THE COMPETITIVENESS OF UKRAINIAN SERVICE EXPORTS IN THE CONTEXT OF UKRAINE’S INTEGRATION WITH THE EUROPEAN UNION AND THE WAR IN UKRAINE

Abstract

The purpose of the paper is to examine the involvement of Ukrainian services companies in global value chains (GVCs) and assess the competitiveness and specialization of Ukrainian services exports. It is necessary to examine this issue after the entry into force of the DCFTA as part of the EU–Ukraine Association Agreement. Additionally, on the eve of the commencement of accession negotiations between Ukraine and the EU and in light of the impact of the war on Ukraine’s economy, it is imperative to investigate this issue. The following indicators are used: the ratio of exports to output and the ratio of imported intermediate inputs to output (participation in GVCs), the normalised revealed comparative advantage index, and the trade balance index (export competitiveness). A special matrix (Widodo, 2009) is developed to identify the four scenarios for Ukraine, indicating different degrees of competitiveness of its exports and the leading exported services. The study is based on data from the WTO and the State Statistics Service of Ukraine, and it covers 2005–2022. The empirical results demonstrate that services have not increased their shares in Ukraine’s exports, and the DCFTA had no impact on Ukrainian services companies’ participation in GVCs or their export competitiveness. Computer services are outliers. The paper also demonstrates that Ukraine has a very strong position in the exports of computer services compared to both EU and non-EU countries. The study contributes to the literature by indicating the leading exported services (mainly computer) as well as services with the potential to gain comparative advantages in Ukrainian exports (other business) based on the product mapping method. The paper also identifies factors that positively determine Ukraine’s competitiveness in this field (i.e., external demand, openness, government policy, the UAH exchange rate, employment, and earnings) and those that should be improved (i.e., human capital, in particular, a knowledge of English, and communication infrastructure). Finally, the study discusses the reasons why the services sector will likely play a key role in Ukraine’s post-war reconstruction.