The focus is on how Ukraine can maintain and strengthen its competitiveness in the face of war, technological change and a volatile world. Historically, Ukraine has not been among the leaders in competitiveness — primarily due to the weakness of its market institutions. At the same time, the new circumstances may partially alter this picture.
Traditional notions of competitive advantage, particularly Michael Porter’s model, now require rethinking. Whereas countries previously progressed from relying on cheap labour and natural resources to an investment-driven, and subsequently an innovation-driven, economy, technological change is now altering the very logic of this transition. Automation, the development of AI and the declining role of manual labour are eroding the advantages of cheap labour and making institutions, flexible regulation, the tax environment and the ability to rapidly develop innovative products more important.
For Ukraine, this presents both risks and opportunities. On the one hand, due to the war, the country has lost some of its traditional competitive advantages, and the state’s resources are largely directed towards defence. On the other hand, Ukraine is already demonstrating its ability to rapidly develop high-tech solutions, particularly in the military-tech sector. It is precisely this combination of high levels of innovation, a liberal regulatory environment, favourable conditions for entrepreneurship and tax incentives that could form the new basis for competitiveness.
The future course of events will depend on the security situation. In a scenario of continued hostilities or an unstable peace without effective external guarantees, Ukraine risks remaining in a ‘steel porcupine’ state — a country forced to spend significant resources on defence. In the event of a lasting peace, reliable international guarantees and a reduction in military expenditure to around 5 per cent of GDP, opportunities for economic development and investment will increase significantly.
Key recommendations include reforming higher education, creating favourable conditions for intellectual work and entrepreneurship, fostering innovation by reducing transaction costs, completing judicial and law enforcement reforms, protecting property and intellectual property rights, improving quality of life, simplifying the process of attracting highly skilled foreign nationals, and creating the right conditions for private investment.
With such policies in place, Ukraine stands a chance not only of retaining its existing competitive advantages but also of developing new ones — particularly in areas where resilience, adaptability, technological capability and entrepreneurial freedom are crucial.