Does Ukraine need an industrial policy?

Despite ongoing negative processes in the industrial sector, Ukraine still lacks a clear vision of industrial policy. The current state aid programs are ineffective in terms of stimulating the industry and increasing its competitiveness. The purpose of this study is to analyze the existing approaches to industrial policy and to identify the best option for Ukraine.

The analysis of the current state of industry and state aid shows a significant decline in the share of industry in GDP and the lack of a clear strategy for industrial development. Summarizing the advantages and disadvantages of the horizontal approach to industrial policy and the current approach (mainly vertical), the government is recommended to gradually reduce the expenditure of public funds to support individual industries and enterprises, and instead focus on creating general favorable conditions to stimulate the efficient operation of markets.

At the same time, it is proposed to continue reforms in the field of state aid, in particular, with regard to monitoring and control procedures at all stages of the implementation of aid programs. Without a strict control system and the introduction of the principle of transparency, any state aid in the context of high tolerance for corruption cannot be effective.