Perspectives on Ukraine’s Single Comprehensive Strategy for Agriculture and Rural Development 2015-2

Sowing the seeds of the future Perspectives on Ukraine’s Single Comprehensive Strategy for Agriculture and Rural Development 2015-2020

NECU, 2016

NATIONAL ECOLOGICAL CENTRE OF UKRAINE P.O. Box 306, Kyiv, Ukraine 01032 Tel./Fax: (044) 238 62 59 e-mail: necu@necu.org.ua www.necu.org.ua

Sowing the seeds of the future: perspectives on Ukraine’s Single Comprehensive Strategy for Agriculture and Rural Development 2015-2020 Author: Vladlena Martsynkevych, vladlena@bankwatch.org, Natalia Kolomiets, nkolomiets@necu.org.ua, Aris Adlers aris.adlers@gmail.com Editor: Anna Zavorotna, mavka@necu.org.ua

This report was published under the financial support of the Swedish Society for the Nature Conservancy.

The content of the article is the sole responsibility of the National Ecological Centre of Ukraine and cannot be regarded as such that reflects the views of the Swedish Society for the Nature Conservancy and other NECU donors.

October 2016 (updated June version) No. of copies: 25 items Freely distributed. Š NECU Cover picture: The free range cows at the family farm in Glukhiv rayon, Sumy oblast, Vladlena Martsynkevych, National Ecological Centre of Ukraine, 2016

Introduction Substantial natural resources are needed for the development of agricultural into an economic sector. According to the National Cadastre of the Anthropogenic Emissions, between 1990 and 2013 livestock and land use were responsible for significant greenhouse gases emissions. Given the considerable environmental impacts of large-scale agriculture, it is necessary to integrate such environmental consideration into agricultural policy priorities in order for rural areas to develop sustainably.

The reform of the agricultural sector is imminent. The Single and Comprehensive Strategy for Agriculture and Rural Development 2015-2020 (hereinafter, the ‘strategy’) was intended to stimulate reform and was in some ways a step forward, with the potential to translate European achievements and experiences to the Ukrainian context.

NECU welcomes the fact that the strategy focuses not only on agriculture development as an economy priority but also on the development of rural areas as such. Such an integrated approach, selection of priority areas and the inclusion of environmental protection and natural resources management issues into the strategy should be regarded positively.

The draft strategy was elaborated in 2015 by a group of international and Ukrainian experts as part of a project funded by the European Union with the involvement of other donors including the US Agency for International Development, the World Bank and International Finance Corporation, the UN Food and Agriculture Organization, the European Bank for Reconstruction and Development, the Organization for Economic Cooperation and Development, the European Investment Bank and individual donor countries like Canada and Switzerland1. The Council on the Single Comprehensive Strategy development and working groups elaborated the Strategy. The process of developing the strategy shows that external experts worked out its contours. Yet the strategy might remain only on paper and will not be used as the basis for public policy in the future (see Annex 1).

NECU has prepared comments to the strategy in regards to rural development and the ecological impacts of agriculture development2. If the strategy is further revised, these comments should be taken into consideration to strengthen the existing document. In case a new strategy is developed, these comments will help form the base for the integration of ecological considerations into a future agricultural policy.

The strategy has identified ten strategic priorities for 20203. Ten priorities form quite an extensive list for the strategic document. For example, in the EU strategies one will not find the priorities on the business climate and Institutional reform of the Ministry of Agrarian Policy and Food. That might be a reflection of the critical need for a reform of the agricultural economy and approaches to the rural development.

Environmental protection and natural resources management – in particular forestry and water management – were defined as one of these priorities. NECU commented on the sections of the strategy entitled ‘Rural Development – Revitalisation of the rural areas’ (Strategic Priority 7) and ‘Water, soil, pesticides, nitrates and minimum environmental standards’ (Strategic Priority 10.1).

1 http://minagro.gov.ua/node/16025 2 10.1. Approach Water, soil, pesticides, nitrates and minimum ecological standards 3 The Single Overarching Strategy on the agriculture and rural areas development for 2015 to 2020: http://minagro.gov.ua/node/16025#principles

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Brief description of the sector after reform and strategy implementation • Export-oriented agricultural sector including export of processed products; • Legal framework adapted to EU requirements; • Investments in the modernization and reconstruction of production, storage and processing facilities; • Favorable conditions for business; the state’s role is very limited; • Easy access to credit and fair financing terms; • Inflow of foreign direct investment; • Developed agricultural households of various sizes and areas give way to more marketoriented small family farms; • Production specialization and diversification; • Flexible and transparent land markets; • Various forms of manufacturers’ groups and organisations; • Better personnel training; • Sustainable, predictable, simple, targeted agricultural policy and a state support system; • Rural areas developed and jobs created in non-agricultural (rural business development) and agricultural areas (product diversification); • Improvement of public infrastructure in rural areas; • Sustainable development is taken into account in all activities; • Established regulatory standards for water, soil and air; and • Some types of agricultural support depend on the compliance with minimum environmental protection requirements.

Comments Strategic Priority 7: ‘Rural Development – Revival of Ukrainian villages’ The development of rural areas is a process of improving the living standards and economic well-being of people in village communities. The strategy has priorities that may lead to success in this regard.

The development and promotion of industrial organisations (cooperatives) is a well-known approach to assist small and medium farmers, by increasing their profitability and competitiveness. The increase of the market share for cooperatives may lead to a more stable and predictable price for food products and their quality, independent of huge agro-industrial companies. We ask for support not only for production cooperatives but also other forms of cooperatives in rural areas: consumer and financial cooperatives (including banking, insurance and others) .

Increasing the productivity and profitability of small farms is essential for rural areas. Developing any business cannot be an obstacle for the development of other local civic or economic initiatives in rural areas.

With the support of small and medium farms, the state is supporting employment and the viability in the rural areas.

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1. Priority 7.1. Improvement of living standards and diversification of economic activities in rural areas All initiatives and expected outcomes are well described in this section but they are very declarative. All the measures are aimed at the development of agricultural entrepreneurship. The first step towards resolving the current situation with villages could be support for value-added agriculturerelated production.

However as living standards include things like access to quality services and other aspects of wellbeing, a forward-looking and innovative solution should be sought. Improving living standards must fit with the reality of current economic and lifestyle standards that require adequate infrastructure: roads and connectivity, internet, waste management, water supplies, as well as an increase in the social capital of rural communities.

Trends from rural areas across Europe can be planned and supported further. For example, among these are green energy and economy, telework, the circular economy, short supply chains, innovative economies, digitalisation, social entrepreneurship and others.

2. Priority 7.2 Rural development with community leadership Rural development with community leadership is based on ‘bottom-up’ initiatives established in partnership with government, business and civil society. It is necessary to provide at least small funding to implement part of the development strategies for the regions. Implementation of the strategy is also a crucial learning experience that must be adopted by local partners, in terms of the selection, monitoring and evaluation of projects. Without this the expected results – ‘a number of the local development strategies elaborated by rural residents for themselves’ and implemented by them’ – is not realistic.

IThere is an additional implementation risk because of the dominance of local politicians influencing the objectives of local development strategies. Relevant mitigation actions could be balanced by including representations of private, public and the civic sector, with additional capacity-provided for these actors.

Strategic Priority 10.1: ‘Water, soil, pesticides and minimum environmental standards’ The Strategy recognizes that agriculture requires many natural resources like land, water and energy.

It also acknowledges the impact on climate change. Because of this, the sustainable management of natural resources is considered a priority for agricultural development.

The strategy’s main goal in terms of environmental impact is a gradual integration of these into agricultural production. NECU supports this position. In April 2016, Ukraine signed the Paris Agreement of the United Nations Framework Convention on Climate Change, obliging it to keep the global temperature within 1.5/2 °С. The impact on climate change and measures to adapt and reduce climate sensitivity should be included in all strategic documents at the national level.

1. The strategy is based on principles of the Common Agricultural Policy (CAP) and the EU’s cross liability agriculture management model in the area of the environmental protection. Within this framework, agricultural producers must comply with minimum environmental standards and receive a financial incentive in case of production in a way that is more ecologically-friendly than the minimum. The Common Agricultural Policy has been under development since the 1950s. Implementation of CAP mechanisms and principles in five years is an ambitious task. It is necessary for the state to provide substantial financial support to agricultural producers who comply with the

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The litter from the poultry growing facilities in the field, Ladyzhyn, Trostyanets rayon, Vinnytsya oblast, photo: Niels Ackerman, Lundi13/NECU, 2016

higher standards to ensure the cross liability principle is respected. The volume of state support for agricultural producers must be greater than the costs or losses related to compliance with the minimum environmental standards. Given the amount of agricultural lands that are processed in Ukraine and the insufficient funding available, the implementation of the cross liability policy in full looks like a long-term goal. However we agree that the general principles should be established at this initial stage of public development.

2. The strategy fails to pay sufficient attention to nitrate and phosphate pollution caused by agricultural. Agriculture is the main source of nitrate and phosphate pollution in soil and water, and air emissions that lead to the climate change. There is a corresponding indicator but the nitrate pollution was not defined as a separate priority issue, the goals or objectives were not specified, the ways to achieve the reduction of nitrate and phosphate pollution from agriculture were also not identified.

3. When developing the strategy, the main issues and rationale for their selection were used, aim of the direction, priority measures, expected outcomes, implementation risks and risks mitigation measures, implementation indicators were defined for each priority strategic direction. Such an approach is a positive example, as it allows one to trace the logic behind strategy planning and implementation. Unfortunately, the strategy contains gaps in the consistency and relevance of the selected priorities. The main strategy elements for each selected problem (rationale, purpose, priority measure, expected outcomes, risks and risks mitigation measures and indicators) are presented in narrative form. If we structure the elements in Annex 1, it becomes apparent that there is no activity for the selected issues that must solve them or success indicators of solving these issues. It is necessary to set in a holistic manner the purpose, measures, expected outcomes, risks and risks mitigation measures and indicators for each issue.

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The specific comments to the text

(in case of the revision or development of a new strategy): • Climate change is mentioned several times, and there are some appropriate measures and the indicators for how to combat it. However climate change was not represented in the ‘purpose’ subsection. We suggest to add to the text the following sentence: ‘the reduction of greenhouse gases released from agriculture’.

• It is necessary to determine the expected outcomes and success indicators in order to solve issues related to the lack of effective emergency management and an integrated approach to the country’s biosafety; • It is also necessary to move the issue of a lack of an integrated approach to waste management in agricultural areas and ‘integrated programmes development’ from the ‘purpose’ to the ‘priority measures’ section and provide for the expected outcomes and indicators; • ‘The increase of new jobs by 5 per cent’ was defined as one of the indicators in strategy implementation Priority 10.1 ‘Water, soil, pesticides and minimum environmental standards.’ However, jobs is not an obvious indicator of environmental quality. We propose to remove this indicator from the list and introduce indicators that would correspond to tasks in the areas where these indicators are missing now (see the table); • For Priority 7, we suggest the establishment of a national network of rural development stakeholders as one of seven features of the LEADER approach. Such an approach adds value for implementation, experience sharing and the promotion of this approach to other rural areas. This would support potential stakeholders and local initiatives in exchanging experience as well as institutional (including international) cooperation; • The special targets are too ambitious in Priority 7.1 ‘Improvement of living standards and diversification of economic activities in rural areas.’ The implementation of the pilot projects (as in the action plan) will not achieve results.

The field at Chyhyryn region, Cherkasy oblast, photo: Niels Ackerman, Lundi13/NECU, 2016

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Conclusions The strategy focuses not only on agriculture development but also on rural areas in general. This is a progressive step. An integrated approach, with the selection of priority areas and the inclusion of environmental protection and natural resources management, is also an important step.

It is also positive that the strategy does not omit climate change, with appropriate measures and indicators being provided. However, it is necessary to refine the text in order to incorporate climate change in all strategy components.

The principles of the Common Agricultural Policy and cross liability can be an important step for the future development of agricultural economics. However, the implementation and success of this approach in practice is dependent on the availability of significant funding to support and stimulate agricultural producers.

One of the negative aspects of the strategy is that it omits the issue of nitrate and phosphate pollution from agricultural sources. Since agriculture is the main source of water and soil nitrate pollution, it is worth rendering a nitrate pollution as a separate issue and provide the purpose, measures, results and indicators to address it.

The consistency of components was poorly worked out for the entire Section 10.1. ‘Water, soil, pesticides, nitrates and minimum environmental standards’. A goal should be set, measures should be defined and expected outcomes and indicators described for each specified issue. At present the strategy lacks such consistency.

In addition, the rejection of the \strategy achievements and their limited integration into plans, programmes and regulations is concerning. Currently there is an attempt to integrate certain elements into the state aimed programme on agricultural sector economic development till 2020. However, important environmental elements are missing, as are balanced diversified development for rural areas and a clear reflection about improving well being.

Annex 1

The problems and challenges in implementation of the Single Comprehensive Strategy for the Agricultural and Rural Development of Ukraine 2015-2020.

The National Reforms Council endorsed the strategy at the end of 2015. In March 2016, the Ministry of Agrarian Policy met with international donors and agreed a consolidated action plan on the basis of the strategy. However, the Ministry of Agrarian Policy expected4 that the strategy would be adopted by parliament (Verkhovna Rada of Ukraine) in order to implement the action plan. The adoption of strategies by parliament is not obligatory in Ukraine5. As a result, the strategy is not perceived as obligatory for implementation and integration into the other legislative initiatives and programmes.

4 The Ministry’s response to the NECU letter of 31.03.2016 5 In the letter-response from 31.03.2016 from Ministry of Agropolicy was mentioned as “draft” that needs adoption (supposedly by the Parliament, but not explained in the letter explicitly)

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In September 2015 the Cabinet of Ministers of Ukraine approved the Rural Areas Development Concept6.

The Rural Areas Development Concept contains a comprehensive approach to the question of rural development, with principles of sustainable development integral. Long neglected, ecological protection should now be included as part of rural production processes.

In 2016, the Ministry of Agrarian Policy plans to develop and adopt the action plan to implement the Rural Areas Development Concept7. Unfortunately, while reviewing and providing comments to a draft, it became clear that the concept is not consistent with the strategy and does not contain many important guiding principles8.

Ukraine also adopted the Concept for the State Aimed Programme for Agricultural Sector Development till 20209 and then later, the Cabinet of Ministers on 30 December 2015 obliged the Ministry of Agriculture to develop comprehensive document of the Programme. While the terms of the programme have been delayed, the Ministry of Agriculture currently has opened the project for commenting.10 Among ministries and other bodies of the executive, there is not sufficient cooperation and monitoring of the strategy as it is outlined in its text. For example, between the Ministry of Agriculture and Ministry of Environment there is no cooperation on the environmental issues, between the Ministry of Agriculture and Ministry for the regional development - on the rural development.11 Information requests to the Ministry of Agriculture have not answered who is responsible for implementation of the strategy. Responses to requests relating to the strategy were provided by the Department for Liaising with associations and civil society, the first Deputy Minister, the Department for scientific-educational work and entrepreneurship development in the villages, and not a single one was provided by the office of the Deputy Minister for European integration, which is supposed to in be in charge of the strategy.

In early 2015 Ministry for Agriculture appointed the council for the elaboration of the draft strategy and the working groups. In 2016, NECU was nominated to take part in the working group on rural development.

However not a single meeting was held during the year.

In addition in April 2016, the Minister of Agrarian Policy was replaced and a different strategy was announced. The practice of revising strategic documents when ministers are replaced is an unfortunately common practice in Ukraine.

The following are the main concerns related to the implementation of the strategy: • The replacement of the Minister of Agrarian Policy calls into question the implementation of the previously developed strategy from 2015; • The 2015 strategy remains a declarative document that has not being integrated into newly developed legislation and programmes; • It is not clear who is responsible for the implementation of the strategy among the Agriministry, and thematic working groups do not function as mandated; • Cross-sector cooperation among ministries and other executive bodies is absent; • It is unclear whether the ministry will continue working with the existing strategy or if it will develop a new document.

6 http://zakon5.rada.gov.ua/laws/show/995-2015-%D1%80 7 http://minagro.gov.ua/node/18971 8 NECU comments for the draft Concept of the State purpose-oriented program on the agricultural sector development for the period till 2020 of 27.07.2016 9 http://minagro.gov.ua/apk?nid=10516 10 NECU comments for the draft State purpose-oriented program on the agricultural sector development for the period till 2020 of 23.09.2016: http://necu.org.ua/komentari-do-proektu-derzhavnoyi-tsilovoyi-prohramy-rozvytku-ahrarnoho-sektoru/ 11 From the letters-responses to NECU from the Ministry of Regional Development and the Ministry of Environment

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Purpose

approach to counter international trade in such products

Pesticides application -- Reduce the share of the counterfeit pesticides on the and a great quantity domestic market of counterfeit -- Implement a comprehensive

ration, response and, if necessary, restoration

-- Introduction of effective A large number of emergency situations management of manmade emergencies in the agriculfrom man-made tural sector which must be sources and natural based on prevention, prepaorigin

management of natural resources, -- Development of appropriate indicators, -- Implementation of cross liability mechanisms

-- Urgent implementation of There is no minimum environmental integration of environmental issues standards, -- Development of programmes into agricultural for the sustainable production.

At issue12

Table 1. The holistic approach analysis

principles, -- Strengthen institutional capacity, -- Develop comprehensive program, -- Implement measures (not specified) to reduce the share of counterfeit pesticides and agrochemicals

-- Align Ukrainian legislation to European

interdepartmental cooperation, -- Develop comprehensive programmes

-- Strengthen institutional capacity and improve

Indicators

certified agrochemicals

-- Reduce non-

pesticides on the domestic market to European indices (10% maximum), -- Improve soil biochemical composition by 10%; increase the humus average in the country, -- Reduce pesticides application by 10% and substitute highly toxic pesticides for less dangerous ones, -- Reduce the application of mineral and organic nitrogen fertilizers to 250 kg of the total nitrogen per hectare

-- Reduce the share of counterfeit

-- 20% reduction by 2020 in greenhouse of sustainable gases resulting from agriculture, agriculture, -- Improvement of soil biochemical -- Sustainable use of composition by 10%; increasing natural resources, average amount of humus nationally, -- Reduced costs of -- Reduce water consumption by 10 for producers industrial purposes in agriculture from the wells, -- Reduce the application of mineral and organic nitrogen fertilizers to 250 kg of the total nitrogen per hectare.

-- Development

-- Align Ukrainian legislation with European principles, -- Strengthen institutional capacity, -- Develop comprehensive programmes, -- Develop minimum standards and indicators for the impact on the biological systems and ecotypes, -- Phased transition to the implementation of the cross liability mechanisms, -- Elaborate adaptation measures for climate change and the reduction of greenhouse gas emission from agriculture as part of the national action plan to prevent climate change

Expected outcome

Priority measures

programmes for sustainable waste management in agricultural areas

-- Development of integrated

Expected outcome

12 Based on the ‘Rationale’ section, Approach 10.1 Water, soil, pesticides, nitrates and minimum environmental standards, page 79 of the Strategy

The lack of a comprehensive approach to waste treatment on agricultural areas

principles

-- Implement the integrated pest management

-- Implement comprehensive Integrated pest control principles are approach for pest management inefficient

Priority measures -- Strengthen institutional capacity, -- Develop comprehensive programmes

Purpose

The lack of a comprehensive approach to the country’s biological security

At issue12

Indicators