Luhansk Region

The foundation and the development of Lugansk region associated with building and working of Lugansk cannon-foundry plant, which in 1800 smelted its first foundry-iron. In 1882 Lugansk plant with the nearby village Kamennyj Brod took the official status of town and soon it became the centre of Slavianoserbsky Uyezd. Since 1876 the railway workshops for repairing locomotives and carriages of active railway-road started their work. In 1895 on the place of foundry-cannon plant State cartridges plant was built and opened. The same year locomotive-building plant began its activity; and it was built by manufacturer Gustav Hartman. With time that plant became the most powerful enterprise of such profile in the Russian Empire.

That time on the territory active development of industry production started on. The enameling factory and smokehouse, alcohol refinery, tannery, brewery and other enterprises were founded.

During past 100 years due to the conditions of energetic development of whole Ukraine Lugansk region became the area of highly developed building, extractive and trade infrastructure. The evidence of that are financial and economical activities and their significant influence in the national value.

The Lugansk region was formed on July 3, 1938. It is situated in the South-Eastern part of Ukraine in the basin of mean flow of the Seversky Donets river; and as it is placed on the crossroads of main transit trade tracks between European countries and Caucuses Lugansk region is in favorable geographical position.

Administrative territorial division: 37 cities, including 14 cities of regional subordination and 23 towns of district subordination; 17 districts; 109 urban settlements; 792 villages.

Administrative centre of region is the city of Lugansk – one of the biggest cities in Ukraine with the population 600 thousand people and large industrial potential.

The region boarders with Belgorod, Voronezh and Rostov regions of Russia.

The length of State frontier is 776 km.

Donetsk and Kharkov regions are the frontier regions of Ukraine.

The length from West to East is 190 km., from North to South – 250 km. The distance from Regional Center to the nearest seaport Mariupol is 280 km. By highway, by railway – 288 km.; to Odessa sea-terminal – 844 km by highway or 1047 km by railway.

Lugansk has its own passenger airport with shipment terminal that every week provides daily flights to cities of Ukraine and as well as international flights. International airport Donetsk is situated within 150 km. from Regional Center.

The region is reach on high-quality coal resources. The estimation of regional coal deposits is over 4 billion tons. Many districts possess the resources of building materials: detritus, sand, clay, lime, whitewash, gypsum and fossil rocks, limestone that are widely used in building industry. There are also natural gas, gold, silver and complex deposits. In Lugansk and Starobelsk there are mineral springs.

In Lugansk region steppe landscape is dominating. The region’s surface is mainly a sinuous plain that rises from Seversky Donets valley in Southern and Northern directions up to Donetsky ridge. The ground is fertile, mostly black earth (chernozem), 80% of region area is ploughed and only 7% is covered with wood. The climate is temperate. The average temperature of the hottest month (July) is +21°С and that of coldest month (January) is -7°С. Winter is comparatively cold with cutting Eastern and South-Eastern winds and light frosts. Summer is hot; its second part is rather dry. The annual average amount of precipitation is 459-505 mm the major part of which belongs to April-September.

Lugansk region is one of the most multinational regions of Ukraine. Its population represents more than 100 nationalities: Ukrainians, Russians, Byelorussians, Uzbeks, Jews, Bulgarians, Georgians, Armenians, Germans, Tatars, Poles and others.

The total population estimated on December 1, 2001 makes 2574,6 th. of people. 83% of them live in the city and 17% – rural areas.

Density of population is 97,7 people/km2.

Demographic load (per1000 people of able-bodied age citizens) is 805,5 th. people which is 32% of total population.
 

INDUSTRY

Luhansk region constitutes an important part of economic potential of Ukraine. The profitable geographical position, close location of raw material sources and product sell markets, multiple industry advanced network of the transport communications, high density of the population give Lugansk region lots advantages that other regions of the country do not have.

Industry plays the main role in region’s economy and its share, in volume of a total public product makes three quarters. In state distribution of activities our region provides 7,6% of the whole industrial production produced in Ukraine and is occupies the 4 place among all the regions of the country.

On the basis of the region’s natural resources some important industrial powers in different branches of industry are created. According to many types of industrial products the region takes the leading place in Ukraine, providing about 43% of coal extraction volume, more than 15% of primary processing of petroleum and release of petroleum, about 30% of metal-cutting machine tools, 20% – nitric fertilizers, about 31% of calcium soda, 32 5 – synthetic pitches and plastic, more than 70% – window glass, more than half of beaten cardboard.

The industrial potential of the region is a diversified complex where the largest part belongs to heavy industry. The power electric complex is in the lead. The basic role here belongs to extractive industry; its enterprises take the fourth part. In extractive branch the coal enterprises are dominated.

The industry of the region is also represented by enterprises of mechanical engineering, chemical, petrochemical, food, timber, textile industry and industry of building materials. The share of production made by the enterprises of manufacturing industry makes in total more than 60%. Increases of the last year rates of production in manufacturing industry are in: mechanical engineering (22.5%), in paper industry (7.8%), metallurgy and metal processing (13.8%).

In Lugansk region there were three large industrial assembly generated. The specialization of Lugansk assembly is represented by enterprises of mechanical engineering, metal working and light industry; Alchevsk – Stahanov assembly – the enterprises of coal, metallurgical and machine-building; Lisichansk – Rubezhnoye-Severodonetsk – the enterprises of chemical, petrochemical industry.

The leading enterprises in certain branches are:
In mechanical engineering: State Holding Joint – stock company “Luganskteplovoz", JSC “Stakhanov Carriage Building Factory”, JSC “Lugansk Machine-tool Constructing Factory “, JSC “Severodonetsk Instrument-making Factory”, Lugansk factory “Donets”, Joint stock scientific and production company “Lugansk Accumulators”, Closed JSC “Stakhanovmash”, Lugansk Car Assembly Factory, JSC “Lugansk Factory of Draft shafts”, Pervomayskiy Machine factory”, Factory “Krasnyj Luch”, Krasnodon Closed JSC “Avtoagregat”;

In metallurgy: OpenJSC “Alchevsk Metallurgical Center”, Alchevsk coke and chemical Factory, JSC “ Stakhanov Factory of Ferroalloys”, Closed JSC “Lugansk Pipe Factory”, JSC “Intersplav”;

In chemistry: Severodonetsk State Production Company “Objedinenie AZOT” ", OJSC ” Krasitel”, JSC “Stekloplastic”, JSC “Lisichansk Factory RTI”, JSC “Lissoda”.

The majority of innovations were carried out on the enterprises of manufacturing industry: chemical and petrochemical, light industries, where innovative works were carried out by 5,6-8,8% of the enterprises. The quantity of enterprises, which have updated number of producing goods, has increased by 8,9%. There were 46 new technological processes, among them one third low-wasted and alternative processes, are implemented, and 373 mastered: machines (equipment, devices, tools), appellations of new materials, goods and products, consumer goods. In the first half-year of 2002 six sites of regional coal-extracting enterprises were automated with modern high-tech equipment.

TRANSPORT AND COMMUNICATION

In our region the transport infrastructure is widely developed, and it satisfies the requirements of the population and enterprises in transportation of passengers and goods including the passenger transportation to the neighboring regions of Russian Federation.

The railway transport is represented by Lugansk and partially by Debal’tsevo boards of railway transport of the Donetsk railway. The extensive length of railway tracks is 1798 km, the total extend spur-tracks of enterprises and organizations are 1778,7 km. The density of railway pro 1000 km2 is 75,2 km. In our region there is a wide network of highways, the length of which is 5800 km. JSC “Trans-King” the biggest Ukrainian company that deals with international auto – transportation is located in Lugansk.

Air-transport is represented in the region by: the Lugansk State Air Enterprise “Lugansk Airlines”, the regional municipal enterprise “International Airport Lugansk” and Severodentsk Airport.

The infrastructure communication involves all built-up areas of the region. Automatic long-distance communication is available between all towns and district centers. Lugansk got the direct steady communication with many countries of the world since the new digital phone-station UTEL was installed. Mobile and paging communication is widespread. The World Wide computer network INTERNET is used in our region.

FOREIGN TRADE ACTIVITY

Among the countries of CIS Russian Federation remains one of the biggest trade partners for the region – mutual relations make the fifth part of whole foreign trade circulation in the region, the share of export comes to121,3 mln. USD, and import – 430,5 mln. USD.

Most volumes of export deliveries are carried out to Turkey – 481,4 mln. USD from the general volume of export of region, Italy–153,9 of mln. USD, Germany – a 45,9 million USD, Cyprus – 56,1 mln. USD.

The greatest volumes of export deliveries are carried out in Turkey – 481,4 mln. USD., Italy –153,9 mln. USD, Germany – 45,9 mln. USD, Cyprus – 56,1 mln. USD.

Main and determining in the structure of export of region there are commodities, that take considerable competition advantages at the external market. It is black metals (specific gravity in the export 16%), electro-ferro-alloys (2,8%), coal (1,9%), machines mechanical and mechanical equipment (1,9%), second aluminum (3,4%), products of naftopererobci (23,5%), products of nitric industry (9%, including fertilizers), build and technical glass (1,2%), dressed textile (3%), plastics and wares from them (2%), instruments:, spare parts to the railway transport and travel equipment and also some types of products of agroindustrial complex, pastry wares.

In the list of products, that will be imported in a region, traditionally prevail natural gas, petroleum and separate types of naftoprodouctiv, products of machine-building industry and ground vehicle.

THE TERRITORIES OF PRIMARY DEVELOPMENT (TPD)

The most effective forms of regional politics, which are used by the countries of highly developed economy, as well as by the countries with the developing economy, are the creating of special (free) economical zones and realizing the complex of activities, which are provided by central and local representatives of executive body by introducing special regulation of investment activity.

Nowadays according to Law of Ukraine About Special Regime of Investment Activity on the Territories of Primary Development in Lugansk region’ №1241-XIV (18.09.1999) the territories of the primary development are supposed to be the following districts: 6 mine towns, 3 regions, i.e. 9 administrational territorial units out of 31.

The towns of Lugansk region belong to the Territories of Primary Development: Brianka, Krasnodon, Pervomaysk, Sverdlovsk, Stakhanov, Krasnyj Luch; Antratsit districts, Krasnodon and Kremennaya districts. The special regulations of investment activity is applied to those firms and companies which implement investment projects with the estimated value that equals not less than:

500 th. USD for implementation of investment project in manufacturing industry, agriculture, health services;

700 th. USD for implementation of investment project in the branches of building, construction and transport;

1 million USD for implementation of investment project in extractive, chemical, machinery building industries, electric power industry, coke production.

The firms and companies, which implement their investment projects on TPD, have the following privileges:

1. Companies which bring raw materials, equipment (except excise goods) on the territory of Ukraine for implementation of their investment projects are released from custom duties for the period of project’s realization but for not more than 5 years.

2. Companies are exempted from value-added tax of the operation of bringing to the territory of Ukraine all the equipment needed for the project’s realization for the period of not more that five years.

3. The income of a new or reconstructed enterprise that realizes an investment project is free from taxes for the period of 3 years.

4. The income from such enterprises that was taken during the 4th or 6th year of the project realization is taxable but only 50% of taxation’s rate. This law is applied since the first income is obtained from the enterprise.

5. The gross revenue charged with extra taxation does not include the investment sum, represented by money, material values, non-material assets, including legal Ukrainian copyrights, invention copyrights, practical models, industrial samples, service brands, know-how etc. Their cost in hard currency is provided by laws of the investor’s country or by the international trade customs and expert estimation in Ukraine.

6. The reorganized enterprises which implement the investment projects set in accordance with the Ukrainian law are not obliged to pay the State Employment Fund Tax until 2009, if the number of employees resigned because of the liquidation, reorganization of mining and other enterprises makes up no less than 50% of the average workers number at the above companies.

7. The private entrepreneurs who implement the investment projects set in accordance with the Ukrainian law do not have to pay the land rent for the new lands development (the territory plan, infrastructure objects building etc.) for the period no more than 5 years.

By January,1, 2003 approved 26 investment projects with the total sum of 85,35 millions USD. Their realization will allow creating 2337 new jobs and save 8607 already existed.

The main ways of investment considered by investment projects are coal production industry – 10 projects, 45291 th. USD, manufacturing industry – 8 projects, 37617 th. USD, light industry – 5 projects, 6519 th. USD, transport – 2 projects, 5931,1 th. USD, food production – 1 project, 550 th. USD.

INVESTMENT ACTIVITY

The investments have been transferred from 30 countries of the world, but non-residents brought the greatest volumes from Hungary, Spain, the Netherlands, Dane, Cyprus, and Switzerland. 71,0% of total volumes of the direct investments enclosed in Lugansk regional economy falls to the share on these countries.

The most attractive kinds of economic activities are chemical and petrochemical industry (chemical manufacture, manufacture of rubber and plastic products; real estate operations, rent and services for juridical person; wholesale trade and intermediary in trade; food-processing industry and processing of agricultural products; manufacture of coke, products of oil processing and nuclear fuel.

The foreign investments are enclosed into 94 enterprises of the region. Almost half of all investments were received by the enterprises of cities of Lugansk and Sverdlovsk (29.1% and accordingly 18.8%), Severodonetsk – 14,0%, Krasny Lutch – 12.7%, Alchevsk – 10.6%

The main investors in the region are the enterprises of chemical and petrochemical, iron and steel industry; on processing metal; manufacture of the electric power, gas, and water. The greatest volumes of the investments are carried out by the enterprises of Severodonetsk, Alchevsk, Antratsit, and also Lutugino region.