Eurasian Integration Yearbook 2012

Customs Unionand the Single Economic SpaceIt should be noted that the positive trade and economic relationships betweenRussia and Ukraine would provide potential for a significant intensification ofinteraction in developing mechanical engineering. For example, the supply ofUkrainian aircraft engines will remain vital for Russian helicopter manufacturersat least through 2017-2018. The available alternative – the construction offactories in Russia – involves high financial and technological risks.In the area of aircraft manufacturing, the Antonov Design Centre has engineeringpotential and competencies that Russian manufacturers lack. Moreover, themassive production of aircraft designed in Ukraine is currently impossiblewithout Russian parts and assembly sites.In addition, a great deal of the defence and dual-purpose equipment that iscurrently in use in the SES countries features Ukrainian-made parts. Theservicing of this equipment will also contribute to the on-going cooperation inthe mechanical engineering sector. However, these ties can only be maintainedand advanced if new types of equipment are created. The development ofcooperation in aircraft manufacturing will boost turnover in the sector. By 2030,the share of aircraft equipment in Ukraine’s exports to the SES could reach7%.Given the deficit in the shipbuilding production capacities, as well as thecountry’s dominant positions in the post-Soviet area in the development andmanufacture of gas-turbine engines for navy, commercial, and passengervessels, there are significant prospects for cooperation in the shipbuildingsector. By 2030, the share of shipbuilding products in Ukrainian exports to theSES countries is expected to grow to 1.2%.As for machinery and equipment production, Ukraine’s main opportunities areassociated with the utilisation of its potential to develop power engineeringand with the development and manufacture of equipment for the productionand transportation of natural resources, conventional weapons, and militaryequipment. Additional opportunities for the development of mechanicalengineering can arise following the rollout of production focused on the SESmarkets and providing industrial assembly and subsequent localisation. Themost promising areas are the production of investment equipment, constructionmachinery and equipment, agricultural equipment, and rolling stock. Theutilisation of the existing mechanical engineering potential, combined with thelaunch of industrial assembly projects, can increase the share of mechanicalengineering in Ukraine’s exports to the SES countries to 20% by 2030.A comparison of estimates shows that the greatest growth in exports and GDPcompared to the baseline scenario (where Ukraine joins neither the EU FreeTrade Area nor the SES) is expected in the option envisioning Ukraine’s joiningthe SES with technological convergence but without the formation of a unifiedcurrency system.36 EDB Eurasian Integration Yearbook 2012