The first half of 2024 demonstrates significant dynamics in the development of the UCA, accompanied by new, powerful, and sometimes controversial trends. The report is addressed to the heads of clusters and partner organisations.  

Results of the 1st half of the year

The alliance’s work for the first half of 2024 was determined by 2 key factors – the transition projects from 2023 (UCA CapGrowth, ClusterFundraise and ClusterINT) and their activities, as well as new events and directions generated during the reporting period. A detailed work plan with a budget for 2024 has not been adopted, but the areas of work were clearly outlined in the annual report and several strategy sessions earlier in the year. The following is a summary of the results of the work in these areas.

1.1 Restructuring of the UCA and increasing the capacity of the business units

The restructuring of the UCA was launched in the 2nd half of 2023 and by the beginning of 2024, the UCA structure included the following structural units (hereinafter referred to as SUs, Figure 1) – the Board, the Executive Directorate (ED), 4 Resource Centres (RCs) and 2 Committees. The Executive Directorate also integrates the functions of the Project Office (PO), the Professionals4Ukraine Coordination Centre and partially the provision of service functions, although they are not all separate units.

In June, another RC “Energy Clusters” was established. The main role of the RC, as reflected in the RC Regulations, is to establish systematic activities to launch joint projects, while the Committees are responsible for advocacy and lobbying through the development of relevant policies (Committee Regulations). Temporary Working Groups (WGs) operate within the RCs and Committees.

The main results of the project activities of all JVs are monitored in the Monday software system. Fig. 1 shows the status of the UCA projects.

The project data shows that the effectiveness of the JVs varies greatly – for the UCA VD it is many times higher, while for most RCs the indicators of joint projects submitted and won are almost zero. The EU-UA clusters partnership project was indicative of the real consolidation of clusters and the real existence of truly joint and priority projects: instead of consolidation around joint projects, we saw competition and, in some cases, conflict situations.

Thus, we can make a preliminary statement:

1. The effectiveness of most JVs is low. The only unit that has shown a significant change in effectiveness is the Innovation Committee, which includes the new Accelerate DGT project, as well as a number of progressive changes in lobbying and advocacy of the UCA, and in alignment with scientists. A separate report by the UCA Executive Board identifies 2 main success factors: the emergence of a new committee chair with much higher personal effectiveness and effective interaction with the UCA Executive Board.
2. The main reason for the low efficiency of most JVs is the lack of resources, primarily qualified grantwriting experts. Although their deficit has been discussed since the end of 2022, virtually no positive changes have been recorded over the past 2 years.  
3. The second reason for this situation is the low efficiency in managing available resources, primarily due to the insufficient level and lack of experience of project managers, contractors, and the clusters themselves. We saw similar examples of low efficiency in both of UCA’s main projects in 2023-24 – ClusterFundraise and UCA CapGrowth. In particular, the total losses in the latter project amounted to €8 thousand.    
4. Centrifugal forces (every man for himself) prevail at the UCA rather than centripetal forces (we do something together). The EU-UA cluster partnership competition demonstrated this quite clearly.

At the same time, it is obvious to the UCA Executive Office that it is not only a matter of low level of interaction and efficiency of individual managers or experts – a more important factor is the low internal motivation of most clusters to do something together.

1.2. Growth in the number of clusters – emergence of new joint projects

The growth in the number of UCA members – from 24 in January to 35 at the end of June 2024 – can be considered a positive trend for the UCA. As well as the better grouping of clusters in 2 key initiatives – the Energy Clusters RC (8 members) and the Clusters4Defence initiative (supporting more than 10 clusters).

At the same time, it is still too early to talk about the success of these initiatives. Like many other similar initiatives in the UCA, they have a systemic flaw from the outset – a lack of professional and responsible leaders. It is noteworthy that in the RC “Energy Clusters”, where there are 5 active clusters, we did not find a responsible coordinator and had to ask our colleagues from the DIH KAU (Natalia Garashchenko was appointed as acting coordinator).

1.3 Unified UCA regulations – impact on growth

The 30% increase in the number of UCA members in the first half of the year can be classified as progress on 2 grounds: 1) a 2-level system of joining the UCA in the categories of “full” and “associate” members has been introduced, and 2) the growth is significant, which means that it is important for clusters, both new and old, to be in the UCA. Among the new clusters, and those that are growing rapidly, the Zhytomyr Agro-Food Cluster, the Volyn Medical Innovation Cluster, and the Heat and Power Cluster of Ukraine are interesting.

Among the new regulations prepared by the UCA in the first half of the year, it is worth noting:

• UCA Code of Ethics (Ukrainian)
• Criteria for a full member of the UCA (Ukrainian)

Instead, we failed to prepare the regulations of the Project Office, which is important for interaction with the RAs in project activities. Also, the final strategic session of the UCA was postponed 3 times (two were held in January and February), which was supposed to determine the mission, vision, and/or plans of the UCA for the year 

1.4  Internationalisation of UCA clusters – joint actions

Following the largest investment of resources in this area of activity in 2022-23, UCA clusters continued to grow in 2024. The most significant achievements and growth indicators of the 1st half of the year include

• A significant increase in applications from foreign clusters for the inclusion of UCA clusters and UCA itself in international consortia (for example, 5 applications for Excellence Hub (WIDERA) projects) – there were more than 10 in total, which is twice as many as in the same period in 2023
• Participation of 7 clusters in the 2nd stage of the e-DIHs competition. Currently, 2 winners are known, led by our clusters from Khmelnytskyi and Kharkiv.
• 15 clusters in different consortia applied for the EU-UA clusters partners call – results will be in September
• Launch of 3 Horizon Europe projects – APPAU, Rivne Interregional Medical Cluster, and Podil Fashion Cluster
• Launch of the 1st UCA Interreg Europe project (Accelerate GDT), which is also a consequence of joining the TIS network (the initiative to include UCA came from there)
• Participation of Board Member Tetiana Vorontsova in a CCI workshop organised by the EC in March
• Winning of an important Business Bridge project (UA Ready 4EU) on internationalisation of SMEs by a consortium including Kharkiv IT Cluster
• Independent and joint delegations of clusters (without donor support) to international conferences in Warsaw, Brussels and Krakow, as well as to the Hannover Messe exhibition

The ClusterINT and Export Allaince APPAU projects (together with Czech and Polish partners) also contributed to the engagement of clusters and the development of a network of ambassadors.

The disadvantage of these activities is that the UCA, while positioning itself as a common brand and internationalisation service provider, sometimes gets “blurred” in the PR of the clusters themselves. This was most evident in Brussels, where we not only failed to present our own joint stand, but also faced strong competition from the “alternative delegation” of Ukrainian clusters. 

1.5 Issuance of UCA guidelines and best practices

Best domestic practices are among the top interests of Ukrainian clusters. The UCA has been working on this issue since the beginning of its activity – in the summer of 2022, a section of “success stories” appeared on the website, and before that, we were constantly sharing best practices in the cluster committee of the Industry4Ukraine platform. To a certain extent, the qualitative classification and understanding of best practices is the UCA’s calling card in relation to other movements, including competitive ones. Therefore, the creation of a catalogue of best practices was included in the work of the UCACapGrowth project. Unfortunately, no best practices were identified as part of this work. There are a number of reasons for this – from the donor’s policy to the contractors’ unwillingness. As a result, these works are still ongoing, but on a volunteer basis. 

There are four important examples of positive methodological developments:

• The first is the systematic work of the Innovation Committee. The work on the preparation of the regional SME development strategy and the general analysis of the SME strategy until 2027 were not specifically planned by the UCA, but are our response to the requests of our partners (Zaporizhzhia CCI and the Ministry of Economy, respectively). As a result, we have made significant improvements and had an impact – in particular, the topic of clusters, which was completely absent from the national SME strategy until 2027, has finally appeared there.
• The TWINS Committee – experts from the Circular Economy cluster and APPAU – are active participants in new legislative initiatives on the national Circular Economy strategy and the draft law on robotics.
• Under the EU4Digital Facility, work was carried out to systematise and register clusters in Ukraine, diagnose them, and prepare them for ESCA certification.
• The UCA CapGrowth project created the first map of clusters in Ukraine (Figure 3), and the UNIDO initiative created the first UCA catalogue.

1.6 Diversification in fundraising 

In this area, the goal was to move away from a single main source of funding, which in 2022-23 was one donor. In general, this task has been successful. In the first half of the year, projects for the UCA, including for individual clusters, were obtained from donors: 

• European programmes and funds – as already mentioned, the participation of UCA clusters in 2024 is the largest since the beginning of UCA’s activity – more than 20 clusters applied for 2 important programmes – e-DIH and EU-Ukraine clusters partnership. Together, these programmes and all UCA clusters expect to receive more than €2 million in funding by the end of 2024 – these programmes should be a real breakthrough in the development of many UCA clusters in 2025-26. Other European programmes worth mentioning are the following:
  • Interreg Europe – 2 projects for the UCA’s IA, and 1 project each for the Khmelnytsky and Volyn clusters
  • The Visegrad Fund – no clusters yet, but a good project in the energy sector to exchange experience is being implemented by the NGO ASTAR and the LEDA (Local Economic Development Agency) network. The latter is becoming the main driver in the BURSHTYN+ and GREEN PRYSAMARYA energy projects.
  • EU4Digital – does not provide direct funding, but will significantly improve the access of UCA clusters to the unified ESCA cluster management standards – UCA clusters have already passed a free diagnosis (results will be in September), and 4 of them will receive an ESCA certificate with the programme’s funds.
• Among donors operating in Ukraine, there is also significant progress in supporting individual clusters:
  • USAID – about 5 clusters receive systemic support from this donor (APPAU, UAFM, Podil Fashion Cluster, Kharkiv IT Cluster, u-Food).
  • UNDP – a number of clusters have won grants for the 2nd half of the year (APPAU, Poultry Clusters,…)
  • UNIDO – since March, there has been a significant improvement in relations and prospects for the entire UCA. In July, the catalogue for the €180 million programme with the Japanese government was published. In March, the Podil Fashion Cluster also implemented a micro-project with this donor.
  • UCORD – negotiations are ongoing to launch a new project for the 2nd half of the year.

Thus, over the past year, this area of UCA’s activities has been quite successful. The disadvantage, as already mentioned, is the very strong heterogeneity and lack of leadership among most of the Structural Units – the strongest clusters receive these grants, while young people remain without funding. Currently, the lack of such leadership is critical for the 2 RCs that are a priority for the UCA – Energy and Defence.

1.7 Developing new joint cluster initiatives

This autumn will mark the first year that all UCA JVs have been working on a “challenge-based” planning approach. That is, market challenges in a particular sector (industry, market segment or field of activity) are the starting point for setting goals and the next planning cycle. In a similar response to market challenges, the UCA formed 2 major initiatives in the first half of the year:

• RC “Energy Clusters Network”, which includes 8 organisations/
• Clusters4Defense – as a joint initiative and proposal of the UCA to international partners to strengthen the Ukrainian defence industry, it was joined by more than 10 UCA clusters.

The third major initiative has just begun to take shape – the Reskilling – Upskilling WG as a joint response to the challenges of staff and human potential loss. Another WG on Data Space was formed from experts from APPAU, Kyiv DIHs, Circular Economy and Digital Energy clusters.

In general, as in 2022-23, we see a lot of enthusiasts, strong professionals, and great project ideas in the UCA community for many of these initiatives. However, the new RCs should be wary of the lack of clear leaders among the clusters and the collective capacity to bring them to real projects.

1.8 Financial indicators of the UCA

Financial indicators of the UCA

The total expenditure budget of the UCA in the first half of the year was UAH 1 million 267 thousand, with a distribution of UAH 887 thousand for the maintenance of the service team of the UCA Executive Directorate, and UAH 380 thousand for holding or participating in major events (outside the framework of grant projects). The income budget amounted to UAH 874 thousand 500 and consisted of membership fees of full members of the UCA (UAH 107 thousand), 2 UCA CapGrowth (317 thousand) and ClusterINT (450 thousand) grant projects. Revenues from new Interreg Europe grant projects are planned only in 2025. Thus, the budget deficit in the 1st half of the year of UAH 392 thousand was covered by the budget of the APPAU, the main sponsor and investor of the UCA since 2022.

First conclusions to the performance indicators in the 1st half of 2024  

The following trends and current state of affairs at UCA can be concluded from the above results

1. Positive trends and progress:
   • Progress in institutionalisation. Accelerate GDT is changing the pace of development with the Ministry of Economy and in the 2nd half of the year we expect a real breakthrough in the release of new state (!) policies and development programmes.
   • Diversification of funding sources. 10 sources of funding – instead of 1-3 in 2022 – is a powerful progress in 2024. Together, this leads to an increase in the capacity of the UCA and many clusters, members of the alliance.
   • Continued active internationalisation with increased subjectivity. Despite the lack of donor funding (in this particular area), the UCA’s activities in international cooperation have not decreased compared to 2023, and have even slightly increased.
   • Becoming a leader in regional innovation ecosystems – if earlier this position in industrial high-tech was observed only in the Kyiv region, thanks to EDIH projects, the position of cluster leadership is significantly strengthened in Kharkiv and Khmelnytskyi.
   • A significant increase in the popularity of clusters and cluster development in the regions of the country. The activities of our clusters in Poltava, Dnipro, Lviv, Mykolaiv, Lutsk, and other regions have led to an increase in the interest of numerous regional stakeholders.
   • Emergence of professional partners – consultants. Innovation Development Centres from Rivne and Kyiv become true partners of the UCA in the areas of new projects and proposals (respectively, auditing the UCA and the Leadership Academy, and developing the UCA project office).
   • The emergence of new initiatives that successfully position the UCA and largely consolidate the best experts, such as the new RC “Energy Cluster Network” and the Circular Economy cluster.
2. Negative trends or “treading water”
   • After a year of work, the UCA has still not been able to establish the work of the Resource Centres – some successes are offset by failures in project activities, competition, or even conflicts in all other areas.
   • External factors had a negative impact on the UCA’s activities in the first half of the year: misunderstandings or direct competition with the UCA came from external, influential forces. The UCA failed to develop a unified and public position on these phenomena.
   • The UCA lacks professionalism in project management and in establishing interaction between the SPs and clusters. 2 UCA’s first projects CapGrowth and ClusterFundraise are quite controversial in their results.  
   • Due to the lack of joint projects, proper leadership from clusters and JVs, there is a decline in trust in the UCA from international ambassadors of the Professionals4Ukraine network. Similar signals come from Germany, Spain, Denmark, and to a lesser extent from others. Ambassadors want to see concrete proposals, who is behind them (clusters and their SME members), proactivity and communication. The UBA has serious problems with all of these.
   • Financially, the UCA is critically dependent on the support of its main investor (APPAU) – the weak results of the RC, which should gradually compensate for the budget deficit, are causing increasing concern among the APPAU Board. Clearly, changes in financial management and increased contributions to the CAA from other stakeholders are needed.
3. Overall, the current state should be characterised as a transition to the next phase of development. The UCA grew very rapidly in 2022 and 2023, but its structure, processes, staff, financial capacity, and most importantly, the experience and culture of inter-cluster cooperation were not sufficient for such rapid growth and external challenges. A number of negative trends, and, above all, the poor performance of the RAs, are caused by this lack of readiness. However, this phenomenon is not total, and some breakthroughs, such as in the Innovation Committee, show that there is a simple solution to these problems – to begin with, it is enough to find adequate leaders of joint projects and establish effective interaction with the UCA Executive Board. These conclusions are a consensus among several consultants – our partners, the UCA Executive Board and the Board.

Consequently, the changes to restructure the UCA launched in the 2nd half of 2023 and which continued with less intensity in the 1st half of 2024 should be continued and completed in the 2nd half of the year.

Areas of activity in the 2nd half of 2024  

UCA’s main challenge is staffing – leadership across all Structural Units. It should be manifested in: a) the presence of jointly funded projects, b) the unification and consolidation of clusters based on common chall

Therefore, in the 2nd half of 2024, the UCA Executive Board offers the following activities to clusters and structural units:

Growing a culture of cooperation: organisational development, leadership and capacity building of clusters

а) Incorporating true win-win mechanisms and increasing the contribution of strong clusters. 

We need to tap into the enormous and yet untapped potential for cooperation and synergy, primarily with the strongest UCA organisations. To do this, the Board, the UCA Executive Board and the strongest actors must find the resources and motivation to carry out the tasks.

• The major stakeholders of the UCA (APPAU, Kharkiv IT Cluster, u-FOOD, UAF, ASTAR…) need to agree on better joint input and interaction within the UCA, as well as support for young clusters.
• Complete a separate UCA reorganisation project launched in June with consultants from the CID in Rivne. Rivne. This project aims to finalise the structure of the UCA that is acceptable to all members of the organisation.
• Launch the Leadership Academy (project application is forthcoming) – its role in significantly increasing the effectiveness of joint project managers and involved experts.

b) Strengthening the UCA’s PMO activities and attracting a sufficient number of project managers and experts by

• Launching a project management school – it is clear that by 2025-26, UCA needs 20+ qualified project managers. Currently, there are no more than 3-5 of them, and they are shared by structural units.
• Allocate and promote the status of “UCA Expert” only to those experts who have proven their ability to bring new projects to clusters and their members.

c) Establishment of a cluster management school – another UCA project that will be of particular importance for young clusters.

d) Separation of the management teams of UCA and APPAU (currently a joint team funded by APPAU). This decision is obvious, due to the numerous complexities of management and financial accounting.

е) Introduction of new regulations

• criteria for a full member of the UCA – a draft proposal is being prepared for adoption by clusters on 24 July. Reinforced by ESCA certification, and eventually national accreditation, this should clearly distinguish between genuine clusters and imitations or “pseudo-clusters”.
• The UCA Ethical Code, which should make it impossible to tolerate individual provocations by internal and external forces and dishonest behaviour.

Responsible for the implementation of these measures are the UCA Executive Board and the Board.

2. Institutionalisation of the UCA / Advocacy and lobbying for cluster development

The UCA will continue to implement the Accelerate GDT project jointly with the Ministry of Economy. Within the framework of the project, and in addition to regular exchanges of experience with EU countries, it is planned to

• Adoption of the first regulations on clusters (to be specified by the Ministry of Economy)
• Launch of a separate project to create regional cluster programmes in 6 regions of Ukraine (with another donor, but it is related to the Accelerate GDT project)
• Awareness-raising campaign for regional stakeholders, as well as other donor programmes, on the needs of the UCA clusters

3. International cooperation

The UCA’s special report on the results of the 1st half of the year and plans for the 2nd half already provides sufficient detail on plans in this area. In particular, it provides for:

• August – 2 events (Lviv and Kyiv) in the ClusterINT project together with our ambassadors
• September – October – certification of UCA clusters at the ESCA level and participation in the EU4Digital conference
• October – participation in the Cluster meet Regions in Chisinau, Moldova and in the international MSV exhibition in Brno
• November – participation in the international trade fair for the Restoration of Ukraine in Warsaw

Other events are also planned that require a budget – the UCA Publishing House is looking for additional funding.

4. Improving the work of the RC and Committees

Changes in the RC’s management are planned for the Defence Industry (Dual-use) and Agri-Food divisions. In general, the plans for the 2nd half of the year are common across all business units:

• Launch the first joint projects with funding – the results of the EU-Ukraine cluster partnership call will be a turning point – we hope that at least 4 consortia winners will be affiliated with the UCA 
• Separately, in the priority areas of the UCA – defence industry and energy – we have to reach a structured, solid portfolio of projects (currently there are none)
• Particular attention will be paid to inter-cluster cooperation – for this purpose, the UCA Executive Board has already started negotiations with individual clusters. One of the priorities is to identify clusters that are overloaded with projects with those that currently have good resources but are, on the contrary, underloaded.
• 2 UCA WGs on best practices should publish their findings with a demonstration of best cases – their promotion should encourage other clusters to interact better.

5. Communication strategy of the UCA  

Work in this area began in April-May but was not continued. The Executive Board of the UCA plans to finalise this strategy in October.

The Executive Board of the UCA is grateful for the cooperation of the Board and all structural units, as well as all UCA member clusters. The first half of 2024 was very challenging due to many factors. At the same time, our growth rates remain high and, overall, UCA has demonstrated significant resilience to all challenges. Comments and suggestions on this report and the 2nd half action plan are welcome.

UCA Executive Board.