12/2017
#
19 U K R A I N E Agriculture Bulletin Proposal to reduce VAT for agricultural producers to 7% EIB, EIF sign EUR 50 million guarantee to support SMEs Agrarian Fund boosts flour exports by 70% in 2017
Ukrainian agribusiness climate shows improvement
All materials are published “as is� and are the property of their respective owners.
Contents State Initiatives ........................................................................................................... 2 1) 2) 3)
Proposal to reduce VAT for agricultural producers to 7% ............................................................... 2 Parliament extends moratorium on land sale ................................................................................. 2 2018 budget eliminates farmer subsidy program ........................................................................... 2
Foreign Aid ................................................................................................................. 2 4) 5) 6)
FAO report highlights vulnerability in eastern Ukraine ................................................................... 2 EIB, EIF sign EUR 50 million guarantee to support SMEs ................................................................ 3 FAO support to expand fruit and berry exports to the EU .............................................................. 3
Private Sector.............................................................................................................. 4 7) 8) 9) 10) 11) 12)
Prime Minister calls for new export strategy .................................................................................. 4 Agrarian Fund boosts flour exports by 70% in 2017 ....................................................................... 4 U.S. to suspend duty-free regime for Ukrainian products .............................................................. 4 UCAB insists government fulfill obligations to agrarians ................................................................ 4 Agricultural exports top USD 14.7 billion ........................................................................................ 5 Ukrainian agribusiness climate shows improvement ...................................................................... 5
Note: The Agriculture Bulletin presents a monthly roundup of headlines and news stories related to Ukraine’s agricultural sector. This bulletin is prepared by Business & Finance Consulting—a Swiss-based development finance consulting company with a long history of working in Eastern Europe, Central, South and South East Asia and North Africa. Read more » BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland
Phone: +41 44 784 22 22 Fax: +41 44 784 23 23
info@bfconsulting.com www.bfconsulting.com
BFC Agriculture Bulletin
State Initiatives 1)
Proposal to reduce VAT for agricultural producers to 7%
December 22nd, 2017, https://zn.ua/ECONOMICS/deputaty-predlagayut-snizit-stavku-nds
New legislation has been proposed to Parliament that would reduce the VAT rate for agricultural producers from 20% to 7%. The bill ‘On Amending the Tax Code of Ukraine to Reduce the Rate of Value Added Tax for Agricultural Enterprises’ would help ensure transparent implementation of the budget in terms of tax revenue as well as allow for the monitoring of the dynamics of GDP.
2)
Parliament extends moratorium on land sale
December 14th, 2017, https://24tv.ua/ru/parlament_otkazalsja_zapustit_rynok_zemli_komu_vygoden_moratorij_n902057
Parliament has extended the moratorium on the sale of agricultural land for another year. Originally passed in 2002, the moratorium was put into place to protect Ukrainian citizens from being taken advantage of while the government worked out a system for the transparent and fair trade of agricultural land in Ukraine. Many experts believe that the legislation for a transparent land market is already in place and that the moratorium can be discontinued. They argue that the government has extended the moratorium as a political move and that real pressure needs to be put on Parliament to abolish it or nothing is likely to change in the near future.
3)
2018 budget eliminates farmer subsidy program
December 8th, 2017, http://en.interfax.com.ua/news/economic/468369.html
Parliament has adopted a national budget for 2018 that includes the removal of the system of subsidies for agricultural producers. In place of the subsidy system, the 2018 budget includes UAH 4 billion to support livestock breeding, including UAH 945 million for a program to help compensate farmers for the cost of purchasing agricultural machinery and UAH 1 billion in direct state aid. Additionally, state funds have been allocated for: a program to support the development of hop growing, vineyards, orchards and berry farms (UAH 300 million); a program of cheap credit for farmers (UAH 66 million); and a program to support the Agrarian Fund’s efforts in storage, transportation, processing and exporting (UAH 52 million). Many agricultural producers are upset by the move and feel that the government is backing out of previously undertaken obligations.
Foreign Aid 4)
FAO report highlights vulnerability in eastern Ukraine
December 20th, 2017, http://www.fao.org/europe/news/detail-news/en/c/1073552/
A new report from the Food and Agriculture Organization of the United Nations (FAO) has found that rural households affected by the ongoing conflict in eastern Ukraine urgently need help to restart agricultural production in order to help restore livelihoods, recover incomes and ensure sustainable food security. The report provides government decision-makers, international organizations and other Page 2
BFC Agriculture Bulletin
interested parties with a basis for setting priorities and choosing effective strategies for addressing food insecurity and poverty. According to the report, the overall value of immediate assistance required by the most vulnerable population is estimated at approximately USD 5.9 million. It also suggests that the donor community make livelihood interventions a central priority and outlines three area for intervention: (1) working with communities to maximize the use of local resources and increase benefits from changes in cropping patterns; (2) building up the necessary infrastructure to connect rural areas and urban markets; and (3) building resilience by creating income-generation opportunities and advancing knowledge and cooperation.
5)
EIB, EIF sign EUR 50 million guarantee to support SMEs
December 13th, 2017, http://finchannel.com/world/ukraine/70347-eu-boosts-support-to-small-businesses-in-ukraine-with-newfinance
The European Investment Bank (EIB) and the European Investment Fund (EIF) have signed a EUR 50 million guarantee agreement with Ukraine’s Oschadbank to support small- and medium-sized enterprises (SMEs) in the country. The agreement will enable Oschadbank to facilitate access to finance for local SMEs by providing a 70% guarantee on each loan, which will allow the bank to extend financing on more favorable terms such as reduced collateral requirements. This is expected to unlock additional financing for SMEs and, ultimately, support job creation and new business opportunities in Ukraine. The guarantee is funded by the EU through the Neighborhood Investment Facility under the EU4Business initiative.
6)
FAO support to expand fruit and berry exports to the EU
December 6th, 2017, http://www.fao.org/europe/news/detail-news/en/c/1071492/
Although farmers in the European Union (EU) grow fresh fruit and berries at significant levels, consumer demand in the EU far outstrips internal production. Small fruit imports into the EU average EUR 641 million per year and have an average annual growth rate of 14.9% over the past five years. To help Ukraine take advantage of this growing market and increase fresh fruit and berry imports to the EU, the Food and Agriculture Organization of the United Nations (FAO) has worked with the Ministry of Agriculture and the national association Ukrsadprom to organize a training on good and sustainable agricultural practices for fruit and berry production and a workshop on how to benefit from the EUUkraine Deep and Comprehensive Free Trade Area agreement. Participants at the training and workshop are expected to improve their understanding of various procedures and mechanisms for importing into EU markets. Trainers will provide practical guidelines on how to organize work at a national level and how to establish mutually-beneficial relationships with local buyers. Trainers will also use hands-on exercises and share their analyses of the latest trends for fresh and frozen products.
Page 3
BFC Agriculture Bulletin
Private Sector 7)
Prime Minister calls for new export strategy
December 28th, 2017, https://www.ukrinform.net/rubric-economy/2372379-groysman-
Speaking at a government meeting, Prime Minister Volodymyr Groysman noted that total exports grew by almost 20% in 2017 and, over the first months of the year, brought in USD 35 billion in revenue. He also stated, however, that a new export strategy will help Ukraine enter into new markets and increase export volumes even more. Ukraine currently exports everything from raw materials to finished products to nearly 160 countries worldwide.
8)
Agrarian Fund boosts flour exports by 70% in 2017
December 26th, 2017, https://zn.ua/ECONOMICS/agrarnyy-fond-uvelichil-eksport-muki-na-70-270441_.html
According to the director general of the Agrarian Fund, one of the largest state operators in Ukraine's agricultural market, the Fund has exported 17,000 tons of flour this year, helping boost total flour exports by 70%. Moreover, the director general expects that this trend will continue into next year as the Fund is taking measures to increase its production capacity. More specifically, the Fund is exploring the possibility of building a modern milling complex with Turkish financing. The director general also noted that Ukraine should move along the path of global modernization and develop the processing industry to boost the export of value-added products. In particular, the country should engage investors in the construction of new facilities for the processing of grains and other foods.
9)
U.S. to suspend duty-free regime for Ukrainian products
December 23rd, 2017, https://112.international/finance/us-suspends-duty-free-regime-for-
In a letter to the United States Congress, United States President Donald Trump stated that the United States will suspend the duty-free regime of preferences that was in effect with respect to a number of Ukrainian goods. This will affect various agricultural products. Prior to the suspension of the program, Ukraine was able to export approximately 5,000 products into the United States duty free.
10) UCAB insists government fulfill obligations to agrarians December 20th, 2017, http://ucab.ua/en/pres_sluzhba/novosti/ukab_napolyagae_na_vikonanni_umov_agrariiv#
The Ukrainian Club for Agribusiness (UCAB) and leading agricultural associations are working together to urge the government to reconsider recent amendments to the tax code and the adoption of the state budget for 2018. UCAB holds that the amendments to the tax code and the adopted state budget will cause significant financial losses for agricultural producers (UAH 10-16 billion) and will suppress investments into the sector. Additionally, UCAB considers the moves to be a gross violation of the commitments taken by the government in terms of its accession to the World Trade Organization (WTO) and its Association Agreement with the European Union (EU). In response to the amendments, farmers have begun protests and blocked roads in three regions of the country. This has resulted in the President appealing to Parliament to postpone the deadlines for amending the tax system for the export of agricultural products. Page 4
BFC Agriculture Bulletin
11) Agricultural exports top USD 14.7 billion December 15th, 2017, https://www.ukrinform.net/rubric-economy/2365048-ukraine-exported-agricultural-products-worth-147bln-dollars-for-10-months.html
The share of agricultural products in the structure of exports for the period of January-October 2017 amounted to 41.8% (USD 14.7 billion). In the 2016/2017 agricultural year, Ukraine held first place in the export of sunflower oil, second place in the export of barley, third place in the export of maize, nuts and honey and sixth place in the export of wheat and oilseeds. The top 10 countries to import Ukrainian agricultural products were Belarus, China, Egypt, India, Iran, Italy, the Netherlands, Poland, Spain and Turkey.
12) Ukrainian agribusiness climate shows improvement December 6th, 2017, http://ucab.ua/en/pres_sluzhba/novosti/agrarniy_biznesklimat_znachno_polipshivsya_u_listopadi_2017_roku
The ‘Agribusiness Climate Index’ (ABI) survey conducted in November demonstrates a significant increase in agricultural producers’ perception of the effectiveness and prospects of their businesses as compared to the results from the August 2017 survey and the November 2016 survey. The latest survey shows that agricultural producers are confident in the resilience of their businesses, with respondents indicating an increase in income and expecting further growth in revenues. Producers also indicated a growth in the number of employees. A positive trend was also observed in responses to the access to high-quality modern technologies and machines. The ABI survey recorded the highest results in the southern regions (45.5 points) and the lowest results in the western regions (30.3 points). Producers with less than 5,000 hectares averaged 19.1 points, whereas producers with more than 5,000 hectares of land averaged 59.6 points. Animal producers had an average score of 38.4 points, while producers of vegetables, cereals, oilseeds and legumes had an average score of 27.4 points.
Page 5
Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com Articles are taken directly from local sources without any fact-checking; they are provided as a convenience and for informational purposes only. Business & Finance Consulting (BFC)’s editing is limited to providing a short summary in English of the texts, highlighting the main points of the original articles. All rights reserved by the authors. BFC takes no responsibility and does not make any representation or warranty, express or implied, or assume any responsibility whatsoever for the content, accuracy, and reliability, or completeness of any of the articles.