THE IMPACT OF INVESTMENT ON THE COMPETITIVENESS OF WOODWORKING ENTERPRISES IN UKRAINE

G31, E22 

THE IMPACT OF INVESTMENT ON THE COMPETITIVENESS OF WOODWORKING ENTERPRISES IN UKRAINE

 

https://doi.org/10.36994/2707-4110-2025-14-41-17

 

Shafranova Kateryna, Higher Education Institution «Open International University of Human Development «Ukraine»

(ORCID: https://orcid.org/0000-0002-9118-8795),

Zobov Artem, Higher Education Institution «Open International University of Human Development «Ukraine»

(ORCID: https://orcid.org/0009-0003-3430-3456)[1]

 

Abstract. Negative trends in the Ukrainian economy are increasingly deepening. The significant decline in economic dynamics is largely due to stressful changes in the socio-economic and political environment, which is primarily caused by the martial law in the country. These factors are primarily based on the predominance of raw materials in production and exports, and the use of outdated, environmentally hazardous and resource-intensive means of production, which is why the once powerful Ukrainian woodworking industry is increasingly declining. In such circumstances, the revival of the woodworking industry in Ukraine requires building a new model of economic development based on the effective mobilization and allocation of important investment resources for the organizational and technological development of the industry.

The interconnectedness of the woodworking industry with many other sectors of the economy determines its role in the economic development of the country.  In particular, in Ukraine, the woodworking industry has more than three hundred products that are supplied to the domestic and foreign markets, and is accompanied by close interaction with a number of industries that are both consumers and suppliers. However, in the face of factors limiting both internal and external development, their impact is increasing due to the economic crisis and martial law, and the search for ways to increase the competitiveness of the woodworking industry is becoming more urgent.

This article examines the impact of investments on the activities of woodworking enterprises in Ukraine. It describes the current state of the woodworking industry, the main problems faced by enterprises and the potential for development. The main obstacles to attracting investment, such as political instability, imperfect legal framework and corruption, are highlighted. Based on the analysis, conclusions are drawn and recommendations are offered to improve the efficiency of investment activities and stimulate the development of the woodworking industry in Ukraine.

Keywords: investments, woodworking industry, economic development, competitiveness, modernization.

 

ВПЛИВ ІНВЕСТИЦІЙ НА КОНКУРЕНТОСПРОМОЖНІСТЬ ДЕРЕВООБРОБНИХ ПІДПРИЄМСТВ УКРАЇНИ

Шафранова Катерина, ЗВО «Університет «Україна»

Зобов Артем, ЗВО «Університет «Україна»

Анотація. Негативні тенденції в українській економіці все більше поглиблюються. Значне зниження економічної динаміки значною мірою зумовлене стресовими змінами соціально-економічного та політичного середовища, що, насамперед, зумовлено воєнним станом у країні. Основою цих факторів є, насамперед, переважання сировини у виробництві та експорті, використання застарілих, екологічно небезпечних і ресурсомістких засобів виробництва, через що колись потужна українська деревообробна промисловість дедалі більше занепадає. За таких умов відродження деревообробної промисловості України потребує побудови нової моделі економічного розвитку, яка базується на ефективній мобілізації та розміщенні важливих інвестиційних ресурсів для організаційно-технологічного розвитку галузі. Взаємозв'язок деревообробної промисловості з багатьма іншими галузями економіки визначає її роль в економічному розвитку країни.  Зокрема, в Україні деревообробна промисловість нараховує понад триста найменувань продукції, що постачається на внутрішній і зовнішній ринки, і супроводжується тісною взаємодією з рядом галузей, які є як споживачами, так і постачальниками. Проте в умовах чинників, що обмежують як внутрішній, так і зовнішній розвиток, їх вплив посилюється через економічну кризу та воєнний стан, а пошук шляхів підвищення конкурентоспроможності деревообробної галузі стає все більш актуальним. У статті досліджено вплив інвестицій на діяльність деревообробних підприємств України. Описано сучасний стан деревообробної галузі, основні проблеми, з якими стикаються підприємства, та потенціал розвитку. Висвітлено основні перешкоди для залучення інвестицій, такі як політична нестабільність, недосконала законодавча база та корупція. На основі проведеного аналізу зроблено висновки та запропоновано рекомендації щодо підвищення ефективності інвестиційної діяльності та стимулювання розвитку деревообробної промисловості України.

Ключові слова: інвестиції, деревообробна промисловість, економічний розвиток, конкурентоспроможність, модернізація

Introduction. The woodworking industry in Ukraine is one of the leading industries with a huge potential for economic growth. Ukraine has significant timber resources that can ensure the development of the domestic market and contribute to exports. The main products of the industry are furniture, sawn timber, plywood, chipboard, fibreboard and wood products.

However, the industry faces a number of challenges that impede its sustainable development and reduce its competitiveness. One of the main problems is outdated equipment and a low level of technological modernisation. Many companies still use machines that do not meet modern requirements, which significantly reduces productivity and product quality.

The second problem is weak investment support. Domestic and foreign investors are not always willing to invest in the woodworking industry due to the risks associated with economic instability and shortcomings in the legal system of Ukraine. In addition, companies often face a shortage of qualified personnel, as well as problems related to the war and the mobilisation of key specialists, which also hinders the introduction of innovations.

Competition in the international market is another challenge. European countries, such as Poland and Romania, offer high quality products at competitive prices, which has helped them to take leading positions in the EU markets. For Ukraine, this means not only improving production processes, but also increasing marketing efforts.

Despite the above challenges, Ukraine's woodworking industry has significant potential for development. This potential can be realised by attracting investments aimed at modernising equipment, introducing innovative technologies and expanding sales markets.

The issue of attracting investment in the woodworking industry of Ukraine in the context of introducing innovations in this industry is extremely relevant today.  Practical aspects of the relationship between investment and innovation in the woodworking industry are highlighted in the works of O. Lyakhovska, N. Shevchenko, T. Kulinich, V.-O. Gychko, K. Shafranova, A. Bezus, L. Sakharnatska, R. Kochut, etc. However, the practical aspects of strengthening the investment attractiveness of woodworking enterprises remain insufficiently studied in terms of their role in the implementation of innovative activities of woodworking enterprises in Ukraine.

Purpose, subject and research methods. The purpose of the article is to determine the factors of successful implementation of innovations, outline the prospects for the development of the woodworking industry through the intensification of innovation processes, and identify the key factors that promote or hinder the innovative development of enterprises.

The article examines the impact of investment on the performance of woodworking enterprises in Ukraine, characterizes the current state of the woodworking industry, the main problems faced by enterprises, and the potential for development. The article offers recommendations for improving the efficiency of investment activities and stimulating the sustainable development of the woodworking industry in Ukraine. The purpose of the article was achieved by using the following research methods: logical generalization and scientific abstraction, structural analysis, analytical method and system analysis.

Research results. The woodworking industry is one of the most important sectors of Ukraine's economy, making a significant contribution to the development of the national economy and job creation. However, in order to ensure the sustainable development of the industry, it is necessary to introduce innovations that increase production efficiency, reduce costs and improve product quality. When considering this issue, it is advisable to understand that innovations are characterized by a high degree of uncertainty at all stages of the life cycle, including the initial stages of idea development, project selection, and innovation implementation. In addition, innovations that have successfully passed the stages of testing and implementation into production may not be accepted by the market and production may be interrupted. In general, it can be said that financing innovation at industrial enterprises, including woodworking enterprises, is a high-risk process characterized by a number of quantitative and qualitative parameters (Fedyshyn, Harmatii, 2020).

The woodworking industry plays an important role in the economy and our society as a whole, providing a variety of products and materials used in construction, furniture, energy and many other industries. The importance of this sector lies not only in its enormous economic potential, but also in its impact on environmental protection and sustainable development. Over the past decades, there has been a growing awareness of the need for environmentally responsible practices in the wood industry. The use of sustainable forest management, renewable energy sources and efficient technologies has become a necessity to preserve natural resources and reduce emissions of harmful substances into the atmosphere.

The domestic woodworking industry is a promising sector of the national export-oriented economy. Ukraine ranks 9th in Europe in terms of forest cover (forest area of 10.4 million hectares) and 6th in terms of timber reserves (15.9% of the territory is forested).  The reserves of the National Agency of Forest Resources of Ukraine amount to 240 m³/ha. The Ukrainian woodworking industry market meets the conditions of safe competition, with large enterprises accounting for 0.1%, medium-sized enterprises for 5.6%, and small enterprises for 94.3%. Ukraine ranks 27^th in global exports of wood products (Sakharnatska, Kochut, 2023).

We cannot ignore the specific negative consequences that the woodworking industry in all regions of the country is experiencing as a result of the full-scale war. The material losses incurred are exacerbated by psychological stress, critical working conditions, disruptions in the export supply system, and a corresponding decline in the profitability of enterprises. At the same time, the management of the woodworking industry is closely related to the issue of environmental standards and environmental protection, which has been a particularly serious problem for Ukraine and the world in general in recent decades (Sakharnatska, Kochut, 2023).

Ukraine's woodworking industry includes several sub-sectors, including logging, sawmilling, furniture and wood products. The industry is characterized by a high dependence on natural resources, a significant share of exports, and a large number of small and medium-sized enterprises. Today, the main problems of the industry include insufficient investment; high depreciation of fixed assets; low efficiency of production processes; lack of modern technologies and equipment; high level of shadow economy in the industry; and lack of sufficient personnel in the context of a full-scale war. At the same time, despite the existing problems, Ukraine's woodworking industry has significant potential for development. This is due to the availability of large wood reserves, the possibility of entering new markets, and the growing demand for environmentally friendly products.

Investments are one of the key factors in the development and competitiveness of the woodworking industry. They open up new opportunities for companies, allowing them to modernise production, introduce the latest technologies and improve management processes.

In recent years, investment in the woodworking industry in Ukraine has remained low. The main sources of financing are the companies' own funds, bank loans and foreign investments. However, the share of foreign investment remains insignificant due to the unstable political and economic situation in the country. The bulk of investments are directed to modernization of production facilities, purchase of modern equipment and technologies, infrastructure development and implementation of energy saving measures. Investments in research and development remain insufficient, which limits opportunities for innovation.

The main investors in the woodworking industry in Ukraine are large domestic companies, international financial institutions, private investors, and state funds to support innovation. However, due to the high risks and low attractiveness of the industry, many potential investors avoid investing in the woodworking industry.

One of the main obstacles to attracting investment is the political and economic instability in Ukraine, and in recent years, the risks associated with a full-scale war. This creates high risks for investors, which limits the inflow of capital into the woodworking industry. The imperfection of the legal framework governing investment and innovation development is also a serious obstacle. The absence of clear and stable rules of the game limits opportunities for long-term planning and innovation. As well as constant changes in the sale of timber products by state forestry enterprises and exchanges.

In addition, corruption remains one of the main problems that hinders investment. High levels of corruption complicate business operations, increase costs, and make the industry less attractive to investors. Insufficient development of infrastructure, including transportation and energy, creates additional challenges for woodworking companies. This leads to higher logistics and energy costs, which reduces the competitiveness of products.

It should be understood that attracting investment in the woodworking industry will contribute to a number of positive changes, the main ones being:

1. Modernization of production facilities. Businesses can upgrade outdated equipment and introduce automated lines that increase productivity and reduce production costs. For example, automation of wood cutting and sorting processes can reduce time and improve processing accuracy.

2. Developing innovative products. Investments contribute to the development of new products, such as wooden structures for sustainable construction, furniture with special properties (moisture-resistant, scratch-resistant, etc.), and other products that meet modern market needs.

3. Increase the export potential. Investing in product certification in accordance with international standards, such as FSC (Forest Stewardship Council), makes products more competitive in the EU, US and other markets.

Special attention should be paid to environmental innovations. In today's environment of growing demand for environmentally friendly products, investors are keen to invest in production that minimises environmental impact. This may include the introduction of wood recycling technologies, the use of production waste to produce biofuel, or the production of zero-waste furniture. Investments in energy-saving and environmentally friendly technologies help to reduce the negative impact of the woodworking industry on the environment. This includes reducing emissions of harmful substances, reducing production waste and preserving natural resources. In particular, one of the examples of successful implementation of innovations in the woodworking industry today is projects to create new types of products using modern technologies. For example, the production of environmentally friendly furniture using non-toxic materials and energy-saving technologies.

The Ukrainian market already has examples of successful investments in the woodworking industry. For example, several large foreign-invested companies operating in the western regions of Ukraine have shown how modernisation of equipment and the introduction of modern technologies can affect productivity.

One such company installed automated production lines for furniture manufacturing, which allowed it to increase production by 30%, reduce energy costs and reduce waste. It also enabled the company to enter new export markets and secure a stable income even during the economic crisis.

Another example is an international technical assistance programme that provides grants to small and medium-sized enterprises for equipment upgrades. The companies that took advantage of this opportunity were able to significantly improve the quality of their products and adapt them to the needs of the international market.

Despite the challenges faced by the Ukrainian woodworking industry, it has significant opportunities to attract investment, the most important of which are

- geographical location: proximity to European markets creates conditions for fast transportation of products;

- availability of resources: large wood reserves provide a stable supply of raw materials for production;

- potential for development: the growing demand for eco-friendly products opens up new opportunities for companies that are ready to adapt to current trends.

Based on the results of the analysis, we can conclude that in order to improve the situation in the industry, it is advisable to implement the following organizational and economic measures:

1. Create favourable conditions for investors. Simplifying bureaucratic procedures, introducing tax incentives and reducing regulatory pressure could increase investor interest.

2. Development of public-private partnerships. State participation in financing the modernisation of enterprises will help attract additional resources.

3. Improving product quality. Investing in product certification and implementing a quality control system will help companies meet international standards.

4. Support for small businesses. Providing soft loans and grants will help small producers adapt to new market conditions.

5. Information support. Educational events and seminars for businesses will help raise awareness of investment opportunities.

Investments are an important tool for modernising the woodworking industry in Ukraine. They not only contribute to the growth of productivity and product quality, but also increase the competitiveness of enterprises in the international market. Creating favourable conditions for attracting investments, intensifying cooperation with international partners and supporting innovations can be the key to the successful development of the industry.

Conclusions. Investments play a key role in the development of innovative activities of woodworking companies in Ukraine. They provide the necessary resources to introduce new technologies, modernize production, and increase product competitiveness. However, in order to attract investment, it is necessary to create favorable conditions, including a stable political and economic situation, improved legal framework, reduced corruption and infrastructure development. Government support and international cooperation are also important factors for stimulating investment activity in the Ukrainian woodworking industry. We would also like to note that a promising area of post-war reform of the woodworking industry is to stimulate the development of resource-saving production and the introduction of sustainable development principles in the practice of the industry.

References

1. Bezus A.M., Shafranova K.V. Characteristic features of certain types of investment companies wood industry in Ukraine. URL: http://www.investplan.com.ua/pdf/6_2017/9.pdf.
2. Kulinich T.V., Hychka V.-O.V. Innovations in the management of enterprises of the forest and woodworking industry of Ukraine according to the vector of stable development. URL: https://heraldes.khmnu.edu.ua/index.php/heraldes/article/view/1372/1399.
3. Liakhovska O.V., Shevchenko O.V. Attracting foreign investments in the woodworking industry of Ukraine: modern trends. URL:  http://www.market-infr.od.ua/journals/2019/35_2019_ukr/13.pdf.
4. Sakharnatska L.I., Kochut R.A. Peculiarities of the development of the woodworking industry under martial law. URL: https://journals.uran.ua/bnusing/issue/view/17083.
5. The State of the Woodworking Industry of Ukraine: Analytical report. -  URL: https://www.ukrforest.com/.
6. Fedyshyn I., Harmatii N. Investment and innovation activities of industrial enterprises of Ukraine. URL: https://elartu.tntu.edu.ua/bitstream/lib/39432/1/805.pdf.

 

 

Надійшла до редакції: 25.03.2025 р.