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EDITOR’S LETTER The UN General Assembly proclaimed the World Press Freedom Day on May 3, 1993. “Proficient journalism enables citizens to make well-founded decisions regarding the development of their society. It also deals with the injustice conviction, corruption and abuse of power. To fulfill this task journalism should be able to thrive in a favorable environment in which journalists can work independently without any interference and in safety.” From the joint message of the UN Secretary General Mr. Ban Ki-moon, the UNESCO DirectorGeneral Ms. Irina Bokova and the UN High Commissioner for Human Rights Zeid Ra’ad AlHussein on the occasion of World Press Freedom Day.
Now you hold a free and independent publication. Though to remain independent is not easy, it is the only way to overcome corruption and to develop professionalism. All we desire - is to be objective and useful for business people, to be a unifying point for those who are interested in a constructive development and formation of the Ukrainian image as a global business partner. We believe that our common efforts will be beneficial.
Sincerely, Ludmila Omelchenko
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CONTENTS NEWS 8
PRESS RELEASE AGRO 2015
EVENT
10
International Conference to support Ukraine 12
ANALITICS
Ukraine โ the Food Basket of the World 16
AGROIMENA PERSONALITY
Time to Give Back to Society
FUND
20
Reliable partner for agricultural producers
ANALITICS
24
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Ukraine: Soil fertility to strengthen climate resilience
VIEW EXPERT
26
Public private partnership as an internationally proven mechanism for attracting private investment 30
VIEW ALTRNATIVE
Direct investment in the agricultural sector of Ukraine does not boost the development of the industry under the current approach 32
PHOTO REPORT AGRO Tour Acros Ukraine
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34
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NEWS
$8 billion
are going to be attracted to the agrarian sector of Ukraine by 2020
State Food and Grain Corporation is planning to ship 4 million tons of grain to China.
Saudi Arabia is ready to invest 1 billion dollars into Ukrainian irrigation system.
А Memorandum of Cooperation between the Republic of Kazakhstan and Ukraine Borys Prykhodko, the head of the corporation, called the stabilization of relations with the Chinese partner one of the most important tasks of GPZKU.
«We need to improve the company’s image as a reliable customer in the domestic market and as a reliable supplier in the foreign market, to create an organization that is able to give an immediate response to the agricultural commodity market conditions», - said Borys Prykhodko. More than 500 tons of grain have been already shipped as a part of the contract with China. Moreover the Corporations is working out a possibility of sugar, powder milk, sorghum, barley and soybeans export to China. “There are no quotas and there is a low import tax on these products. We might supply flour”, – informed Borys Prykhodko..
It was reported by Oleksii Pavlenko, the Minister of Agriculture and Food, after his visit to Saudi Arabia. “We had a conversation with several companies among which were companies from Saudi Arabia that are ready to invest up to 1 billion dollars in our irrigation system.” – he said. The World Bank is considering the possibility of financing of the project.
was signed in Kiev in May 2015 during а social function of the Diplomatic Business Club, which was devoted to contribution of development of friendly countries. The social function was held with the support of the Ambassador Zautbek Turisbekov and the Embassy of the Republic of Kazakhstan in Ukraine. The Ambassador noted a number of favorable preconditions of the importance of Ukraine and Kazakhstan cooperation..
Ukraine and Norway: prospects of strategic partnership in the fishing industry On May, 25 there was a business conference “Opportunities for Ukrainian and Norwegian business: focus on the agricultural sector» that was organized by the Norwegian-Ukrainian Chamber of Commerce (NUCC). “Norway is the world’s second largest exporter of fish and fish products, and Ukraine is a global supplier of raw materials for fish feed. We must establish a partnership that will be beneficial for both sides, creating a strategic partnership between Ukraine and Norway in the field of aquaculture”, - said Dmytro Shulmeister, the director of the Department of Food of the Ministry of Agrarian Policy and Food of Ukraine. 8
The main theme that was brought up at the conference was the revision of the Agreement on agriculture between Norway and Ukraine, namely the possibility to include some additional items in the list of products that are tax-free. The most relevant thing for Ukraine is the inclusion of corn, wheat, soy cattle cake and honey. Furthermore, the director of the Department noted that soybeans and sunflower oil have already got this status but Ukrainian producers are using this opportunity not sufficiently.
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NEWS Japan is going to provide a grant to purchase the equipment made in Japan for the Ukrainian agrarian sector.
Мinister of Agrarian Policy and Food of Ukraine, Oleksii Pavlenko, had a meeting with the Deputy Minister of Foreign Affairs of Japan Yasumasa Nagamine and the Ambassador of Japan in Ukraine Shigeki Summi. During the meeting, the Minister expressed his gratitude for the political and financial support of Ukraine, particularly in the implementation of common projects of technical assistance and participation of Ukrainian specialists in the agricultural sector in training courses of the Japanese International Cooperation Agency (JICA). In turn, the Deputy Minister of Foreign Affairs of Japan, Yasumasa Nagamine, confirmed that the Japanese side intents to support Ukraine in ways of financing the investment and technical assistance projects. The Japanese Ambassador Shigeki Summi reported that the Government of Japan is planning to provide a grant to buy the necessary equipment in Japan.
Google will invest in agricultural technology
The Ministry of Agrarian Policy makes a forecast to put up 150-180 agrarian stateowned enterprises for privatization until 2016.
Google Ventures, the technology department of venture capital companies, as well as the investors of DBL, and Kleiner Perkins Caufield&Byers are investing 15 million dollars in the American company Farmers Business Network (FBN). The company is planning to carry out the analysis of temperature and soil characteristics and other data collected via use of the computerized sensor agricultural equipment in order to help farmers make better decisions when growing crops.
According to various estimates of the Agricultural Ministry, the economic effect can reach the point of 600 million to 1 billion hryvnas from the privatization of state agricultural enterprises. The Minister, Oleksii Pavlenko said that 571 stateowned enterprises are subordinated to the Ministry among which 96 are working and only 20 are profitable. “Last year’s total losses of agricultural state-owned enterprises are nearly 0,5 billion hryvnas.” - informs the Ministry of Agrarian Policy. The preparation of fulfilling the privatization of state-owned enterprises of public agro-industrial complex will be held with the assistance of the Fund for Innovation and Development of Georgia.
NEW UKRAINE 2015 — International investment conference Empire State Capital Partners organized «NEW Ukraine 2015» international investment conference that took place from 13-15 May, 2015 in InterContinental Kiev. The aim of this conference was to discuss political, economic and cultural achievements that Ukraine has reached after Euromaidan victory, those improvements that core government systems have obtained and the changes that still need to be implemented in order to continue the Revolution of Dignity on a proper level. We strive to demonstrate to international investment and business society a NEW level of our country, a NEW
approach to the key issues of collaboration with partners, NEW initiatives to improve the investment climate, and NEW level of organizing business events - «NEW Ukraine 2015». The event was be held on May 13-15, 2015 and covered the following sectors: Macro & Politics, Agro, Infrastructure, Machinery, Real Estate, Ecology, Renewable Energy, Financial and Banking sector and Venture Capital.
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PRESS RELEASE
On June 3-6, 2015 the Expocentre of Ukraine National Complex will welcome AGRO 2015, the XXVII-th International Agriindustrial Exhibition sponsored by the Ministry of Agrarian Policy and Food of Ukraine.
AGRO 2015 is the largest agriindustrial exhibition at the territory of our country which serves as the platform to improve production, introduce innovations and develop all fields of Ukrainian agro-industry. It is a business event to open opportunities for cooperation with the countries - leaders in the world agrarian sector. It opens up a dialogue with the Ministry of Agrarian Policy and Food of Ukraine, Ukrainian associations, small and large enterprises and foreign investors. It is AGRO 2015 that establishes the agrarian sector development strategy in the coming years. 10
Over 30 thousand sq.m exposition area will be allocated to demonstrate the best products and technologies of hundreds of domestic and foreign participating companies. Traditionally, the exhibition halls of the Expocentre of Ukraine National Complex will house the representatives from the leading agrarian companies in Ukraine and the world, including Belgium, China, Finland, the Republic of Korea, Germany, Poland, Slovakia, Latvia, Lithuania, the Republic of Turkey. Every year the number of AGRO visitors exceeds 40,000 persons; among them are the country chief executives, representatives of the large agricultural holdings, owners of small and medium farming enterprises, experts of machine building, food and processing industry. Substantial part of the exhibition will be traditionally covered by the best samples of modern machinery: combines, tractors, mounted equipment/attachments, equipment for grain processing and storage as well as equipment to build agricultural structures and transport harvest. The variety of products will allow the most proper and profitable options to improve yields and production quality. AGRO 2015 will offer broad options for professionals to exchange business experience thanks to the extensive scientific program: interactive briefings, seminars, conferences, round table discussions. They will raise topical issues of agriculture, market analysis and forecasting for agricultural products, legal aspects of agrarian sector. Traditionally, AGRO will build long-term partnerships on cooperation, joint production, support and subsidies in agriculture, which will be the major impetus for the development of domestic agriculture.
The following exhibitions will be held in the frames of AGRO 2015: • ExpoAgroTech2015 – agricultural machinery, equipment and spare parts; • Biofuel 2015 – renewable energy resources; • Hi-Tech Аgro 2015 – automation, control of alternative energy, GPS and GIS technologies; • Organic 2015 – organic products and technologies; • Animal’EX 2015 – farm animals, veterinary and products for livestock husbandry; • FishExpo 2015 – fish industry and fishing; • Plant Growing and Agricultural Chemistry – agrotechnics, agrochemistry, eco-friendly products and technologies, farm households, horticulture, farm gardening, crop production, greenhouses. A specialized exhibition program includes tasting and sales of environmentally friendly products, an exhibition of various animal species and exposition of the most common food fish to be observed in the outdoor pools. Of particular note is a unique exhibition of the NAAS innovative developments in livestock farming, vegeculture and seed production. AGRO 2015 exhibition is the most important event in Ukraine agriindustrial sector. Its target is to demonstrate the achievements, establish contacts between producers and buyers, open the Ukrainian market for foreign companies as well as introduce innovative solutions and technologies aimed at agribusiness development minimizing the costs and increasing profitability of both large and small agrarian enterprises.
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EVENT
International Support for Ukraine Conference On April, 28 2015 the International Support for Ukraine Conference took place in Kyiv and was attended by representatives from 56 countries. A lot of questions were considered during the event including macro-financial help from the EU to support Ukraine in conditions of Russian aggression, monitoring the investment opportunities in Ukraine, particularly in agricultural business sphere. 12
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«
»
Everyone who supports Ukraine - supports the stability of the European Union and the world
Arsenii Iatseniouk, The Prime Minister of Ukraine
Ukraine was represented by the country’s top leadership – the President Petro Poroshenko, the Chairman of the Parliament Volodymyr Groysman, the Prime Minister Arseniy Yatsenyuk and members of the Cabinet. Among the foreign guests there were the Prime Ministers of Latvia and Slovenia, the President of the European Commission Jean-Claude Juncker, the Commissioner for European Enlargement and Neighbourhood Policy Johannes Hahn and others.
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Even despite the fact, that the format of the conference was changed and the “donor” conference became a conference in support of Ukraine, it was an important event that attracted additional informational interest to Ukraine. It showed another signal of openness and readiness to be a platform for investment. It helped to see potential investors and understand the conditions under which they will invest in the economy, and get to know which sectors are the most attractive in terms of investment. The Ministry of Agrarian Policy and Food of Ukraine invited AGROIMENA edition as a media partner of the conference, and we were able to hear the reports of the participants firsthand. The Prime Minister Arseniy Yatsenyuk called on the donors to provide financial support to Ukraine in order to implement the reforms and to fight against corruption. “Everyone who supports Ukraine - supports the stability of the European Union and the world,” - said the Prime Minister. He stressed that international investors should pay attention to the agricultural sector because “Ukraine can produce ecologically clean and competitive agricultural production.” Aivaras Abromavichus noted the positive stabilization of the dollar and also said: “In order to improve the investment climate in the country Scott Jacobs was invited - the godfather of the regulatory “guillotine” all around the world. It will take him three weeks to review our regulatory environment ... We hope he will take it up with his specialists and will be able to implement this regulatory “guillotining” over the next 12 months together with us and the Parliament.” “We are ready and willing to provide Ukraine with an unprecedented level of financial support.” - said the Commissioner for European Enlargement and Neighbourhood Policy Johannes Hahn. “But the main condition of this support is to carry out reforms.”
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After that the conference was divided into four discussion boards: “Restitution of the regions that are victims of the conflict” “The business climate and investment opportunities in Ukraine” “Energy industry, energy efficiency and reforms” “Agrarian policy and reforms”.
Agrarian panel discussion
The key achievements and next steps in reforming of agriculture, new directions of agrarian business and prospects of banking capital in the financing of the agricultural sector of Ukraine, as well as the strategy of the development of agriculture and rural areas in the years 2015-2020 were considered at our board. The members of the discussion: Oleksii Pavlenko - the Minister of Agrarian Policy and Food of Ukraine, Andrii Pyvovarskyi – the Minister of Infrastructure of Ukraine, Heinz Olbers - the director of credit operations in the neigh-
ards of product quality. The latter is especially important in the context of reorientation of the Ukrainian agricultural sector to the European, Asian, Middle East and American markets. According to the Minister, although Ukraine had actually lost the CIS market in 2014, domestic farmers have quickly found alternatives in Europe (export of agricultural products increased by 4.4% there), Asia and the Middle East (+10% of exports), the USA (+33.2% of exports). Ukraine is now actively preparing to conclude a number of free trade agreements with such countries: Canada, Turkey, Serbia, Vietnam, Israel. Minister Pavlenko particularly stressed the availability of a wide range of opportunities for foreign investors in Ukraine. Potential stakeholders may take interest to invest in the projects of construction and modernization of irrigation systems, restoring navigation on the Dnieper and the Southern Bug rivers, development of biofuel production, and processing industry in agriculture. The Ministry of Agrarian Policy plans to increase the produc-
boring countries of the European Investment Bank (EIB), Rufat Alimardanov - the head of the regional office of the International Finance Corporation in Ukraine and Belarus, Lystra Antoine - the Global Director for Agribusiness Development, DuPont Pioneer. Oleksiy Pavlenko, the Minister of Agrarian Policy and Food of Ukraine, began his speech with presenting Ukraine as the food basket of the world. He noted that at the moment the country was ensuring food supplies to 150 million people and possessed the necessary resources to supply foodstuffs to 400 million people around the world. In order to unleash the agricultural potential of Ukraine, the Ministry of Agrarian Policy has introduced a number of important reforms of the sector, including privatization of unprofitable state enterprises, deregulation, the land reform, and implementation of European standtion of grain crops to 100 million tons and to double their exports. His optimism was reduced by the Minister of Infrastructure Andrii Pyvovarskyi, who said that the infrastructure of Ukraine is not ready to increase grain exports by two times. “Ukraine has a unique location, but that is not enough... 90% of Ukrainian roads are in poor condition. About 50% of railway lines need modernization, wagons have become outdated. The ports do not have enough terminals. We will not be able to cope with the double increase in grain exports.” He also noted the need of improving the weight control of the goods on the roads and emphasized the need of an urgent implementation of concessionary roads. The Minister of Infrastructure was supported by Heinz Olbers, the director of the department in the neighboring 14
countries of the European Investment Bank: “The agricultural sector should not be considered separately. It is necessary to take into account the total complex, including transportation and logistics, as a shared objective of creating of added value production,” - stressed H.Olbers, noting that Ukraine will be able to compete successfully in the export of agricultural products only upon this condition. Lystra Antoine – the Global Director of Sustainable Agriculture Development at DuPont Pioneer, said that Ukraine is located in a zone of “Blue Ocean” according to climate conditions and soils fertility, and in order to provide food security it is very important to support Ukraine so that it is able to feed the world. DuPont Pioneer Company has invested in the agrarian sector of Ukraine 500 million dollars and provided 250 work places for Ukrainians at the enterprise in Poltava region. Grain safety guarantees food security. The agrarian discussion board was the largest of the four. Potential investors from different countries
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Currently, a third of Ukraine’s population works in the agricultural sector. Agricultural products comprise 31.5% of the total exports and 17% of the country’s GDP – all this indicates the significance of the agricultural sector for our country”. Our journalist asked the President of the US-Ukraine Business Council, who was presented at the agrarian discussion board, Mr. Morgan Williams: what his impression of the event was, whether it was possible to bring in a constructive form an image of Ukraine as a global business partner. Mr. Morgan Williams answered that in order to create a positive image and to stabilize the economy about 10 years are needed, but today we became convinced that there is a real dialogue with the government!
The results and plans
presented at the agrarian discussion board expressed their clear interest to real projects in Ukraine. Thus, the representative of the Fund for Arab Economic Development was interested in particular projects of a state rate. A regional representative of the Kuwait Fund for Economic Development offered to hold a round table conference together with the representatives of the Asian Union. Summing up the results of the agricultural debate, Minister Oleksiy Pavlenko noted: “I am very glad to see the understanding that the agricultural sector has power to help the country out of economic stagnation and to give a new impetus for the country’s economic development! You know, agribusiness is not all about grain growing. It also implies processing, logistics, creation of new jobs in villages and development of rural areas.
Representatives of the European Union reminded that Kiev has already received financial help amount of which is equivalent to more than 6 billion euros out of guaranteed 11 billion. In the nearest future Ukraine will be provided with the next tranche of macro-financial help in the amount of 1.8 billion euros. According to the State Secretary of the Ministry of Foreign Affairs of Germany Markus Ederer, at the International Conference in Support of Ukraine in Kiev Ukraine, Germany will provide 1.4 billion euros in loans, financial help and grants. “Only this year Germany will appropriate 700 million euros under bilateral assistance and 500 million euros in financial borrowings for budget support,” - he said. During the conference in Kiev, the Estonian Foreign Minister, Kate Pentus-Rozimannus, said that Estonia will give Ukraine 3.35 million dollars of financial help. It is also became known that the US Vice President Joseph Biden called the conditions for obtaining a new financial help Ukraine can get. «The decision of about 1 billion dollars of long-term guarantees will be finally decided in the coming days, and another 1 billion dollars - at the end of this year if Ukraine will continues to follow the path of reform,” - he said.
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The conference shows that foreign partners can provide support to Ukraine, but they expect from us real steps to reform. The main expectations are to reform the judiciary system, law and order security. Economy Minister Aivaras Abromavichus said that this conference was not expected to sign some particular agreements and treaties, there will be other conferences on cooperation with Ukraine, the one which will take place in Riga. On 13th, July 2015 in Washington a business summit Ukraine-USA will be held. Also such events are planned for Ukraine in Berlin, Hamburg and Stuttgart. Although theconclusionwill be made by the representatives of the international community at a large investment conference in Ukraine in autumn 2015.Unless, of course, Ukraine refrains from making reforms and endsup with theendemic corruption that was part of the original system.
RELATED INFORMATION In Riga a memorandum on the appropriation of the next tranche of macro-economic help worth of 1.8 billion euros to Ukraine was signed. The head of the European Parliament, the German politician Martin Schulz, said that in order to stabilize Ukraine economically is more important than talking about its prospect of EU membership. 15
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ANALYTICS
Ukraine –
the Food Basket of the World The press-service of the Ministry of Agrarian Policy and Food of Ukraine
Ukraine’s trade location
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Global food safety
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Ukraine is a leading agricultural exporter in the world
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AGROIMENA
PERSONALITY
Time to Give Back to Society Olena Kryzhanivska, the press-service of the Ministry of Agrarian Policy and Food of Ukraine
On June 2nd, six months had passed since Oleksiy Pavlenko assumed office of the Minister of Agrarian Policy and Food of Ukraine. Now his Ministry is cited as one of the most progressive – for the number of planned and already implemented reforms, for the level of cooperation with civil society, and for a completely new comprehensive vision of development of the country’s agricultural sector. Yet again Oleksiy Pavlenko sums up the interim results of his work and talks about the power of the mission that daily encourages him to move forward. 20
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DOSSIER FROM AGROIMENA
«
My first weeks in the office... They were featured by piles of waste paper inherited from former employees of the Ministry and containing decisions that existed only on paper and were never implemented, an absolute mess with the list of state-owned enterprises, bloated bureaucracy and half-empty land cadastre. There also were various expectations... Our fellows in arms expected that we would quickly restore order. Our enemies wanted us to fail shortly. The society hoped that we would provide it with all the things necessary at once. Now I took my step by step actions to prove that my task is to help Ukraine survive these difficult times, and make the domestic agricultural sector thrive. What should be done to achieve this?
»
If I see that I can change something in this society – I must do this.
In the year 2001 I went to do my MBA in the Netherlands. There was a large audience in the first introductory course. Then a neat retired old man of about 70 years came and said: “Is there anyone dreaming of working at McKinsey after graduation?”. All students raised their hands: as if there was anyone not willing to work at McKinsey and to earn hundreds of thousands of dollars. Then he said: “I am a partner at McKinsey. And who wants to work at investment companies, like Goldman Sachs?”. Everyone raise hands again, of course... “I am counsel there. I also collect cars. I have a house in Tuscany. I own an apartment in London. I have a property in the U.S. I travel a lot. I have no money troubles. Who wants to be like me?” A sea of hands rises. And then he says: “Now attention please! I’m about 70 years old. I have no children. No grandchildren. No friends. I believe that I am a loser.” Complete silence hangs in the auditorium. People, who had come from all over the world to get an MBA and possessing mad motivation, had nothing to say. So then, for an hour, we discussed social responsibility with him. We agreed that at some point we realized that it was high time to give back to society – to do something great not only for ourselves but for others as well. This refined my understanding of happiness. I don’t want to be happy from the point of “have it all”. If I see that I can change something in this society – I must do this. I dreamed of leaving my quiet life, even of losing a part of my freedom to do something that can change the world. I want others to say about me: “He really tried hard. He tried and succeeded”. As it always turns out in life, when you really want something, the entire universe will help to get your desire fulfilled. To get this chance to change my country, I had worked my tragic way up – the Ukraine’s Revolution of Dignity and the subsequent events. Night shifts, assaults, the entire range of volunteer work – all this has led me to understanding that something had to be changed at the top. Only if the system is changed, I will be able to be as efficient as possible. Returning to business meant for me to fail to comply with a risky desperate wish – an attempt to change life in Ukraine for the better. The chance to lead the agricultural sector is an opportunity once in a lifetime. I decided to use it.
Letting business loose
Firstly, we should eliminate overregulation. Bureaucracy, officialdom, 100 flimsies, dozens of permits and certificates are absolutely useless and are a temptation to bribe – all this should be left behind. We have cancelled 14 permits, 6 licenses, reduced the time for obtaining a phytosanitary certificate (from 5 day to 24 hours), abolished the quarantine certificate and introduced about 50 other changes on deregulation of the agricultural sector. The Ministry of Agrarian Policy is planning to cancel hundreds of such permits complicating agribusiness. My position is clear – the less an official controls, the more freedom is given to an entrepreneur. The field where the government should have the final say is the quality standards. The Ukrainian agricultural sector focuses on European requirements for quality of products. In order to meet them, much work needs to be done.
Proposing privatization
There is a troublesome situation with state enterprises (SEs) in the agricultural sector. In a perfect world, they should be working so that they fill the state budget. The reality is much more prosaic. The Ministry set up a special working group in order to compile the list of SEs in the field and to assess their functioning. International auditors were engaged in its composition on a voluntary basis. What have they seen? In most cases they found deserted facilities, abandoned fields, and once even a gas station. Instead there should have existed spheres of agriculture with poetic names – sericulture, viticulture, horticulture... They should, but in fact they were not developed. Therefore, the best solution is the privatization of inefficient state enterprises. We learnt such a verdict from more than 250 state enterprises. The situation with two giants of the domestic agricultural sector – PJSC “SFGCU” («State Food and Grain Corporation of Ukraine») and SE “Ukrspyrt” – is much more complicated. They function. They have difficulties. Large production capacity entails the temptation of big money. We have already revealed abuses in their activities worth more than 9 billion UAH. My philosophy is as follows: as many as possible state enterprises should be passed into private ownership.
Oleksiy Pavlenko Minister of Agrarian Policy and Food of Ukraine - Born in the town of Uman, Cherkasy region Education: - National University of “Kyiv-Mohyla Academy”, faculty of economics, bachelor in economics – 1998 - International Privatization Center, International Business School, finance specialist – 1999 - Ukrainian Academy of Foreign Trade, master’s degree in “International Management” – 2000 - MBA. Nyenrode Business School, Netherlands, master’s degree in Business Administration – 2002 - Received scientific level of «Professor of economics» (in 2010), thesis «Meat and meat products import regulation in case of Ukrainian euro integration» - PhD in Economics. Thesis: “Regulation of importation of meat and meat products in the formation of European integration processes of Ukraine” – 2010 Career: - Auditing company KPMG, Kyiv – 1997–2001 - Member of an Audit Committee, Head of Restructuring team and Business Development team with Damen Shipyards Group (Netherlands) – 2002–2003 - “Rise” group of agricultural companies, CEO. Was responsible for strategic planning, implemented efficient budget and control systems – 2004–2006 - “Foxtrot” group of companies, Deputy Chief Executive Officer, responsible for strategic development – 2007–2009 - Agroprogress Holding LLC, member of the Supervisory Board – 2011–2013 - European Milk Technologies LLC, member of the Supervisory Board – 2013–2014 - Minister of Agrarian Policy and Food of Ukraine – since December 2, 2014. 21
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The land reform is the trigger for a chain of positive processes in the economic system.
»
Land reform is an opportunity to become a real master of one’s own land There has been a lot of political gambling, for instance over the land reform. This is an unprecedented phenomenon that this reform has been pending for over 20 years. At the end of 90’s we had 7 million owners of land shares – notional land parcels, which appeared after the collapse of the collective farms (kolkhozes) However, their owners have no way to dispose of their properties, except for renting or transferring them in inheritance. In fact, they do not have the cadastral numbers and do not even know the exact coordinates of their parcels. Currently, the majority of shareholders are retired persons, who are not able to farm on their own. They rent their land parcels for very small amounts of money ($50-100 for
22
ha per year), or even get the rent in natural products. For the years of the ongoing reform, 1 million of share holders have passed away. They had no time to dispose of their land. Therefore, land reform is necessary, especially to make Ukrainians full owners of their land: to sell, to work the land, to rent out for a decent price, to unite with neighbors or to exchange it. However, for the time being, the population perceives such prospects with caution. The main reason for this is the lack of trust for the government. For our part, we are always ready for dialogue. We discuss the need for the introduction of the land reform with civil society. We give reasons for our position. We are engaged in preparatory activities – to fill the land cadaster and to hold the land inventory.
We are gradually preparing the population for opening of the land market. After all, the positive effects are obvious. This will increase the rental cost. And the possibility of uniting land parcels for joint production. One will also be able to receive a loan secured by land. The land reform is the trigger for a chain of positive processes in the economic system. However we will not manage to fulfill any constructive decision without understanding of society.
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Creating a brand of Ukraine But the most enjoyable part of my job is presentation of Ukraine’s agricultural sector at investment conferences and international exhibitions. Ukrainian delegations do not even need to practice eloquence. We are not asking for handouts. We do not lure investors into a trap. We do not promise them piles of gold. We use the objective facts. And the facts speak for themselves... Now Ukraine feeds some 140 million people and has the potential to feed 400 million people. Ukraine is the leader in the rankings of world exporters: No. 1 – in sunflower oil No. 3 – in corn No. 4 – in barley No. 6 – in wheat No. 7 – in soybean No. 8 – in poultry Ukraine possesses 30% of the world reserves of black soil. This will enable us to increase grain production up to 100 million tons and to double its exports. With all these incredible figures, the agricultural sector of Ukraine is one of the least funded by the government, compared to other countries of the world. The difficult situation in the Eastern Ukraine, the occupation of the Crimean Peninsula, almost complete loss of some markets is not beneficial to the country’s agriculture. But the agricultural sector has shown a tremendous ability to survive in critical conditions! In 2014, this was the only sphere that showed growth. Exports of Ukrainian agricultural products to the U.S. increased by 30%, to Asia – by 10.1%, to the EU – 4.4%.
Attracting foreign investment
More and more foreign investors learn the great potential of the Ukrainian agricultural sector. Namely: Pioneer, Monsanto, John Deere, AGCO, Bunge, Cargill. The Finnish company Sampo Rosenlew will support the Kharkiv Tractor Plant in manufacturing of combine harvesters (it is going to produce 200-250 harvesters per year).
Canada and Israel allocate 19 million Canadian dollars to support Ukrainian fruit and vegetable farms. FAO will provide financial aid to small farmers in Donetsk and Luhansk regions – for the amount of $800 000. I felt the confidence of investors during the discussion of the new agricultural policy and reforms at the International Support for Ukraine Conference. They showed trust and interest. Of course, they ask about the risks. There are always risks. The risks in the agricultural sector are natural and inevitable, regardless of social or political situation in the country. However, the benefits of investing in Ukraine’s agriculture are so attractive! We initiate numerous investment-attractive projects – the restoration of river infrastructure (the rivers of Dnieper and Southern Buh); the creation and modernization of irrigation systems in Southern Ukraine, which will allow tripling of grain production in the region. The logistics needs of Ukraine are also urgent – modernization of line elevators; an increase in the number of trucks for transportation of grain. Investments in the processing sector, in the production of goods with high added value will prove profitable as well.
The development of biofuel production, where Ukraine has good potential, is also attractive for investors. By the year 2020 we are going to raise about $8 billion of investment in the agricultural sector. I still face a number of important tasks. I must make every effort to maintain a positive image of Ukraine as the food basket of the world. I must assure Ukrainian society that our line of policy is reliable and the planned reforms are transparent. We should overcome political gambling and take effective steps to implement these plans. To this end I have long forgotten the notion of ‘freedom’. I do not remember what it means to be in charge of my time either. Yet this is what I wanted, isn’t it? I wanted to leave something behind – something bright and clear for the future generations of Ukrainians. And sure enough, I got the chance. And I have no right to waste it.
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FUND
Reliable partner for agricultural producers
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DOSSIER FROM AGROIMENA
PJSC Agrarian fund Activity
Public joint-stock company (PJSC) Agrarian fund was founded in 2013. 100% of the company shares belong to the state. PJSC Agrarian fund is the biggest state disposer of flour in Ukraine ensuring food security of the country. PJSC Agrarian fund is leader of the agro-industrial complex which purchases, ensures storage and processes about 20% volumes of the wheat of 2-d and 3-d classes necessary for internal consumption in Ukraine. The Agrarian fund sells flour through the Agrarian stock exchange ensuring price equilibrium on the market.
PJSC Agrarian fund Programs
Andriy Radchenko
Chairman of the PJSC “Agrarian fund” board
Forward Purchases
Cooperation with Agrarian Fund
Within several months of work PJSC Agrarian fund became an open and public state enterprise. The new team managed to organize within a short term work in such way that it ensured protection for agrarians and became a reliable partner for baking enterprises. We improved the conditions of forward purchases, arranged contest of insurance companies, having presented to agricultural producers a greater possibility in selection of the insurers. All this made it possible to make conditions of cooperation with agrarians more advantageous and productive. At present, the forward program of 2015 is nearing its completion. To ensure state security PJSC Agrarian fun” has purchased more than 1 mln tons of cereals. Forward purchases of buckwheat are still underway, and we plan to buy not less than 25-30 thousand tons of this product. Moreover, this year, on recommendation of The Ministry of Agrarian policy and food of Ukraine the agrarians increased areas of cultivated lands under buckwheat exactly for purchase of the product by the Agrarian fund. Nowadays PJSC Agrarian fund is one of the key state enterprises which ensures the food security of the country. At present PJSC “Agrarian fund” is an active market enterprise which sells flour through the agrarian stock exchange thus replenishing its stock on the market and preventing the possibility of the speculative trends development. For improvement of work with baking enterprises PJSC “Agrarian fund” suggests concluding long-term contracts, which allows conducting mutual work more productive. Cooperation with the Agrarian fund as a state enterprise creates additional guarantees for agricultural producers, makes it possible for baking enterprises to buy timely and in necessary volumes flour. Sign: Andrei Radchenko, chairman of the PJSC Agrarian fund board
The Uniqueness of the PJSC Agrarian fund work on the market consists in the fact that greater part of cereals is bought according to the forward (preliminary) programs. Prepayment according to the program of forward purchases constitutes 65% of the grain cost. General volume of purchases in 2015 should constitute 1–1.2 mln tons of wheat, wry, barley and buckwheat grain.
Spot Purchases
PJSC Agrarian fund is an active participant of spot purchases. In 2015 the Agrarian fund has the intention to purchase on spots 200 thousand tons of wheat of 2-d and 3-d classes.
Sell of Flour
Baking enterprises sell flour through Agrarian stock exchange at the prices which formed on the organized agrarian market at the time of the stock exchange contract conclusion.
Retail
PJSC ”Agrarian fund” actively tries to enter the Ukrainian retail trade market with packaged flour. Entry of the state company into the retail market will allow restraining prices and widening the assortment. In the brand product line from PJSC Agrarian fund will be presented flour, sugar, buckwheat and other groats.
International Activity
In 2015 the company started to develop new direction of work – international cooperation. PJSC Agrarian fund works over development and introduction of investment projects, attraction of international technical assistance, attraction of investments into development of the agrarian sector. The Agrarian fund actively cooperates with international financial institutions and funds and participates in international food programs.
Regional Network
One of the biggest advantages of PJSC Agrarian fund as a partner is availability of the developed regional network. In each region of Ukraine work regional departments or representatives of PJSC Agrarian fund. Having addressed to a regional department or representative in the region, agricultural producers may obtain all necessary information about the forward programs.
Education: - Scovoroda Kharkov national pedagogical university, mathematical department, mathematician, 1989–1994. - Karazin Kharkov national university, economic department, specialization “Finance and credits. Banking”, 1994–1997.
Working record: - Andrei Radchenko headed the Agrarian fund in February 2105. Before appointment to the position of chairman of the PJSC “Agrarian fund” he worked for many years in the banking sector and agro-industrial complex. - AKIB “Ukrsibbank”. From 1995 till 2003 passed all carrier steps in the banking field – from specialist of the department of hard currency trading operations to manager of the retail business. - Commercial bank “Finances and credit” – member of the board, chairman of the retail business. - AB «Index-Bank», Credit Agricole SA – deputy chairman of the board, manager of commercial sector. - KUA «PIO GLOBAL Ukraine» - managing director. - Managing company “AGRO SOLUTIONS” director. 25 25
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ANALYTICS
Ukraine: Soil fertility to strengthen climate resilience Preliminary assessment of the potential benefits of conservation agriculture
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Agro-ecologic zones (AEZ) of Ukraine
Erosion triggered by land tillage is threatening both comparative advantages and competitiveness of Ukrainian crop production systems
Highly favourable agro-ecological conditions and an advantageous geographical location give Ukrainian agriculture its competitive edge Ukraine is renowned as the breadbasket of Europe thanks to its black soils (“Chernozem” black because of the high organic matter content) which offer exceptional agronomic conditions. One-third of the worldwide stock of the fertile black soils, which cover more than half of Ukraine’s arable land, a large variety of climatic zones, and favourable temperature and moisture regimes, offers attractive conditions for the production of a large range of crops including cereals and oilseeds. Ukraine’s proximity to large and growing neighbouring markets – the Russian Federation and the European Union – and access to deep sea ports at the Black Sea, provide direct access to world markets, especially large grain importers in the Middle East and North Africa.
Over the years, the Chernozem soils have been widely degraded by poor land management and the resulting soil erosion. It is estimated that more than 500 million tonnes of soil are eroded annually from arable land in Ukraine1 resulting in loss of soil fertility across 32.5 million hectares and equivalent to around USD 5 billion in nutrient equivalent. This represents a significant loss of the country’s main agricultural productive asset: its soils. The value of eroded soil each year is around one-third of the agricultural gross domestic product (GDP). This means that for each dollar of added agricultural value generated, one-third is lost through erosion; or ten tonnes of soil are eroded for each tonne of grain produced2. Soil erosion is the major challenge that threatens the comparative advantage of crop production systems of Ukraine. Other major natural damage caused by soil erosion is likely to include siltation of rivers, harbours, and dam reservoirs (feeding hydroelectric power stations).While the above estimates are national averages, the problem is much more acute in specific areas, particularly in the south-east of the country where soil has been eroded to a desertification extent.
There is evidence to suggest that the intensity of erosion and resulting loss of soil fertility is accelerating. Loss in soil fertility inevitably increases production costs of field corps by requiring additional resources to maintain the same productivity (for instance, additional fertilizers to keep the same yield). Soil degradation processes driven by erosion imply a number of interlinked issues. Organic matter works like glue that keeps soil particles together, improving their structure. Thus organic matter increases the resistance of soil to mechanical disturbance, such as those produced by rain falling on the ground or a tractor wheel. That is why fertile soils with higher organic matter content are less prone to erosion or compaction, and have higher infiltration. Organic matter also increases soil capacity to hold water. Loss of organic matter reduces its capacity to retain moisture, which is always essential especially during dry years. During the last 15 years, drought events have increased both in intensity and frequency in Ukraine due to a changing climate. Droughts are now occurring on average once every three years, causing crop productivity decline. It is expected that climate change, and the projected increase of extreme events, will exacerbate these phenomena in the near future. In some major productive areas of the country (the so-called Steppe area, in the southern part of the country) these impacts are more severe than elsewhere. This region produces 50 percent of the grain of Ukraine.
1 Source: Official statistic of the Ministry of Agriculture. This assessment is based on two field surveys carried out in 1961 and 1985 in state land of Ukraine (at that time a Soviet Republic). In 2006, Dr. Bulygin made an estimate of 760 million tonnes based on a hydromechanical soil erosion model built on average weighted values for runoff length, slope, soil erodibility, and crop management. The more conservative amount of 500 million has been selected as a cautionary measure. 2 Team estimates based on 500 million tonnes annual erosion versus an average cereals and oilseeds production of 49.8 million tonnes (2006-12 average, source FAOSTAT). 3 See section “Soil fertility and climate change resilience”.
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Paradoxically, the high agricultural quality of Ukrainian soils and the prevailing perception of their inherent productivity resilience is delaying much needed remedial measures that should be put in place to first stop and then reverse soil degradation. Without action, the cost to reverse soil degradation is increasing rapidly and in some areas soils have become so degraded that it is now extremely expensive to recover them. Excessive land tillage is well known to be the major driver of soil erosion. The Ministry of Agrarian Policy and Food of Ukraine (MAPFU) is fully aware of this and is prioritizing erosion prevention and the use of resource-saving technologies. Ukrainian soil scientists and academics - albeit with limited resources and means - are focusing their research on stopping and reversing soil erosion, including the projected negative impacts of climate change. Farmers are under pressure to reduce their production costs to be competitive in the global market and so have begun introducing resource-saving strategies and innovative soil conservation technologies such as minimum tillage. The considerable expansion of the use of minimum tillage during the last decade is testimony of the effort to-
wards change. This is a move in the right direction that has already provided a number of important benefits. However minimum tillage technology alone provides only a partial remedy to soil erosion and the loss in soil fertility. Conservation agriculture (CA) with no-till is a more sustainable and effective Climate Smart Agriculture practice which reduces soil erosion, maintains soil fertility, and enhances drought resilience3 and significantly reduces production costs by minimizing fuel consumption . CA has now been successfully implemented in Kazakhstan, where, with support of the World Bank, the Food and Agriculture Organization of the United Nations (FAO) and the International Maize and Wheat Improvement Center (CIMMYT, 1 of 15 international agricultural research centres part of the Consultative Group on International Agricultural Research [CGIAR] Consortium), the technology has been gradually adopted and reached 1.85 million ha in 2012, contributing to significant productivity and environmental benefits5 . During the last ten years or so, some progressive farmers of Ukraine -- with international exposure -- have also satisfactorily adopted conservation agriculture on about 2 percent of the arable land of the country, mainly in the Steppe area. Unfortunately, this is still happening too sparsely to stimulate wide emulation.
Misconceptions regarding CA technology adaptation, such as the belief that Ukrainian soils are not suitable to the technology, are creating obstacles to widespread adoption. Improved research networking is required to facilitate knowledge sharing on appropriate application and technology effectiveness. However, the wave of change and the genuine professional interest of agriculture enterprises appear to be increasing. This ought to be further encouraged and leveraged. Should dedicated resources and specific development initiatives be made available, it is likely that agricultural enterprises - beginning with the Steppe area where the erosion issues are more pressing - will start championing a virtuous cycle towards large-scale adoption.
5 See http://www.eastagri.org/publications/pub_docs/Info%20note_Print.pdf and http://www.worldbank. org/en/results/2013/08/08/no-till-climate-smart-agriculture-solution-for-kazakhstan.
INFORMATION
The World Bank
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is an international financial institution that was established to provide financial and technical help to developing countries. The World Bank Group consists of five institutions managed by the member states. The World Bank provides grants and low-interest loans. They support a wide range of investments in areas such as education, health, public administration, infrastructure, development of
the financial and the private sector, agriculture and natural resource management. Some of the projects are financed together with governments, commercial banks, export credit agencies and private investors. In addition to financial support, the bank offers support to developing countries through advising and access to advanced knowledge.
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Table 1: Ukraine: Potential impact from the adoption of conservation agriculture Level
Type.
Per 1 ha
Benefits for 3 million ha (short-term)
Benefits for 9 million ha (medium-term)
Benefits for 17 million ha (long-term)
Annual farm benefits
Incremental net income
USD 136
USD 0.41 billion
USD 1.23 billion
USD 2.31 billion
Annual national benefits
Off-farm additional output value and additional soil fertility value
USD 123
USD 0.37 billion
USD 1.11 billion
USD 2.10 billion
USD 259
USD 0.8 billion
USD 2.3 billion
USD 4.4 billion
6
18
34
2.4 people
5.4 million people
16.1 million people
30.4 million people
0.5 tonnes CO2 per year
1.5 million (equivalent to the emissions of 0.3 million cars)
4.4 million (equivalent to the emissions of 0.9 million cars)
8.3 million (equivalent to the emission of 1.7 million cars)
USD 200
USD 0.6 billion
USD 1.8 billion
USD 3.4 billion
Total national benefits % share of agricultural GDP
Annual global benefits
Improved food security (additional people fed during drought years, nonmonetary benefit) Reduced emission
Total investment requirements
Investments in farm equipment and herbicides, plus research and extension
FAO, with World Bank support, carried out a first analytical attempt to quantify the benefits that large scale CA adoption could generate in Ukraine. The countryspecific preliminary assessment provides remarkable estimates on the potential benefits at different levels: farm, national and global. The national annual benefits potentially accruing from CA/ no-till adoption on 17 million hectares could reach an impressive USD 4.4 billion, or 34 percent of agricultural GDP, and almost stop the USD 5 billion natural capital depletion caused by soil erosion (without counting global environmental and food security benefits). The potential benefits of three scenarios are summarized in the Table 1.
The above table represents a rough estimate of the benefits which could accrue from large-scale CA adoption in Ukraine. These estimates, which include the benefits of the area already under CA, were based on the following assumptions: • The potential areas were estimated on the basis of specific technical and organizational feasibility, soil and crop types. CA would have the maximum potential in the shortterm (a few years) to cover an area of about 3 million hectares in the Steppe region (farms of 4 000 hectares and above). The Steppe region has the potential in the medium-term (six to ten
years) of reaching 9 million hectares (the entire suitable area in the Steppe region). Ultimately, a gradual move into the Forest Steppe area could be foreseen so that, in the longer term, a total area of 17 million hectares could be converted to CA. The estimates were obtained by multiplying the benefits per hectare for the potential adoption area. • The incremental net income at farm level is a function of reduced costs for fuel and mechanization, increased longterm yields (after decreasing yields during the first years of technology adoption), higher investment costs for new equipment but lower equipment depreciation, increased costs for herbicides and fertilizers over the first years of technology adoption. • The off-farm national benefits are estimated as a function of the additional national benefits derived from the following assumptions: (i) the reduction of crop production variability with the introduction of CA/no-till would benefit traders and intermediaries (additional production for the price difference between export and farm gate prices); and (ii) 75 percent soil erosion reduction6 quantified in terms of the value of NPK nutrients loss avoided. The off-farm benefit from reduced siltation of fluvial infrastructure and reduced import of fuel were not included in these national benefits. • According to World Development Indicators, the 200812 average agricultural GDP of Ukraine is 11.8 billion at current prices.
• Improved food security was estimated in terms of increased supply of cereals on the basis of an average annual consumption of 130 kg of cereals/per capita/per year. • Carbon sequestration has been estimated on the basis of the global estimates of soil carbon sequestration rates7 by the Intergovernmental Panel on Climate Change (IPCC) in 2007.
6 This value was selected on the basis of international experience. 7 Annual mitigation of 0.33 tCO2-eq /ha /yr (this is the average of 0.15 tCO2-eq/ha/yr-1 for the Cool Dry zone and 0.51 tCO2-eq /ha /yr-1 for the Cool Moist zone) for soil sequestration + 0.16 t CO2/ha/year of avoided emission from fuel burning.
INFORMATION
Food and Agriculture Organization, FAO
is an international organization under the patronage of the United Nations, which was created in 1945. FAO acts as a lead agency dealing with the problems of rural development and agriculture in the UN system. The main objectives of the organization are to eliminate hunger and malnutrition; to reduce the poverty and strengthen the economic and social development; sustainable management and use of
natural resources, including land, water, air, climate and genetic resources. The organization helps developing countries and countries with a transitional economy to modernize agriculture, strengthening the cooperation of governments, partners in the development sphere, public society and the private sector. The total budget of FAO for 2014-2015 is 2.4 billion dollars. 2299
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EXPERT
Dentons is a global law firm driven to provide clients a competitive edge in an increasingly complex and interconnected world. A top 20 firm on the Acritas 2014 Global Elite Brand Index, Dentons is committed to challenging the status quo in delivering consistent and uncompromising quality in new and inventive ways. With a legacy of legal experience that dates back to 1742, Dentons was formed by the combination of international law firm Salans LLP, Canadian law firm Fraser Milner Casgrain LLP (FMC) and international law firm SNR Denton. Dentons’ clients now benefit from approximately 2,600 lawyers and professionals in more than 75 locations spanning 50-plus countries across Africa, Asia Pacific, Canada, Central Asia, Europe, the Middle East, Russia, CIS and the Caucasus, the UK, and the US. The firm serves the local, regional and global needs of a broad spectrum of clients, including private and public corporations; governments and government agencies; small businesses and startups; entrepreneurs; and individuals
Anzhelika Livitskaya (Shtukaturova), lawyer Dentons
Public private partnership as an internationally proven mechanism for attracting private investment Anzhelika Livitskaya (Shtukaturova), lawyer Dentons When it comes to investments in the private agricultural sector, it is necessary to focus on such an important and proven mechanism as public private partnership. We want to note that the projects of public private partnership equaled 32% of the global market in Europe. In Ukraine, the percentage of such projects is minimum. Often, public private partnership in Ukraine is taken only as an opportunity to implement projects of road infrastructure construction. However this is a fallible judgment. One of the conditions of the successful investment and profitability of an agricultural project is excellent logistics. To say it simply - the better logistics your agricultural project has, the more profit it will bring. 30
What aspects in the agricultural sector can be successfully (profitably for both public and private partners) implemented in the framework of public private partnership? Development of transport infrastructure (railway and river transport). The main agricultural business members are often faced with the problem of grain transportation to the storages. «Ukrzaliznytsya» does not have (or perhaps does not want) to update and increase freight wagons fleet for this purpose. From our point of view, the problem will not be solved without investments and attraction of private fund to this area. Development of infrastructure for the product storage (grain storages, port grain terminals).
Over the past 2 years significant changes in the legislative regulation of port grain terminals have been seen, but it is too early to talk about a large number of successfully implemented projects (in the framework of public - private partnership) in this area. The problem of «slipping» is not connected with the private sector but only with the stagnation of the authorities. Fairly successful investment projects can be implemented even under the current Ukrainian legislation system. We want to believe that the year 2015 and the newly elected «faces» of the executive branch will completely change the situation for the better.
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20A Kozhumyatska str., 1st Floor Kyiv, 04071, Ukraine +380(44) 237 77 27 www.empirestatecap.com
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ALTERNATIVE
The first Ukrainian site author Journalism
Nurislam Zubairov, Economic journalists
Direct investment in the agricultural sector of Ukraine does not boost the development of the industry under the current approach Nurislam Zubairov, journalists in «ФРАЗА.ЮА»
The government has not managed yet to create the conditions under which foreign investment in the agricultural sector will boost the proper development of the industry. The analysis of foreign direct investment in the agriculture shows that foreign investors are now in no hurry to invest in long-term projects and in the development of agricultural sector as a whole. 32
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Ukrainian agribusiness, but they have nothing in common with the qualitative development of the industry, including related industries such agricultural engineering and chemical industries.
Oil and sweets
At the beginning of May 2015 there appeared the information that the Swiss company Nestle wants to buy the corporation «Roshen» which belongs to the President of Ukraine Petro Poroshenko, confirming the fact that despite the crisis, the interest of foreign investors to the Ukrainian assets remains the same. Nowadays, the Swiss already owns Lviv «Svitoch», PJSC «Volynholding», the manufacturer of products under TM «Torchyn» and Kharkov «Technocom» (TM «Mivina»). And in the case of a successful negotiations, Nestle will significantly strengthen its position in the market of confectionery and food products in Ukraine and other countries of the former Soviet Union. Since 1994 the Kraft Foods Ukraine has been working on the Ukrainian market, and it recently changed its name to «Mondelis Ukraine». The company owns two factories: Trostyanetska confectionery factory (Sumy oblast) and subsidiary LTD «Chips, Lux» (Kiev oblast). The Ukrainian subsidiary of the American integrated group - Bunge, controls a significant storage capacity of grain and sunflower oil (TM «Oleina» and «Rozumnitsya»).
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is the investment company «Renaissance Group» (managing partner - Stephen Jennings). All other enterprises with foreign investment have the land bank of 10 thousand hectares up to 100 thousand hectares where cereals and legume crops are grown. The «Danosha» company, owned by Danish investors is an exception. It was set up in June 2004 at the former pig farm «Carpathians» («Prikarpatie»), ever since it created the company of European standards with more than 12 thousand heads of breeding stock. Nevertheless, the company owns about 10 thousand hectares of land where they grow raw materials for feed production.
Dreams and reality
The Minister of Agrarian Policy and Food of Ukraine Alexei Pavlenko assured that with sufficient financing in domestic agriculture, production in the country can be increased at least by twice. «Ukraine receives 3 times less investment than Poland. Now the agricultural sector has a great potential for investment, which is estimated at 8 billion dollars over the next few years. The country may become the biggest producer of honey, cereals and poultry, «- said Pavlenko during a mid-May conference «New Ukraine «. In his opinion, the most promising sectors for investment include irrigation, dairy industry, construction of plants for soybeans recycling, port logistics and bioethanol. European Bank for Reconstruction and Development also agrees that the Ukrainian agribusiness is attractive to investors, by the way one of the bigMore than 20 international companies gest investors in Ukraine said: «More are willing to invest in the agrarian sector of Ukraine than 20 international companies are willing to invest in the agrarian sector up to 2,5 billion euros over the next three years, under of Ukraine up to 2.5 billion euros over the condition of provided effective assistance from the next three years, under the condition of provided effective assistance the authorities to solve the identified obstacles from the authorities to solve the identified obstacles for investments.» for investments. Although these are only the plans. EBRD Meanwhile, there is a relatively small outflow of funds in the agricultural sector of the country. It is connected In addition, «Bunge Ukraine» is a major exporter of grain. to the general situation in the country and a lot of unsolved At the moment, the company is implementing two projects problems in the industry. Thus, according to the Ukrainian Grain still takes the basis of agricultural export in worth 180 million dollars. Agrarian Confederation, the outflow of investment from the Ukraine. That provides a high dependence on the situation agribusiness of Ukraine in the 1st quarter of 2015 equaled on world markets. The development of recycling system 391.1 million dollars, 286.5 million dollars of which was reof agricultural products would make the situation better. lated to the food industry and the production of tobacco Though nowadays the level of recycling of agricultural ТHowever, the main focus of investment in the agricul- products. However the situation in other segments of the products remains relatively low. According to the General tural sector of Ukraine is to create a land bank. Moreover, industry is slightly better, last year was not marked by a Director of the Analytical Center «UkrAgroConsult» Sergei the major investments in the acquisition of the rights for boom from new investors. All other few new projects have Feofilov, now in Ukraine about 15-17 million tons of grain the leased land shares started at the beginning of 2000, been realized by long-standing Ukrainian companies. are recycled annually, and by 2020 this figure will increase when there was the unsoldering of the land of the former to about 20-22 million tons.» Export of grain is a strate- CAE (collective agricultural enterprise, editor’s example), gic tool of Ukraine and our business card. It involves a big and the opportunity to generate huge commercial lands in business and a huge number of employees. The recycling the hope of their future acquisition. should be increased together with the increasing exports «. For example, the American New Century Holdings Creation of modern recycling enterprises requires se- takes the second place in Ukraine in terms of land bank rious investment and the necessity of international certifi- - 430 thousand hectares, ceding only UkrLandFarming cation. Foreign investors could help in the development of that belongs to Oleg Bakhmatyuk with its 670 thousand the agricultural sector, but the country has not created the hectares. Though during 2015 the company NCH intends conditions for these investments and still, the government to increase its land bank by another 30-40 thousand shows no interest. Although the Ukrainian market is pre- hectares. In Ukraine, all NCH agricultural enterprises are sented by the world’s major grain traders such as: a group grouped into six agricultural holdings «Bio Agro», «Promin of «Cargill», «Louis Dreyfus» and «ADM Ukraine», a subsid- agro», «Lat Agro», «Golden Svitanok», «Charivnyi Svitanok», iary of a large German trader Archer Daniels Midland Co. «Kraevyd Invest». Specialization of enterprises are growing Toepfer/ADM, the investment of these companies is limit- of wheat, rape, corn, sunflower and soy. Some companies ed in the creation of the conditions for storage and trans- are developing farm production. shipment of grain. Thus, the largest exporter of Ukrainian The second-largest foreign investor of leased land is grain, among foreign companies, «Louis Dreyfus Ukraine» «Ukrainian Agrarian Investments» (UAI) and it has 261 together with LTD «Brooklyn-Kiev» are realizing the project thousand hectares of farmland at its disposal. The UAI of transshipment grain terminal worth 99 million dollars. holding includes 62 agricultural sectors and 5 elevator There is no doubt that such investments are necessary for sectors in 16 regions of Ukraine. The largest shareholder
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A hundred years throwback
Land is never enough
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