Oxstones Investment Club™This article is a response to Tetyana Salo, “Future at Home” (in Ukrainian language), Lvivska Poshta, No. 42 (1417), August 22, 2013. Available online: http://www.lvivpost.net/lvivnews/n/21764.
In Tetyana Salo’s article, business executives, politicians, scholars, and social activists shared their vision on the future of Lviv. The city of Lviv is a historic center of the Western part of Ukraine, located in a relatively short driving distance to the borders of the European Union (EU). It has over 700,000 residents.
Several of these interviewed experts emphasized emergence of Lviv in a role of major hub/center of the information technology (IT) industry. Many IT-based ventures already successfully operate in the city. The article analyzes feasibility of implementation of such plans.
Certainly, current political and economic stagnation caused by dysfunction and corruption of the national administration in Kyiv leads to serious concerns about any positive economic development in the country. A problem is worsened by actions of the appointees of the central government leading local administrations. The main administrative division of Ukraine is a region. Some English-language sources provide an original non-translated Ukrainian term, spelled as oblast or oblast’. The next level of administration division downstream is a district. Heads of the region/oblast administrations, semi-officially referred as governors, are appointed by the President of Ukraine. In their turn, governors fill out the positions in the region administrations and choose heads of district administrations. Mayors of cities and towns as well as members of legislatures of all levels occupy their positions due to the results of the elections. Based on this, the President and his inner circle have a lot of control. However, the leadership of the cities and towns in Ukraine can exercise authority in their areas.
From the more optimistic standpoint, the countries of Central Europe already demonstrated the record of victory over political challenges and economic growth. Examples include, but not limited to the economic achievements in Croatia in the 2000s–2010s after the Balkan Wars in the 1990s and ability of Lithuania to emerge much stronger after the Great Recession. Ukraine itself indicated potential of a positive change during the Orange Revolution in 2004–2005.
Lviv functioned as the major political, economic, and cultural center of the Western part of Ukraine for centuries. While the majority of manufacturing in Ukraine in the 20th century primarily concentrated in the central and eastern cities, Lviv nevertheless has enjoyed solid standing being well-known for production of television sets and intercity buses. It is necessary to emphasize that the period before achievement of independence of Ukraine in 1991 was a tough time for Lviv. The central authorities of the USSR deliberately hindered strengthening of this city, famous for its pro-democracy and pro-patriotism inclinations.
Education continuously flourished in Lviv due to presence of the Ivan Franko National University of Lviv (also known as Lviv University) and the Lviv Polytechnic National University. Lviv Polytechnic acts as a real giant in developing specialists in science, technology, engineering, and mathematics (STEM). Lviv University, the oldest university in Ukraine, also provides its fair share of STEM graduates. In addition, the Ukrainian Catholic University (UCU) quickly rose to prominence since its foundation in 2002. The UCU primarily concentrates on business disciplines, social sciences, and humanities. It may contribute to supply of professionals in business and law for the IT industry. Plus the increase in demand for the IT education may lead the UCU to start training of programmers. Ukrainian universities often started new majors in the last decade, and the UCU became famous for innovation in teaching methods and offerings of new programs. About thirty more institutions of higher education operate in Lviv. They vary in size. Several of them also offer undergraduate and graduate STEM programs.
Since re-establishment of private enterprises in 1988 in the last years of communist rule in Ukraine, Lviv emerged as one of leading cities in entrepreneurial activities. Therefore, tradition of private initiative became as continuous there as notions of hands-on practical technical management and quality education. One of the experts interviewed by Salo, social activist Petro Roy, mentioned a positive impact of the city’s educational hub and youthful culture for creation and implementation of new entrepreneurial ideas.
Most of all, Lviv achieved its fame for arts, historic architecture, and pro-freedom political movements. The city has beautiful parks and closely located mountains. It simply cannot become overly technical, let alone getting dull.
Furthermore, the local legislatures in the city of Lviv and in Lviv Region often come up with their own initiatives, more advanced both in pro-democracy reforms and in creation of a pro-business environment. The same line of behavior normally pertains to the directly elected mayors in Lviv Region. In the past, during more democracy-friendly times, it was also the case for the authorities of region and district administrations. So the space for initiative remains available.
During my career, I never worked as a programmer. But I studied the IT industry and its workforce from the positions of management, international development, and business strategy, in particular during my fieldwork in Chennai, as a part of graduate studies at University of Amsterdam. Furthermore, many years of my professional activity transpired in Boston. Alongside Silicon Valley, Boston and its area around I-95 highway became the major IT centers of USA. Based on the existing prominent role of other industries in Lviv, it appears that Lviv will not evolve into the mono-industry hub, such as Silicon Valley and Bangalore, but instead Lviv has a significant chance to follow successes of Boston and Chennai, the cities that successfully captures opportunities of the IT field and simultaneously developed other industries. Salo as well as some experts, interviewed by her, such as Pavlo Khobzey and Serhiy Kushnir, indicated opportunities in the IT industry alongside other opportunities. Still, the magnitude of successes in Boston and Chennai cannot be easily repeated, so overconfidence should be definitely avoided.
The IT industry enjoys unparalleled growth and amazing potential worldwide. Surely, the opportunities may be either utilized or missed. However, an addition of a major hub may be done according to the variant of horizontal expansion instead of decreases in the IT industry in other geographic areas.
Over the centuries, Lviv developed as a multi-ethnic city. An international dimension of the IT hub highly depends on the general situation in Ukrainian political and economic life. An excellent location of Lviv in proximity to other countries would not mean much for the internet-driven IT industry. However, the location means a lot for other industries, such as tourism (as mentioned several times in Salo’s article), trade, education, transportation, etc. The beautiful city may attract professionals from other Ukrainian cities. In a case of the political and economic stabilization of Ukraine, the location of the city of Lviv may serve as an additional factor for attraction of highly qualified personnel from Russia, Central Asia, and China, and in the long run even from other parts in the world.
However, these opportunities relate to some potential challenges that need to be addressed. Most importantly, corruption needs to be deleted from any presence in business activities. The business-government relations need to be enhanced by measures attracting entrepreneurs, the aforementioned qualified personnel, and the foreign direct investment (FDI). The measures of taxation need major improvement in order to stop any barriers on the way of business activities and job creation.
Moreover, the city of Lviv would need an increase in the number of commercial and residential properties. The industry of architecture, building engineering, and construction has both challenges and opportunities in this endeavor. The service-oriented industries will experience opportunities as well. Last, but not least. Issues of environmental protection in the growing cities need to be taken in consideration. The experience of European cities has a lot to offer in this regard.
In conclusion, it needs to be re-iterated that Lviv does not exist in a vacuum. The current processes in the country may hamper many initiatives and projects. Nevertheless, political improvements are possible. The success of the IT hub in Lviv is highly realistic. Solidification of the IT hub in Lviv would enable a positive impact on Ukraine, the IT industry, and the world economy.
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