The Luhansk region is located in south east Ukraine in the watershed of the mid current of the Seversky Donets river on its route from the Donbass to Russia




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НазваниеThe Luhansk region is located in south east Ukraine in the watershed of the mid current of the Seversky Donets river on its route from the Donbass to Russia
Дата конвертации14.02.2013
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The Luhansk region is located in south east Ukraine in the watershed of the mid current of the Seversky Donets river on its route from the Donbass to Russia.

The region was founded on June 3, 1938, and covers an area of 26,700 sq.km (4,4% of state territory). The population is 2.9 million (5.7% of the total Ukrainian population) - the fourth highest of all the Ukrainian regions. The average density is 105 people per 1 sq.km, with 87% of the population living in towns and 13% - in villages. Ethnically, the region includes 54.8% Ukrainians and 41.7% Russians.

Administratively, it is divided into 18 districts, with 37 towns and 109 major settlements. Altogether, there are 980 dwelling locations in the region. The Luhansk region’s largest towns are Severodonetsk, Krasny Luch, Stakhanov, Alchevsk and Rubezhnoye.

The regional center is the city of Luhansk, located 800 km from Kiev and 300 km from the nearest sea port, Mariupol, on the Sea of Azov. Luhansk is one of the largest cities in Ukraine with a population of about 600,000. In 1995, it celebrated its 200th anniversary. Luhansk is a major industrial center of Eastern Ukraine and an important transport link with railroads, highways and airways crossing the city from West to North, Central and Southern Russian provinces. The city of Luhansk has very close sister-city links and economic relations with Lublin (Poland), Cardiff (Great Britain), Pernik (Bulgaria) and others.

From South to North the region stretches for more than 250 km and from West to East for 190 km. The region’s North, East and South boundaries coincide with the Ukrainian borders. There it borders the Belgorod, Voronezh and Rostov regions of Russia. In the South-West it borders the Donetsk region and in the North-West it borders the Kharkiv region of Ukraine.

The regional landscape is typically lowlands running upwards from the Seversky Donets valley to the north and Donetsky mountain ridge in the south.

The soil is fertile, mostly chernozem. Application of advanced climate-oriented agriculture technologies would lead to rich harvests of locally grown plants. The region has few forests, accounting for only 7% of the region’s area.

The region has billions of tons of coal reserves. Two-thirds are anthracites and one-third are power-station grades. Plentiful supplies of limestone, sandstone, chalk, marl and various types of clay widely used in construction are also available. Huge reserves of waste tips have accumulated alongside collieries which could also be used in construction. There are also gas deposits. Luhansk and Starobelsk have mineral springs, which are said to have medical properties.

The climate is temperately continental. The average temperature in July (the warmest month) is 21 C and in January (the coldest month) is -7C. Winter is moderately cold with sharp Eastern and South-Eastern winds and frosts. Summer is sultry, its second half is noticeably dry. Autumn is sunny, warm and dry.

Goods produced in the Luhansk region can quickly be delivered to Kiev, Moscow, Rostov, Belgorod, Voronezh and the Azov and Black Sea ports by road, air, and rail.

With relatively low investments Luhansk city airport could be quickly transformed into an international airport.


INDUSTRY


The Luhansk region is a major industrial center. In term of production output it is the fifth most productive region in Ukraine.

By far the most important group is composed of coal extraction, metallurgy, machine-building and metal-processing industries, but recently their share has been decreased as the chemical, petrochemical and glass production branches of industry have significantly increased their output. Wood-processing and construction materials production are also currently being developed.

Former state industrial enterprises are being transformed into joint-stock companies of various types, including holding companies and other corporate structures.

Production shares, by sector:

- Coal mining 28.6%

- Metallurgy 23.5%

- Chemistry and petrochemistry 12.6%

- Machine-building and metal-processing 9.3%

- Food sector 6.9%

- Energy 8.3%

The coal mining industry accounts for 36% of the industrial fixed assets of the region. Most of them need re-tooling.

Machine-building and metal-processing possess 14.3% of the industrial fixed assets and produce a wide range of goods.

Following these two major groups are chemistry and petrochemistry, producing fertilizers, synthetic ammonia, caprolactone, soda, dye stuffs and technical rubber. These industries possess 17.2% of regional fixed production assets. Metallurgy accounts for 11.5% of industrial fixed assets.

In the national labor division the Luhansk region provides 25% of coal extraction, metal-cutting lathes, electric engines, baking soda production and over 15% of oil products, steel pipes, fertilizers, synthetic ammonia, and textile production. It also produces coke, metal, cast iron, steel, rolled metal, electric locomotives, cargo wagons, mining machinery, electric equipment, accumulators, carbamide, carbolactame, dye stuffs, plastic, rubber, window glass, furniture, shoes, household appliances and many other goods.

Historically there are three major production centers:

- Luhansk - machine-building, metal-processing and textile enterprises;

- Alchevsk and Stakhanov - mining, metallurgical and machine-building enterprises; and

- Lisichansk, Rubezhnoye, Severodonetsk – chemical and petrochemical enterprises.

The leading enterprises are:

Machine-building: State Holding Co “LuganskTeplovoz” (Luhansk Diesel Locomotives), JSC “Stakhanovsky Vagonostroitelny Zavod” (Stakhanov Wagon Plant), “Lugansky Stankostroitelny Zavod” (Luhansk Lathe Plant) Production Association, JSC “Severodonetsky Priborostroitelny Zavod” (Severodonetsk Instrumental Plant), Luhansk plant “Donets”, “Luganskiye Accumulyatory” (Luhansk Accumulators) Scientific and Production Association, JSC “Stakhanovmash” (Stakhanov machine-building plant), “Lugansky Avtosborochny Zavod” (Luhansk Auto Assembling Plant), “Lugansky Zavod Kolenchanykh Valov” (Luhansk Crankshaft Plant), Pervomaisk Machine-Building plant, “Krasny Luch” Plant, Krasnodon JSC “Avtoagregat” (Auto Aggregate).

Metallurgy: JSC Alchevsky Metallurgichesky Zavod” (Alchevsk Metallurgical Plant), Alchevsk Coke Plant, JSC “Stakhanovsky Zavod Ferrosplavov” (Stakhanov FerroAlloys Plant), JSC “Lugansky Trubny Zavod” (Luhansk Pipe-Producing Plant), JV “Intersplav”.

Chemistry: Severodonetsk State Production Association “Azot”, JSC “Krasitel” (Dye Stuffs Plant), JSC “Stekloplastik” (Glass Fibre Plastic), “Lisichansky Zavod RTI” (Lisichansk Technical Rubber Plant), JSC “Lissoda”.

JSC “Alchevsky Metallurgichesky Zavod” is one of the largest producers of cast-iron, steel fraction, thick-sheet and high quality rolled metal both in and outside Ukraine. The plant exports its products to more than 30 countries. Its product is certified by “Lloyd Register” Co (Great Britain) and “TUF” (Berlin-Branderburg, Germany). In 1995 in Paris the plant was awarded an international prize “For Commercial Prestige” for the high quality of its products and corporate image. Its range of products is extensive and increasing in demand.

JSC “Lugansky Trubny Zavod” is one of the leading producers of steel water and gas electrically welded small diameter pipes. It has an annual production capacity of 300,000 tons. The plant produces galvanized pipes and jointly with foreign companies it is mastering the production of high precision pipes for car and tractor shock absorbers. Goods produced by the plant are widely used in Ukraine, Russia, Belarus, Kazakhstan, Turkmenistan, Moldova, Lithuania, Latvia, Estonia, Germany, and Italy.

Severodonetsk State Production Association “Azot” is one of the largest producers of nitrogen fertilizers. It normally exports about 200,000 tons of nitrogen fertilizers to the CIS and other countries. The association produces more than 60 items, including ammonia, carbamide, methanol, acetic acid, formalin, catalyst, acetone, polyvinyl-acetate glue and emulsion.

JSC “LisichanskNefteOrgSintez” (Lisichansk Petro Organic Synthesis) annually processes 24 million tons of Tumen oil for Russian suppliers. In 1992 polypropylene and catalytic cracking were put into production.

JSC “Steklopastik” manufactures glass fiber wall and roof insulating materials and protective film for heating mains.

JSC “Stakhanov Technical Carbon Plant” exports technical carbon of various types to all the CIS countries, Poland, the Czech Republic, and Slovakia.

JSC “Lisichansky Zavod RTI” (Lisichansk Technical Rubber Plant) produces various items, including moulded and unmoulded goods, sleeves, conveyor tapes and wedge belts.


AGRICULTURE


Agricultural gross output accounts for 2.9% of total GDP. The main emphasis is placed on grain and industrial crops, meat and dairy livestock production.

The agriculture sector includes 334 enterprises of various types of property: 1,469 farms, 8 closed joint-stock companies, 175 limited liability companies, 5 open joint-stock companies, and 75 private leasing companies. All these enterprises have 1.88 million hectares of land, of which 1.58 million hectares is cultivated; 1.18 million hectares have ploughed fields.

The region has 155,3 hectares of ploughed fields which are state land reserve intended to be formed into private farms. Some 67.7 hectares of unclaimed state reserve is temporarily used by collective and state agriculture companies and local governments - this is the reserve for forming new farms.

The total sales of all the regional agriculture companies in 1999 was UAH 732.4 mln, 50.8% of which came from plant growing and 49.2% from livestock farming. The share of the private sector (farms included) was 62%.


CONSTRUCTION


The Luhansk region has developed over 400 construction enterprises with a total labor force of nearly 77,000.

Around 300 are construction and assembling enterprises and transport companies, and more than 100 are manufacturers of wall materials, pre-fabricated ferro-concrete structure, metal constructions, glass, lavatory and bathroom equipment, insulating materials, power and binding (lime) materials. These companies employ about 13,000 people.

The construction industry infrastructure includes 11 project and research institutes, 17 production and scientific associations, 27 procurement agencies, 2 railway companies and 7 transport companies.

The construction industry possesses rich reserves and a developed infrastructure suitable for manufacturing a wide range of construction materials and consumer goods. A number of construction companies are potential exporters.

Around 65 enterprises produce wall materials, 45 of whom also manufacture small units. The annual production capacity of wall materials is 644 million bricks, including 543 million pieces of unit brick of small-sized construction materials.

About 30 companies produce slag concrete blocks, aerated concrete blocks and stone blocks. Major companies are JSC “Silicat”, “StroiIndustriya” Ltd, and “Georgievsky ZSM” Ltd.

Some 15 enterprises produce lime sand and ceramic brick. “Rubezhansky ZSM” Ltd is the leading producer of lime sand brick, it produces 57% of the region’s lime sand output. The major producers of ceramic brick are: “Pervomaisky ZSM’ JSC, Severodonetsk Ceramic Brick Plant, “Azot” Production Association, “Zimogorievsky KZ” JSC.

Seven enterprises produce bricks using mining waste as the raw materials. They widely apply semi-dry and “hyper” pressing method to process sandstone, slag, coal wastes and shell rock.


Ecological safety is ensured by ”EcostroiAvto” Ltd, creating effective technologies and producing specialised machinery for sulphur refinement and advanced milling machinery. Their technologies are cost-saving and environment-protective.

The ore-free construction materials sub-sector includes 7 enterprises specialising in sand extraction and production of road-metal with solidity 700-1000 kg per sq. cm (the annual output is 3.0 and 6.0 mln cub m. respectively).

In total there are 6 road-metal plants and cast pits. Major enterprises are: “Kondrashevsky Peschany Carier” (Kondrashevsky Sand Pit), JSC “Krasnoluchsky ZSM-6”, JSC Uspensky Carier” (Uspenka Sand Pit), Medvezhansky and Komsomolsky Sand Pits, Valyanovsky Road Metal Plant.

Open mining method is used to extract ore-free materials. Drilling and blowing is carried out by Luhansk Department of Blow-up Workings, which is properly equipped for these types of operations.

Some 23 companies produce reinforced concrete structures and their total annual output is 840,000 cub.m. “LuganskStroi”, “Lisichansky ZhBI” (Lisichansk Reinforced Concrete Plant), JSC “Severodonetsk Zhelezobeton” (Severodonetsk Reinforced Concrete Plant), “LuganskShahtoStroiIndustriya” (Lugansk Mine Construction Company), JSC “Krasnoluchsky ZhBI-7”, “Stakhanovsky ZhBI-7”, JSC “ZhBI” are known to be the most significant and reliable partners.

The region accommodates large production facilities for frame-and-panel plates (700 000 sq.m of housing annually).

Nine companies specialize in production of wall facing materials and ceramic tiles, with JSC “Keramik”(Ceramics) being the largest of them.

Two companies produce heat and sound-insulating materials. JSC “Alchevsky ZSK” produces mineral wadding, it also works on producing hard mineral plates made out of non-toxic binding materials and insulating shells for pipes.

Metal structures, non-standardized equipment and metal attachment units for construction industry are produced by 10 construction enterprises and 18 companies of mining, machine-building and other sectors.

Wood-processing, saw-timber, window and doorframes production is carried out at 12 enterprises.

Glass industry is represented by 3 enterprises: JSC “Lisichansky Stekolny Zavod” (Lisichansk Glass Works), Lisichansk Glass Works “Proletary”, and Popasnoye Glass Works, which together produce about 50% of total Ukrainian window glass. All these enterprises enjoy a reputation of being reliable partners in the international market. They also have a number of investment portfolios prepared for future partnerships.

“Lisichansky Stekolny Zavod” offers thin glass and also has facilities for reinforced rolled and pattern glass, glass fibre, smalt, silicate blocks, fireproof and other consumer goods production.

“Proletary” Glass Works manufactures high-quality polished glass by the float process method on melted metal, polished window glass, glass accessories for vehicles, various devices and furniture, mirrors, flat triplex, stalinite and stematite, fire-proof items, silicate blocks.

The collective enterprise “Popasnyansky Stekolny Zavod” specialises in high-quality tableware, tableware sets and glass disperses for production and consumer lamps.

The construction industry in the Luhansk region possesses huge production facilities; a number of perspective sites are nearly finished. With its rich resources and a developed infrastructure, it has all the necessary prerequisites for attracting potential investors. More than 95% of the enterprises are privatised, others are being shareheld and under privatisation.


FOREIGN ECONOMIC ACTIVITY


The Luhansk region sustains trading and economic relations with 78 countries.

Foreign trade turnover totalled USD 737.6 mln with favourable balance of USD 280.5 mln. In term of export it is the sixth largest exporting region in Ukraine.

The leading exporters are: Alchevsk Metallurgical Plant, JSC “Linos”, Severodonetsk “Azot:, Stakhanov Ferro-Alloys Plant, JV Intersplav”, Luhansk Sewing Factory “Style”, JSC “Luhansk Pipe-Producing Plant”, JSC “Krasitel”.

The Luhansk region exports to 75 countries. In 1999 the total exported goods value was USD 509.1 mln, which accounts for 69.0% of the total foreign trade turnover of the region. The leading trading partners are: Germany – USD 35.6 mln or 7.0% of the total export; Italy – USD 44.5 mln or 8.7%, Belarus – USD 9.3 mln or 1.8%, Turkey – USD 56.2 mln or 11.0%, Moldova – USD 5.0 mln or 1.0%.

The main exports are: steel, rolled iron, petroleum, fertilizers, metal cutters, ferrous metal and ferrous metal goods, plastics, accumulators, paints, coal-preparation machinery, foodstuffs, organic chemicals.

Last year the region imported goods from 59 countries for USD 228.6 mln, which accounts for 30.9% of the total regional turnover. The main imports partners were: Germany – USD 25.8 mln or 11.3% or the total import, France – USD 7.0 mln or 3.1%, Belarus – USD 5.1 mln or 2.2%, India – USD 3.4 mln or 1.5%. Imports included: oil, gas, wood, semi-finished and consumer goods.

A key feature of the Luhansk region is its close economic co-operation with Russia, which could be explained by its geographical position. The Russian Federation remains the leading trading partner for both exports (20.7% of the total exports) and imports (57.9%).


TRANSPORT AND COMMUNICATIONS


The region has an advanced transport infrastructure, which serves the needs of the coal-mining, metallurgy, chemical, petrochemical and other industries, particularly in terms of barter trade with the bordering Russian regions. Around 8% of the population is employed in transport related jobs.

The railway transport sector is represented by the Luhansk branch and partly the Debaltsevo branch of Donetsk Railway Co, and the Popasnoye State Enterprise for Freight and Passenger Transportation. Railways length is 2009 km, spur tracks - 23,20 km. Railways density is 75.2 km per 1000 sq. km.

The region has an extensive highway network, some 8,000 km within the towns and villages. The “Sovtransavto-Luhansk”, Ukraine’s largest transport company, is located in Luhansk.

Municipal transport is also rapidly developing, including trolley buses, buses and tramways.

The regional air transport is provided by Luhansk State Aviation Co and by “Severodonetsk”Airport.

The piping system is maintained by Lisichansk District Pipelines Dept. (67 km) and by Dept. of Trunk Pipelines (99.6 km).

The regional telephone communications network covers all populated areas (419 telephone exchanges). Automatic domestic and international communication is possible to all cities and district centers. Through the new digital telephone exchanges introduced by UTEL, Luhansk has direct and stable telecommunications links with many countries around the world.

Mobile and paging communication is widely spreading. Luhansk also has its own Internet providers.


SCIENCE


The region accommodates 50 research centers that represent the Academy of Sciences of Ukraine, Ministries of Coal-Mining and Machine-Building and other institutions. The number of researchers is 3,652. In 1998, research was conducted for UAH 31,112.8.

The leading institutions are: Luhansk branch of the Institute of Industrial Economy of the National Academy of Sciences, “UkrNIIObogascheniye”(Ukrainian Research Institute of Coal Preparation), “UkrNIIGidroUgol”(Ukrainian Research Institute of Coal Hydration), Scientific and Production Association “UgleMekhanizatsiya”(Coal Mechanization), State Mines Project Institute “LuganskGiproShaht”, State Research Center of Chemical Technologies “KhimTekhnologiya”, State Research Institute of Chemical Machine-Building, State Project and Design Bureau of Coal-Preparation Machinery “GiproMashUgleObogaschenye”, JSC “Impulse” computer center.


SOCIAL SECTOR


The labor force of the region is 1.7 mln people traditionally regarded as highly qualified and professionally trained. 1,010,000 people are employed in the region, 469,600 people in industry (207,000 of them in coal mining industry), 74,100 people in construction, and 111,100 in agriculture. Higher education is provided to 46,500 students through eight higher educational establishments and two of their branches.

In addition, there are 41 technical schools and colleges with 23,600 students, 81 vocational training schools (39,600 students), 810 kindergartens (49,000 children).


BANKING


The regional banking system has two levels. The first level is represented by the Regional branch of the National Bank of Ukraine and by 102 banks, of which 2 are legal entities (UkrKommunBank, Vostochno-Promyshleny Bank) and 100 are branches. Most of them are located in Luhansk, including Luhansk branches of UkrEximBank, PrivatBank, PravexBank, Aval. Three banks, PromInvestBank, UkrSotsBank and Bank “Ukraina”, cover the main industrial and agriculture areas.

Besides the national currency, hryvnia, banks also deal with other world currencies. To maintain and increase profitability banks have introduced electronic banking and are moving into specialized areas, such as servicing credit lines of foreign and international finance institutions.

The second level of the banking system is represented by the Pensions Fund, Luhansk branch of State Innovation Fund, 4 investment companies, and 11 insurance companies. All theses institutions offer a wide array of finance and economic services to numerous companies and organizations.


SPECIAL REGIME OF INVESTMENT ACTIVITY IN THE TERRITORIES OF PRIORITY DEVELOPMENT IN LUHANSK REGION


This description of the Luhansk region’s potential provides a very brief preview of some of the many factors that would prove attractive to potential investors. The foundations are in place and, as Ukraine continues its transition to a market economy, the region can provide excellent opportunities to investors who act promptly.

One of the main directions of market reform is to improve the economic situation of the region by attracting foreign investments to priority industrial sectors: coal, steel, chemical, food, machine-building complex, innovative activity, etc.

With this aim, on the 15th of July 1999 the Law of Ukraine “On Special Regime of Investment Activity in the Territories of Priority Development in Luhansk Region” was adopted.

This will be implemented by creating new jobs to ensure placement for the workers dismissed due to restructuring and re-profiling of mining and other enterprises, by implementing new technologies, developing foreign economic relations, increasing deliveries of high quality goods and services, creating new production, transport and market infrastructure, and efficiently using natural resources.

The special regime of investment activity has been introduced in the territories of priority development and will be valid for a period of 30 years, when investment projects are implemented in the sectors (sub-sectors) of priority development. Their enumeration has been adopted by the Cabinet of Ministers of Ukraine in the established order.

The territories of priority development include Bryanka, Krasnodon, Pervomaisk, Sverdlovsk, Stakhanov, Krasny Luch, Antratsit, Krasnodon, and Krimenna district of the Luhansk region.

The special regime of investment activity is applied to the business entities that realize an investment project to a total value of:

- USD 500 thousand – for the period of realization of investment projects in agriculture, food processing, and healthcare;

- USD 700 thousand – for the period of realization of investment projects in transport and construction industries;

- USD 1 million – for the period of realization of investment projects in mining, power generation, coke production, chemical, and machine-building sectors.

Realization of an investment project is considered to begin on the date of the first investment payment.

This Law defines the following incentives for newly set up companies:

1. The special legal regime of business activity implemented by this Law is applied to business entities for the period of investment project realization in the established order, and they receive preferential treatment stipulated by this Law concerning payment of an import duty, value-added tax (VAT), tax on profits, tax paid to the State Innovation Fund and to the State Employment Fund of Ukraine, and land tax.

2. The business entities importing raw materials, machinery and equipment (except excise-duty products) to Ukraine to be used in the framework of an investment project are exempted from import duty for the period of the investment project implementation but no more than for 5 years.

3. The transactions of importing machinery and equipment to Ukraine to be used in the framework of an investment project are exempted from value added tax for the period of the investment project implementation but no more than for 5 years.

4. In case of untargeted use or alienation of specified raw materials, machinery and equipment before the expiration date of the investment project realization, an import duty and VAT are payable in the established order.

5. Profit of the newly set enterprises including those in the process of re-profiling and restructuring, which implement investment projects, is tax exempted for 3 years.

Profit of such enterprises obtained for the period of investment project realization from the 4th to the 6th year inclusive is taxed at the rate of 50% of the actual tax rate. This rate is used from the moment when the first profit is received.

Calculation procedure of profit obtained for the period of investment project realization is established by the State Tax Administration.

If during the accounting (tax) period full or partial alienation of investments has occurred, the business entity who has received investments is obliged to pay a profit tax in full volume.

6. Gross revenue of an enterprise to be taxed does not include the investment amount obtained in the framework of the investment project as:

- monetary means;

- material values;

- non-material assets including legal ones in the territory of Ukraine, such as rights of authorship, investor’s rights, rights to industrial designs, trade marks, services, know-how, whose value in a convertible currency is confirmed according to the regulations of the investor’s country or international trade customs, as well as expert evaluation in Ukraine.

7. The newly set up enterprises implementing investment projects, including the enterprises in the process of re-profiling and restructuring, where the number of employees reduced from the closed coal-mining and other enterprises is at least 50% of the average number of employees in the tax period, are exempted from the payments to the State Innovation Fund and to the State Employment Fund for the period up to 2009.

8. The business entities implementing investment projects are exempted from land tax for the period of land exploration (territory planning, infrastructure building) but no more than for 5 years.

9. The business entities implementing investment projects in the territories of priority development without setting up a juridical body through affiliates, departments and other separate divisions make up a separate balance of their financial and economic activity agreed with corresponding bodies of the State Tax Service of Ukraine.

The managing bodies in the territories of priority development are:

- the Committee for the issues of the territories of priority development;

- local government institutions/agencies

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