Mechanisms and Tools of Stimulating
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2017/18 Knowledge Sharing Program with Ukraine Sharing Program 2017/18 Knowledge 2017/18 Knowledge Sharing Program with Ukraine: Mechanisms and Tools of Stimulating National and Foreign Direct Investments 2017/18 Knowledge Sharing Program with Ukraine 2017/18 Knowledge Sharing Program with Ukraine Project Title Mechanisms and Tools of Stimulating National and Foreign Direct Investments Prepared by Korea Development Institute (KDI) Supported by Ministry of Economy and Finance (MOEF), Republic of Korea Prepared for The Government of Ukraine In Cooperation with Ministry of Economic Development and Trade (MEDT), Ukraine Program Directors Youngsun Koh, Executive Director, Center for International Development (CID), KDI Kwangeon Sul, Visiting Professor, KDI School of Public Policy and Management, Former Executive Director, CID, KDI Project Manager Taihee Lee, Specialist, CID, KDI Project Officers Yoojin Joung, Research Associate, Division of Policy Consultation, CID, KDI Yoonjung Kim, Senior Research Associate, Division of Policy Consultation, CID, KDI Senior Advisor Young Kon Chin, Former Commissioner, the Board of Audit and Inspection, Republic of Korea Principal Investigator Kangsoo Kim, Senior Fellow, KDI Authors Chapter 1. Kangsoo Kim, Senior Fellow, KDI Tetiana Tavlui, Consultant, Center for Transport Strategies Chapter 2. Guho Eom, Professor, Hanyang University Liudmyla Musina, Member of Public Council, MEDT English Editor Korea Institute of Culture and Arts Translation Government Publications Registration Number 11-1051000-000881-01 ISBN 979-11-5932-348-5 ISBN 979-11-5932-302-7(set) Copyright ⓒ 2018 by Ministry of Economy and Finance, Republic of Korea Government Publications Registration Number 11-1051000-000881-01 2017/18 Knowledge Sharing Program with Ukraine: Mechanisms and Tools of Stimulating National and Foreign Direct Investments Preface Knowledge is a vital ingredient that determines a nation’s economic growth and social development. Its true value was brought to light by the advent of the knowledge economy and a key question policymakers now face, especially in developing countries, is how an environment can be established that encourages and facilitates the creation and dissemination of knowledge across the nation. This need has led many countries to engage themselves in active policy dialogue to share their development experiences and benefit from mutual learning. Korea’s development has also depended heavily on knowledge. Its remarkable transition from a predominantly agrarian economy to an industrialized country was made possible by its well- rounded and extensive understanding of technology, management, public policy, and other diverse issues acquired from domestic and foreign sources and through trial and error. Building on these rich experiences, the Korean Ministry of Economy and Finance (MOEF) launched the Knowledge Sharing Program (KSP) in 2004 to assist partner countries to improve their policymaking. KSP, as implemented by Korea Development Institute (KDI), focuses on providing solutions customized to each country’s economic, social and administrative settings, building capacity for effective policymaking and strengthening global networks for development cooperation. In 2017/18, KSP policy consultations were organized with 31 partner countries, with Mekong River Commission joining the partnership for the first time. The 2017/18 KSP with Ukraine was undertaken by the MOEF and the Ministry of Economic Development and Trade (MEDT) with the aim of “Mechanisms and Tools of Stimulating National and Foreign Direct Investments.” To that end, the KDI research team and the Ukraine counterpart made a range of collaborative efforts by exchanging development experiences, conducting joint studies and designing a policy action plan in line with the country’s development targets. With that, it is with great optimism for the future of Ukraine that the results of the 2017/18 KSP are presented. I firmly believe that KSP will serve as a stepping stone to further elevate the mutual learning and economic cooperation between the two countries and hope it will contribute to Ukraine’s sustainable development in the future. I wish to convey my sincere gratitude to Senior Advisor Dr. Young Kon Chin, Principal Investigator Prof. Kangsoo Kim as well as project consultants Prof. Guho Eom for their extensive contributions to the successful completion of the 2017/18 KSP with Ukraine. I am also grateful to Executive Director Dr. Youngsun Koh, Project Manager Dr. Taihee Lee, Project Officer Ms. Yoojin Joung and all members of the Center for International Development for their hard work and dedication. Lastly, I extend my warmest thanks to the MEDT and related Ukrainian agencies for their active cooperation and great support. Jeong Pyo Choi President Korea Development Institute (KDI) Contents 2017/18 KSP with Ukraine ..................................................................................................... 012 Executive Summary ............................................................................................................. 015 Chapter 1 Strengthening of Public Investment Management System (PIMs) in Ukraine Summary ...........................................................................................................................024 1. Introduction .............................................................................................................026 2. Structure and Trends of Ukraine State Budget ...............................................................028 2.1. Fiscal and Budgetary Trends: State and Local Funds ..................................................028 2.2. State Budget Trends and Composition ....................................................................030 3. Public Investment Management Reforms in Ukraine .......................................................033 3.1. Evolution of Reforms in Public Investment Project Management ................................033 3.2. Reforms and Legislative Changes in the Management of Public-Private Partnership Projects .............................................................................................................036 4. Public Investment Portfolio in Ukraine ..........................................................................039 4.1. Public Investment Projects Portfolio .......................................................................039 4.2. Portfolio of Public-Private Partnership Projects .........................................................042 5. Public Investment Management Process ........................................................................043 5.1. Process of Public Investment Projects Management .................................................. 043 5.2. Public-Private Partnership Project Management Process ............................................049 6. Assessments and Policy Recommendations .................................................................... 056 6.1. Assessments and Policy Recommendations for PIPs Management ................................056 6.2. Assessments and Policy Recommendations for PPP Management ................................068 7. Summary and Conclusion ...........................................................................................072 References .........................................................................................................................077 Appendix ..........................................................................................................................079 Abbreviations .....................................................................................................................082 Chapter 2 FDI Promotion through Development of Industrial Parks Summary ...........................................................................................................................084 1. Introduction ............................................................................................................ 087 1.1. Purpose of Research ............................................................................................ 087 1.2. Scope and Method ............................................................................................. 093 2. Concept of an Industrial Park and Recent Trends ............................................................ 094 2.1. Concept of an Industrial Park ................................................................................ 094 2.2. Recent Trend of Industrial Parks ............................................................................ 095 3. Current Situation and Performance of IPs in Ukraine ....................................................... 097 3.1. Summary of the Development of Industrial Parks in Ukraine ...................................... 097 3.2. Evolution of Legal Framework and Government Policy .............................................. 112 3.3. Barriers and Tasks for Development of Industrial Parks .............................................. 125 4. Analysis and Implications of Korean Experiences on IP ..................................................... 129 4.1. Development History and Current Situation of IP in Korea ......................................... 129 4.2. FDI Attraction Policy and Performance in Korean IP and SEZ ...................................... 134 4.3. The Role of KICOX .............................................................................................. 142 5. Policy Actions and