract or grow. This is not quite the type of economy that can withstand war and guarantee security. We have also realized that both our enemies and our friends are equally determined to block our export logistics for raw materials. For everything we extract or grow, we need to maximize the added value created here in our country.

Дмитрий Кисилевский9

Border blockages have clearly demonstrated that this is absolutely vital. Not all farmers can export their harvest, and ores could not be exported until the sea was opened. Processing provides higher value in smaller volumes, making it easier to export and more beneficial for the state and the economy.

And correspondingly, a higher margin.

– A higher margin, more jobs, and greater labor productivity—all relate to processing. This is certainly not just about turning grain into flour; it encompasses all sectors within the processing industry—from agro-processing to machine engineering, electronics, and beyond.

The third important word is defense industry. The defense sector is currently a crucial driver in the economy. This could have been the starting point, as it pertains to our security. When a missile is heading our way, we cannot respond with Adam Smith’s textbook or a post from some local Ukrainian libertarian about the free market. Government policy should focus on producing the types of goods we need. Therefore, the defense industry is a very important component of our economy, and I believe it will remain so for the coming decades.

If we talk about the future development of the country: we have fans of IT, miltech, and agriculture. How do you envision Ukraine in 10—20 years or more? What path do you see as a priority in terms of prospects and our real capabilities today?

– I believe in a country that produces many complex, high-tech goods and thrives because of that. In other words, it’s about export, not import; processing, not raw materials; R&D and high technologies. Returning to exports, we should not be sending our people or raw materials out into the world; instead, we should be delivering the results of our knowledge-intensive, high-tech labor.

Currently, we have an economic structure where the share of processing industry before the invasion was just over 10%. The OECD, a club of developed countries, considers a 20% share normal. Thus, we had half the share of processing high-tech sectors in our economic structure compared to our closest neighbors—Turkey, Poland, or Romania. This is very problematic. The share of processing industry correlates with another indicator—GDP per capita in purchasing power parity. To simplify, this is a certain analogy for poverty.

The lower the share of processing industry in GDP, the poorer the country. Therefore, our economic task is to increase the share of high-tech processing sectors in GDP, which will lead to overcoming poverty. This movement has specific components that require creating conditions in the country that make it profitable to produce goods here, making it attractive to invest in new production facilities in Ukraine, and ensuring it is advantageous to export goods with high added value.

At the same time, the Russians are actively destroying our industry. What they have captured over the past year is already in ruins, but globally our industry is suffering greatly due to this war. Many believe that the war might provide a chance to rethink the industry. To reboot the post-Soviet enterprises as they were and possibly create new ones. How do you see this situation? Are there any trends in this direction?

– The war has forced many people to wake up from the neoliberal haze. I apologize for using such a harsh term, but it is true. Unfortunately, there are still people who believe that the state should withdraw and that no industrial policy is needed—that everything will somehow work out on its own.

While in neighboring countries, it’s not like that at all, is it?

– Absolutely. All countries that have become successful and comparable in size to Ukraine have achieved success by applying a wide range of industrial policy tools. And they continue to do so. Returning to your question, the war has allowed many to see the importance of having industry in the country.

The defense industry is the first illustration of this. If you produce missiles, you have something to respond with. If you produce drones that can fly 20 km, then you can strike 20 km away. If they can fly 1000 km, you can hit at 1000. If you do not produce them, you wait for someone to provide them. And the strike needs to happen today.

Similarly, with non-military industry. If a country has enough energy equipment manufacturers, power restoration happens faster.

If there are no manufacturers of transformers, electrical cabinets, cables, then the power outage lasts longer.

And this, in turn, affects the ability to earn money and the work of entrepreneurs?

– These are jobs in the country, and taxes. There are still situations where structures close to the Ministry of Defense buy Chinese trailers, and all taxes from that trailer go to the budget of the People's Republic of China. That’s great, but I don’t recall Chinese soldiers fighting for us. If it is a Ukrainian manufacturer, he will pay taxes here, and all taxes paid in Ukraine will go to the Armed Forces. This is important, we must talk about it, and it needs to be emphasized.

The importance of industry is becoming clearer to more people. Consequently, the war gives us the opportunity to rethink priorities in economic policy. If previously there was a widespread opinion on the necessity of a free market and equal rights, now most people are starting to understand that this concept does not lead to the emergence of missile or transformer manufacturers in the quantities we need.

Therefore, the state must purposefully define priority sectors and provide certain forms of stimulation and support for these industries or production. This includes all processing, the defense industry, and certain goods that we need either for defense or for everyday life. And overall, to be prepared for defense, to ensure we have critical goods for civilian use. And to have sufficient economic power to finance defense for as long as necessary. We understand that external assistance is not eternal. And, by the way, regarding our first question about important characteristics of the economy, I would like to highlight the word self-sufficiency. I believe this is something we should be thinking about.

On economic patriotism

Regarding internal industrial policy, the term localization is often mentioned. It is about localizing production and the state purchasing goods from Ukrainian manufacturers. Skeptics will say that the quality of some Ukrainian products may not match that of Chinese or European counterparts. How do we find this balance, and most importantly, should we even look for it? Should we commit to a specific tunnel and work within it, increasing our own production capacities and investing in our manufacturers?

– I am one of the authors of the localization law. While it does not address a very broad range of issues, this law has become a worldview shift in understanding how public procurement should operate. During the reform of public procurement, when the Prozorro system was created to combat corruption, we opened our public procurements to the world, stripped the state of mechanisms to prioritize domestic producers, and made low prices the main criterion for procurement. This has led to a very high level of import penetration