Ukrainian Cluster Alliance: course on internationalization

Ukrainian cluster alliance (UCA), created at the end of March, takes today the clear course on the internationalization of Ukrainian industrial SMEs. Here is my brief overview of these processes and the dynamic, as the head of UCA.

Why clusters and why internationalization

Clusters have the recognized role of economic drivers and they are a main instrument of industrial policy in developed countries. During COVID-19 leading clusters started to play yet another role. They were powerful players in fighting with crisis, and especially improving the resilience of supply / value chains.  In Ukraine, cluster movement started late, just in 2019-20 clusters started to be organized and coordinated among them, but these processes have not been finished before the war.

The initiative of consolidation of Ukrainian clusters is dated by early March, and known as Clusters4Ukraine. This initiative was our response to 3 main challenges of industrial Small and Medium Enterprise (SMEs) in Ukraine 

  1. Evacuation & Relocation of SMEs
  2. Support of clusters members, then support of critical industries (food, drug, textile, critical infrastructure)
  3. Coordination in humanitarian and logistic management.

The idea was clear. If we can help our SMEs, clusters members, so we can help our critical industries, and so far, to approach our victory.

At the end of March, the initiative Clusters4Ukraine united 16 clusters and it has been transformed into Ukrainian cluster alliance (UCA). UCA proposed much more structured and formalized approaches and governance. It also started the regular actions on internationalization. In one month later, we had 32 clusters.

So, why internationalization?

The economic situation looks dramatic in the country. Industries have decreased productive capacities of 30-50%. About 50% of SMEs in Ukraine stopped work during 1st month and this situation remains tough till now. Just 12%  of industrial SMEs have been relocated from regions in combat zones, others just stopped. In agri-culture, 30% of crops were not planted. The export is completely blocked by Black sea and by airlines. We have huge destruction of infrastructure and cities. And, general losses are estimated between $600 -800 billion US. For businesses all that means the dramatic shrinking of most of the domestic markets which leads to massive unemployment, poverty with all relative consequences.

That is why in UCA, we consider internationalization as the only reliable strategy for the survival of Ukrainian SMEs. We distinguish pure product export from internationalization, as the last one covers more options of international collaboration including common development projects (e.g. in innovation), as well as more flexible options of integration into global and regional value chains.

Go international. Actions and results of last 3 months

We mobilized and consolidated our resources at the level of cluster management, but of course we lacked the capacity, especially the financial capacity. European cluster alliance was 1st institution who reacted to our situation. They proposed the ECCP platform  (European Cluster Collaboration Platform) as the marketplace and mid March we launched this tools. It allows to publish from one side the needs of Ukrainian clusters, and from another side – offers from European clusters. Today this tool serves as the database of all needs & offers.

Another launched tool is regular C2C (Clusters2Clusters) meeting online. It completes ECCP marketplace  and it became the true catalyst in the development relationship between Ukrainian and EU clusters. When people talk to people, even online, it always works better.

So, till now we had 5 such meeting at the level of industries communities, – in textile, furniture, agri-food, engineering and industrial automation, machinery. Beside of that we had almost 50 B2B meeting on the B2B platform of European Enterprise Network (EEN).

All together, these actions start to bring first results.

1) We have agreement with the several industrial associations in EU and US about the integration of Ukrainian clusters and associations into them. In particular

a. UCA is joined to ECA (European cluster alliance)

b. Association of Industrial Automation of Ukraine is joined to the american ‘Control System Integrator Association’ (CSIA)

c. Ukrainian association of textile industry ‘Ukrlegprom’ is joined to EuraTex

All these associations open to Ukrainian counterparts their resources and possibilities for free. It already serves as the huge motivation and catalyst for Ukrainian SMEs to go international.

2) The same time, the regular meeting started with Polish and Romanian clusters associations. We are in close relationship with both associations and plan regular b-lateral C2C / B2B meeting. For instance, 25th of May we have extensive B2B meeting with Polish automotive cluster. Such a targeted and well coordinated way, these meeting allow  Ukrainian SMEs to find their potential supplier/ customer or a partner much faster.

3) American CSIA also launched the initiative of the financial aid to our association APPAU called 1H4U. We started to get first money this month (Vertech from US). Thanks a lot to italian Autoware who was the initiator of this action!

4) European CECIMO and Orgalim also support UCA, we have started exchanges and we clearly see the openness of these association, leading players in industrial hitech sectors.

5) Last but not least, we go to the agreement with French CIMES, the regional cluster of Industry 4.0 about cooperation in this field. It is also the result of previous B2B exchanges on EU platforms. Several similar agreements are to come, in particular with Chezh Republic and Lithuania.

First lessons. Next steps

So, up to me, all such results are not bad for the young cluster movement in the country where the war continues. Our team in UCA (15+ people) worked these 3 months  as volunteers, we had till now no donors and Ukrainian State support. Just international support mentioned above.

And we can conclude now about first lessons and perspectives. My 3 lessons of this period are as next ones

1) Leading role of the key associations and clusters in these results is clear. We would never have such fast results without the help of ECA in EU and CSIA in US.

2) Support of European commission is as well crucial, as all actions in the frame ‘Support Ukraine’ with ECA are done with the department DG GROW.

3) Proactivity and solidarity is the next success factor. As well from Ukrainian side (especially APPAU and Ukrainian Automotive and Mobility clusters) also from EU and US sides, there are number of initiatives which come from concrete people, leaders of communities.

Regarding perspectives, we plan to go deeper into industrial dialogues with all mentioned partners.  It’s clear that Ukrainian SMEs, associations and clusters are not so much mature and developed as Western ones. But Ukrainian potential is big, especially in human resources and talents. So, the task of integration of our industries and industrial SMEs, our innovative ecosystems into European value chains looks quite feasible. And UCA can be a strong partner in this strategic approach of our State.

But may be, at the level of human values what is even more important for us, this is about human and professional solidarity in every meeting, every communication, every agreement. Thank you all, guys! The Victory will be our, I mean for all us, people and communities, which care about peaceful, sustainable and democratic world.

Alexandre Yurchak
CEO in Association of Industrial Automation of Ukraine / coordinator Industry4Ukraine platform