Electronics Giant Moves Into Ukraine

IVANO-FRANKVISK, Ukraine -- Tyco Electronics Ltd., one of the operating segments of United States-based conglomerate Tyco International Ltd., is set to invest $60 million into the construction of a new wiring and cable plant in Ivano-Frankvisk Region.

This makes it the latest of several major international producers of such products to launch production in western Ukraine within the last three years.

Taking advantage of low labor costs and rising world prices for cable and wire, Tyco and other global producers stand to get high returns on their investments, while Ukraine’s cash-strapped western regions will improve budget revenues and employment statistics.

Tyco Electronics Ukraine Ltd., a 100 percent subsidiary of Tyco Electronics Ltd., was registered in Ivano-Frankivsk in February 2006, and signed an agreement with the Ivano-Frankivsk City Council to build the plant on July 25.

Construction of the new Ivano-Frankivsk plant, which will produce wiring for consumer electronics, as well as cables for communications systems and the automotive industry, will begin this year and is expected to be completed by 2009.

“We plan to employ 4,000 to 5,000 people … We planned to start plant construction in February, but did not receive enough support from the city administration at that time,” Petra Streifler, manager of PR and advertising for Tyco Electronics Ltd., told The Post Aug. 1.

According to the agreement signed on July 25, Tyco Electronics Ltd. is obligated to invest $60 million into the construction project and create at least 3,000 jobs.

The Ivano-Frankivsk City Council, for its part, committed to provide a plot of land to the company within 30 days of the signing of the agreement.

Tyco Electronics Ltd. will rent the 15-hectare plot, paying the city administration a monthly rent of over Hr 116,000 ($23,000) during construction and Hr 154,000 ($30,800) after it has been completed.

The land plot is part of the 419-hectare Khryplinskiy industrial center, which the city said it set up to attract investment into the local infrastructure by offering administrative streamlining and economic incentives.

“There was a tender for the land plot. Khryplinskiy industrial center is an object of pride for us, and we consider the agreement with Tyco to be a great achievement that will give people jobs,” said Andriy Oleksyn, a spokesman for the Ivano-Frankivsk mayor’s office.

According to Oleksyn, the prior city administration held up the start of construction works for years, but the new city council elected during the country’s March 2006 general elections moved things along.

“While Kyiv’s growth in the last years is noticeable, it’s different for regions like Ivano-Frankivsk, so we consider this agreement to be an outstanding achievement. The minimum salary for future Tyco employees will be Hr 950 ($190) [per month], which is very different from the official minimum salary in the region, which is Hr 400 ($80),” he added.

Western Ukraine already boasts two other global producers of wire and cables: Leoni, which is headquartered in Germany and claims to be the world’s largest and longest established manufacturer of wire, cable and wiring systems, and Japan’s Yazaki, which calls itself the world’s largest producer of wire harnesses.

Leoni Wiring Systems UA GmbH has a plant in Transcarpathia Region, while Yazaki has production facilities in Lviv Region.

The newly constructed Leoni plant started its production in July 2003.

“For now, we have about 2,700 employees. Our customers are world leaders in the automobile industry: General Motors and Porsche. We are also analyzing opportunities of future cooperation with Ukrainian automobile manufacturers,” Nadiya Shaban, personnel and marketing manager of Leoni Wiring Systems UA GmbH told The Post July 31.

Yazaki Ukraine also launched manufacturing in 2003, with a contract with the German-based carmaker Opel. According to Yazaki’s website, the company invested 31.7 million euros (around $40.6 million) into the factory’s construction, the largest industrial investment by Japan into Ukraine’s economy. As of September 2004, the Yazaki plant boasted 1,300 employees.

Like Leoni and Yazaki, Tyco Electronics Ukraine has its eyes set on exporting the wire and cable that it produces in western Ukraine for the time being.

According to the German Office for Foreign Trade, between February 2005 and February 2006, prices on the world market for copper cables and wires went up by 48 percent, and for aluminum-based products, by 26 percent.”

“It is highly probable that world market prices for copper, aluminum, steel and other materials used for cable and wire production will go up, causing 10 to 25 percent growth in the price of cable products,” reads a June 2 report by the German Office for Foreign Trade.

“There are a number of reasons for a company like Tyco to build a plant in the western region of Ukraine,” said Vasyl Bevz, executive director of UkrElektroKabel Association, whose membership includes 21 out of 25 of Ukraine’s cable and wire producers.

“Compared to salaries in the central and eastern parts of the country, wages here are approximately 20 percent lower,” he said.

In addition to Leoni, Yazaki and Tyco, Kromberg & Schubert, a German auto-wiring manufacturer, announced in March last year that it would build an 18-million-euro ($23 million) production facility in western Ukraine’s Volyn Region.

Tyco Electronics Ltd. is a global supplier of electrical and electronic components. In the 2005 fiscal year, it reported an annual turnover of around $12.2 billion dollars and 95,000 employees worldwide.

Source: Kyiv Post


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