CHEMICAL PRODUCTION MODERNIZATION IN THE FORMATIVE PHASE OF INDUSTRY 4.0: STUDY OF TRENDS AND PROBLEMS OF INVESTMENT SUPPORT

The object of the research is the investment process of modernization of chemical production. The long-term systemic crisis in the Ukrainian chemical industry, unprofitability and high capital intensity of production are constraining factors for its radical modernization. Modern tasks of digitalization of production and introduction of smart innovations form new problems and require new approaches to their solution. In the process of research, the methods of analysis and synthesis, comparison, structural analysis, generalization and graphical method were used. The analysis of foreign practice of innovative investment in chemical production found that the development strategies of companies and their investment priorities depend on the role of the segment in the global value chain. Industry leaders are diversifying their investment portfolios in the direction of high technologies for deep processing and production of high-tech low-tonnage products. At the same time, the technologies of Industry 4.0 and smart manufacturing become an integral part of their innovative investment strategies. The study of trends and problems of investment support for the Ukrainian chemical industry showed that its traditional business model is gradually losing its resource and technological basis, and there are not enough investments within the industry for large-scale modernization. For external investors, certain segments of the chemical industry, producing liquid differentiated small-tonnage consumer goods, are of particular interest. Promising approaches to the revitalization of investment activities in the chemical industry in the context of the formation of the Industry 4.0 are identified. They are based on the special role of chemical production as a supplier of smart materials and technologies, making it a necessary component of any innovation ecosystem. It is shown that external investments for the smart modernization of the industry should be sought among the industries consuming chemicals. It is substantiated that small and medium-sized enterprises should become the key subject of Industry 4.0 processes in the Ukrainian chemical industry. Considering the insufficient technological readiness and investment support of such entities, their specialized support and program financing is necessary. The proposed approaches allow overcoming the existing internal and external limited financial resources and mobilizing investments to launch smart modernization of chemical production.


Introduction
Industry 4.0 is a new modern paradigm of industrial development, it forms models for the problemsolving of the Industrial Internet of Things and processes their so lutions in various industrial sectors. According to the fin dings of experts from the international consulting company PricewaterhouseCoopers, «The buzz around Industry 4.0 has moved from what some saw as PR hype in 2013 to investment and real results today» [1].
Gradually, the conceptual ideas of Industry 4.0 are included in the agenda of Ukraine. Thus, the promotion of digitalization of industry and its transition to the principles and fundamentals of the Industry 4.0 concept is one of the topical directions for implementing the Strategy for the development of the industrial complex of Ukraine for the period up to 2025 within the framework of the stra tegic objective «Modernization and growth of industrial production». The essence of this direction, the developers of the project Strategies see in the «digitization of all tangible assets and integration into digital ecosystems and value chains of the partner countries» [2].
It is clear that the modernization of the industry, in particular, digital, requires significant investment re sources. In the same Strategy, among the main areas of implementation, the first one is titled «Attracting external and domestic investment in industry», where involvement in the production of foreign direct investment (FDI) is considered as the main condition for modernizing the industry, ensuring the competitiveness of industrial pro ducers and integrating them into global value chains. However, while «systemic problems of the investment field» are stated, the fall in capital investments in the industry of Ukraine is 65.2 % compared to 2013 and the TECHNOLOGY AUDIT AND PRODUCTION RESERVES -№ 1/4(45), 2019 ISSN 2226-3780 inflow of the bulk of FDI in the financial and insurance sectors.
To overcome these negative processes, it is planned to introduce a number of measures and a package of initiatives, in particular, aimed at attracting FDI into production: -establishment of relations between the Ukrainian industrial small and mediumsized enterprises and fo reign investors; -encouraging investment in projects to deepen the processing of raw materials, which will increase the value added of products, create new jobs, will con tribute to the growth of industrial production in the regions and its product diversification; -analysis of existing industrial resources, production, innovation and labor potential of each region and the development of strategies for regional industrial deve lopment based on the methodology of smart speciali zation, etc. At the same time, it should be emphasized that the effectiveness of systemwide measures and their impact on the development of specific enterprises is largely deter mined by the specifics of the industry environment and its readiness for transformations. Therefore, the actual stage of research is the analysis of sectoral aspects of industrial investment in the context of the objectives of Industry 4.0.

The object of research and its technological audit
The object of research is the investment process of mo dernization of chemical production.
Chemical production has certain features of technical and technological support, which significantly affect its economy and organization: -complex continuous technological schemes; -various types of equipment; -high fund and energy intensity of production pro cesses; -significant costs for infrastructure facilities; -environmental, fire and explosion hazards. The structure of the Ukrainian chemical complex is dominated by largescale production of basic chemicals. But they are characterized by significant physical and moral deterioration of technological equipment, and in modern conditions they lose their competitive potential.
Investments for largescale renewal and modernization of industry production are constrained by a number of systemic reasons (high capital intensity, a long investment cycle, unprofitability or low profitability of many indus tries), as well as certain destructive situational factors.
At the same time, the ideas of the fourth industrial revolution, or Industry 4.0, are now rapidly spreading around the world, revealing the prospects for industrial development based on the use of cyberphysical systems. Specialists discuss the characteristics of the digital deve lopment of the chemical industry and new opportunities related to the Internet of Things [3,4]. Chemicals 4.0 is formed [5][6][7] -the industrywide concept of smart modernization of chemical production.
The restructuring of the Ukrainian chemical industry on the principles of Chemicals 4.0 has many diverse prob lems. One of the most problematic issues is the investment support of modernization processes.

The aim and objectives of research
The aim of research is studying the processes of in vesting the modernization of chemical production and the definition of approaches to their transformation in the con ditions of Industry 4.0.
To achieve the goal of the research the following tasks are defined: 1. To analyze the modern foreign practice of investing innovative development of chemical production.
2. To explore the trends and problems of investment support of the modernization of chemical production in Ukraine.
3. To identify promising approaches to the revitalization of investment activities in the industry in the context of Industry 4.0 formation.

Research of existing solutions of the problem
The research of theoretical and applied aspects of in vestment support of industrial development is devoted to the work of many scientists. In these works, the influence of the quality of forecasting future investment returns on corporate investment decisions was investigated [8]. And also analyzed the model of financing the real sector of the economy and built a financial and economic mechanism to ensure the investment activity of enterprises [9]. The paper [10] explores the relationship between foreign direct investment and the productivity of host country domes tic firms. According to the study, the authors separate out productivity gains along the supply chain (obtained through direct transfers of knowledge/technology between linked firms) from productivity effects through indirect investment spillovers.
Special attention is now paid to the issues of finan cial and investment support of neoindustrial develop ment and digital business transformations. The strategic aspects of investing processes in Industry 4.0 are covered in the work [11]. The influence of digitalization and digi tal technologies on investment policy and international investment is considered in [12]. The authors believe that the emergence of hybrid business models (related to the integration of digital data and technologies in operations and business models of nondigital enterprises) may lead to the emergence of a new chapter in the globalization of investment. But a restraining factor for crossborder investment decisions can be the unresolved problems of national security and privacy.
The work [13] defines the role of the state in the institutional transformations of the investment compo nent of digital development, in particular, its regulatory, coordinating and stimulating functions. The need for neo industrial development of Ukraine and the implementation of an active state policy on the investment support of the modernization processes is also noted in [14]. The author's theses on promising forms of investment in industry based on the strengthening of the capacity of centralized and local sources of financing in the context of financial de centralization are worthy of attention. However, scientific and applied issues of expanding budget investment, neo industrial development require additional study.
The work [15] presents the results of longterm statis tical studies the influence of tech investments, ICT and TECHNOLOGY AUDIT AND PRODUCTION RESERVES -№ 1/4(45), 2019 ISSN 2226-3780 financial factors on global manufacturing and service in dustry performance. Lowtech industries rely on loans and tech investments. As they move to transition industries, tech investments are more important. Once they become highly technologically advanced, bank lending policies be come more important.
The specifics of investing in the chemical industry and its individual aspects are outlined in a number of papers. Thus, the results of a study of the R&D investment features, implementing European chemical companies, are given in [16]. A comparative analysis of the investment policy of public and private producers of chemicals is presented in [17]. The treatment of the issues of evalua ting the effectiveness of investments in chemical industry enterprises is the subject of [18,19].
PricewaterhouseCoopers present the results of a global survey of managers of large chemical companies regarding the current status and plans for investing in the digitalization of industry production [20]. Generalized research results show that chemical companies plan to invest in digital technology up to 5 % of their annual income over the next five years. The expected benefits are annual revenue growth of 3.1 % and cost reduction of 4.2 %.
The conducted scientific research shows that the modern economic literature covers various aspects of the investment support of industrial modernization processes, including in the context of Industry 4.0 processes. There are certain developments re garding the sectoral features of the chemical industry.
At the same time, the implemen tation of the developed approaches in developing countries requires ad ditional research. A review of the literature indicates that individual work, for example, is devoted to the problems of industrial investment in the Ukrainian chemical industry [21].
In [22], on the basis of statistical analysis of the performance factors of the leading chemical companies of the world, it was shown that capital costs are the most significant factor in the growth of chemical production. How ever, not only investment volumes are important, but also their direc tions. Therefore, the above trends of intellectualization and digitalization of production should be the basis for rethinking the development policy of the chemical industry in Ukraine and ways to improve its investment support.

Methods of research
During the execution of the work the following scien tific research methods are applied: -methods of analysis and synthesis -in the study of modern features of the development of chemical production and the processes of its investment, the impact of Indus try 4.0 technologies on the development of the industry; -comparison method -when assessing the specific capital costs and R&D costs of the chemical industry in the world; -structural analysis method -to identify differences in the dynamics of indicators for the product segments of chemical production; -graphic method -for visual representation of the dynamics of financial and investment processes in the chemical industry; -method of generalization -when drawing conclu sions on the key problems of innovative investment in chemical production and ways to solve them.

Research results
In the study of foreign investment practice providing innovative modernization of chemical production, the data of the Global Top 50 Chemical Companies 2017 rating [23] and the corporate reporting of two chemical companies, the German BASF and the Norwegian Yara International, were processed. Due to the specifics of production processes, technical support and the influence of market factors on the activities of petrochemical companies, the latter were excluded from the analysis ( Table 1).
The data of Table 1 indicate that among the top compa nies in the world in the production of chemicals in terms of quantity and volume indicators diversified companies prevail. They are also leaders (together with manufactu rers of special chemicals) by unit costs for research and development (2-6 %). At the same time, the share of capital expenditures in the sales of industrial gas and agrochemical companies (more than 10 %), with some Note: developed on the basis of data [23] ISSN 2226-3780 exceptions, markedly exceeds the similar indicators of diver sified companies. These data reflect different development strategies and investment priorities in different segments depending on their place in the global value chain of the chemical industry. Differentiated by segments of chemical production, there is a return on invested capital. Thus, according to experts of McKinsey & Company, the median return on invested capital (before tax) in the production of special chemicals is more than 16 %, in diversified companies -about 12 %, in the production of basic chemistry -11 %. These values exceed the corresponding average for the global economy [24].
The development of largescale basic chemical produc tion (early stages of chains) is based on access to cheap resources, highly efficient technologies and favorable logis tic flows. Therefore, investments in these segments are aimed primarily at building new plants, expanding and modernizing existing facilities, creating infrastructure facili ties, and acquiring production assets, transportation and distribution systems.
At the same time, companies in developed countries are gradually losing competitiveness in the markets for largetonnage products due to high prices for raw materials. Therefore, they are forced to shift the focus of attention to the final stages of global value chains and diversify portfolios of investments in the direction of high technologies of deep processing and pro duction of hightech lowtonnage products.
This trend can be traced by comparing the structure of sales, investments and R&D expenditures by product segments of BASF in 2017 (Fig. 1).
The study of modern features and results of the leaders of the world chemical business shows that the technologies of Industry 4.0 are becoming an integral part of their innovative investment strategies. For example, BASF already has a wide portfolio of innovative materials, system solutions, components and services for 3D printing. In 2017, a subsidiary of BASF 3D Printing Solutions GmbH was founded to purposefully expand this business.
In addition, the Dutch manufacturer of the threads Innofil3D B.V. was acquired, which made it possible to organize the production of long thin plastic fibers for 3D printing.
Yara International, a leading player in the global mineral fertilizer market, in 2017 continued to develop its platform for Circular Economy and the SINTEF Innovation Lab. With SINTEF, Yara aims to explore ways to revolutionize fertilizer production and develop technologies that allow for more environmentally friendly, cheaper and smarter processes, as well as development of sensor technologies.
As for the Ukrainian chemical industry, it has recently been in a deep crisis caused by a combination of destruc tive economic and sociopolitical factors. The financial performance showed a catastrophic state of basic chemical production: at the end of 2014, accu mulated losses amounted to almost 3 billion USD and the annual unprofitability of operating activities reached 23.5 % (Fig. 2).
Due to the deterioration of the indica tors of production and commercial acti vity and the lack of revenues, investment activity in 35 % of the enterprises of the industry decreased (Fig. 3, 4). In addition, most of the investment went to the restora tion of wornout equipment, so this scale of investment was insufficient to meet the challenges of innovative modernization of the industry.
In the second half of 2017, recovery growth began in the sector. At the end of last year, the volume of chemical production increased by 18. enterprises after long downtimes, as well as the effect of a low statistical base. But the experience of the previous stages of development of the chemical industry of Ukraine indicates a limited and temporary upward trend based on situational factors. Therefore, the impetus and results of the current growth should be used for a radical trans formation of the industry production model. The data in Fig. 3 show that from 2017 there is a gradual recovery of capital investments in the Ukrainian chemi cal industry. But their share in sales (4.5 %) has not yet reached the precrisis level (6.1 %) and is in the lower range of the corresponding figure for a group of world leaders in the industry.
Noticeably worse is the level of specific innovation costs in the chemical industry of Ukraine: in 2016 it fell to 0.14 %, and by the end of last year it grew only to 0.4 %. The achievable guideline for recovery here should be the level of 2012 -1.7 %.
The reduction in specific innovation costs in 2016 was due to a significant (11 times compared to 2012) falling of industry investment in innovation. Following them, the industry indicators of innovation activity and performance have plummeted.
In 2017, innovative investments in chemical produc tion somewhat revived, but this did not lead to positive changes in performance indicators. However, it should be noted a significant increase in the cost of domestic R&D, which may indicate the spread in the field of innova tive thinking and the formation of appropriate business models.
The limited sources of financing are important prob lematic issues for innovative investment. Fig. 4 indicates that external sources of investment are not systemic in nature, but their significant contribution to the financing of innovations in the precrisis period indicates investment prospects for the sector.
Foreign investment can be a power ful driver for the development of the in dustry on innovative principles. But the dyna mics of foreign investment largely depends on macroeconomic, institutional and noneconomic factors.
The study of the dynamics of foreign investment in chemical production showed that their slow growth until 2013 replaced by the active outflow in subsequent years. If in 2013 foreign investment in the chemi cal industry accounted for 2.2 % of the total foreign investment in the economy of Ukraine, in 2017 this share decreased to 1.7 %. This value is calculated on the basis of data [26].
Own funds of enterprises are also objec tively limited by the source of investment, since Ukrainian chemical production has so far failed to achieve profitability of the activity (Fig. 2). However, if analyzing the financial results before the taxation of enterprises depending on their size, it becomes clear that the main contribution to the negative industry financial result is made by large enterprises. At the same time, according to the State Statistics Service of Ukraine [26], 79.2 % of medium sized and 72.1 % of small enterprises re ceived profits in 2017.
It is worth noting here that previous ly, the focus in developing the region's industrial and investment policy was on the resource efficiency of large enterprises of basic chemistry, which produced two thirds of the total industry product. Now the Ukrainian basic chemical production is gradually losing its competitive potential. The current performance of individual en terprises depends mainly on institutional and other noneconomic factors [28]. Basic chemistry enterprises had good investment op portunities for radical modernization in the mid2000s. Their investment programs contained many measures for technical reequipment, optimization of production capacity, energy saving, diversification of production, development of new types of products. But the imple mented projects had an improving character within the existing technical and technological level of production, which provided only temporary support for its compe titiveness. Own funds of enterprises, million USD Other sources, million USD

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Today, the sector is dominated by «short», point in vestments focused on the production of liquid products of traditional demand [21]. Investors are not interested in the modernization of outdated Ukrainian basic chemical plants through a set of diverse risks and the best alterna tives available.
At the same time, separate segments and activities related to the manufacture of differentiated products for consumer markets are gradually developing in Ukraine. These are the production of complex agrochemical pro ducts, paints and varnishes, flame retardants, household chemicals, cosmetics, water purification agents, materials for modern diagnostic methods, etc. These segments are distinguished by the significant participation of foreign capital, the attraction of advanced foreign technologies and readiness for further innovation development.
The active development of these industries should be considered in the context of neoindustrial models, now rapidly spreading in the industrialized countries. Neo industrialization of chemical production provides, among other things, the creation of hightech environmentally friendly lowtonnage production in the segments of the special and «fine» chemistry (the final stages of the value chains) based on innovative technologies.
In investment terms, such a transformation of strategic benchmarks in the development of chemical production means the possibility of a parallelsequential investment method, when the creation of highvalueadded industries is financed by funds generated by the previous stages. This is the opportunity that now exists in the Ukrainian sector of basic chemistry. This chance should be used to preserve and extend value chains that are traditional for the Ukrainian chemical industry.
A weighty source of foreign investment in digitali zation and the development of chemical production on a smart basis can be investment in consumer industries. The fact is that modern chemical production is a mem ber of various value chains, which causes its great in tersectoral importance. McKinsey & Company specialists write: «Last, we must keep in mind that the chemical industry has an intrinsically sound business model: its products enable the «world of things». Without some support from the chemical industry, hardly any of what we touch, of the buildings we live in, the food we eat, and the healthcare we receive could exist. The industry as a whole is therefore positioned to profit from a wide range of trends, from sustainability to emobility, from commodity demand surges to major changes in consumer behaviour» [29].
But in Industry 4.0, the role of chemical manufacturing is increasing, as it is a key supplier of advanced mate rials for digital and smart technologies. For example, [30]: -for mobile and smart devices, components from modern chemical materials are necessary substrate, backplane, transparent conductor, barrier films and photoresists; -for highspeed Internet -chlorosilane for ultrapure glass; -for more efficient and smaller integrated circuitsdielectrics, colloidal silica, photoresists, yield enhancers and edgebead removers. Another chemical production partner in the application of smart solutions is agriculture. The concept of «preci sion farming» involves the use of chemicals with precise means to increase yields. This approach requires a trusting, transparent relationship between farmers, manufacturers and suppliers of agrochemicals, developers and equip ment manufacturers, traders. All partners receive their benefits through access to optimal solutions generated by technical platforms based on processing large amounts of data.
The agricultural sector is now one of the locomotives of the Ukrainian economy. It generates a significant por tion of gross domestic product and export earnings. The introduction of new technical solutions, in particular, digital, is a promising direction for increasing the efficiency of agricultural production. So, the Ukrainian agrarian sector also needs investment opportunities for the development of various intersectoral innovation ecosystems, including cooperation with chemical production for the implementa tion of the concept of «precision farming».
In the management of sectoral development processes on a neoindustrial basis, an institutional aspect is important. According to the State Statistics of Ukraine [26], the number of major chemical producers decreased from 18 in 2011 to 8 in 2017, mediumsized enterprises -from 193 to 161, and small enterprises -increased from 1504 to 2075. In addition, for many years the basis of the business strategies of large enterprises is not innovative invest ment drivers, but situational noneconomic advantages. Analysis of the reporting of leading enterprises shows that in recent years, technological refinements have not been carried out by them.
At the same time, small and mediumsized enterpri ses (SMEs) are developing in the region, which, in certain technological areas, has a competitive portfolio of innova tive developments, creates new production facilities and is looking for opportunities to integrate into global value chains. So, the modern foreign practice of neoindustrial development and the activation of SMEs in the Ukrainian chemical sector indicate a shift in the focus of invest ment in the direction of knowledgeintensive lowtonnage production with high added value. However, investment issues by SMEs in Industry 4.0 technology are more complex. Without breaking the whole range of problems of investment activity of small and me diumsized enterprises, let's focus on two aspects.
The common digital tools and smart solutions that the ICT sector offers must be adapted to the specific industry conditions. On the other hand, the request for relatively inexpensive business solutions in the develop ment of smart technologies can be satisfied only if there is enough demand from the subjects of the industry and cheaper unit costs for individual projects.
Another problem is considerable uncertainty and high innovation risks of such projects. Investors are forced to make investment decisions in conditions of high informa tion asymmetry and require certain signals to reduce it.
In fact, both problems affect the improvement of mar ket communication between the industrial and ICT sec tors. To solve them, it is necessary to take advantage of foreign experience supporting innovative initiatives. For example, the promotion of the organization of industry demonstration centers to highlight the best practices or test sites for the implementation of pilot innovation pro jects. Given the shortage of financial resources for inves ting such an infrastructure of Industry 4.0, one should actively use the experience and resources of European institutions.

SWOT analysis of research results
Strengths. The proposed approaches to the revitaliza tion of industry investment in the context of Industry 4.0 take into account the international experience of the neo industrial development of chemical production, the current problems of investment support for the modernization of the Ukrainian chemical industry and the special role of chemical production in the processes of the fourth industrial revolution. They allow to overcome the existing limited financial resources and mobilize investments to launch smart modernization of chemical production.
Weaknesses. The proposals envisage the attraction of organizational and communication resources of the busi ness community for the use of sectoral and intersectoral synergies, but only large chemical enterprises have positive experience of collective initiatives.
Opportunities. Given the high intersectoral importance of chemical production as a supplier of smart materials and technologies, smart modernization of the chemical industry can become a driver for Industry 4.0 processes in other sectors of the economy.
Threats. In Ukraine, there is a complex of macroeco nomic and sociopolitical risks. If they are implemented, the investment climate will deteriorate. This will lead to further reductions in industrial investment and inhibition of Industry 4.0 processes.

Conclusions
1. The modern foreign practice of investing innova tive development of chemical production is analyzed. It is revealed that the development strategies of enterprises and their innovation and investment priorities depend on the role of the segment in the global value chain of the chemical industry. The average level of investment in research and development among industry leaders is 2-3 % of sales, capital assets -8-10 %. Due to the loss of competitive positions in the markets for largetonnage products, companies in developed countries are shifting attention to the final stages of value chains, that is, they diversify their investment portfolios in the direction of high technologies for deep processing and the production of hightech smallscale products.
2. The tendencies and problems of investment support for the modernization of chemical production in Ukraine are investigated. It is shown that as a result of a deep systemic crisis of industry production, there has been a significant drop in capital and innovative investments. The traditional business model of the Ukrainian basic chemical production is gradually losing its resource and technological basis, but there are not enough investments within the industry for its radical modernization. For ex ternal investors, certain segments of the chemical industry that produce liquid smalltonnage consumer goods are of particular interest. The development of these industries can be viewed as nonsystemic examples of the neoindustrial sector upgrades.
3. The promising approaches to the revitalization of investment in the chemical industry in the context of the formation of the Industry 4.0 are identified. They are based on the special role of chemical production as a supplier of smart materials and technologies, making it a necessary component of any innovation ecosystem. So, external investments for the smart modernization of the industry should be sought among the chemical industries.
Based on the existing institutional structure of the chemical industry of Ukraine, in the development of sec toral processes of Industry 4.0, the rate should be placed on SMEs. But, given the lack of technological prepared ness and investment support of such structures, they need specialized support and program funding.