Agriculture has traditionally been a key industry in Ukraine, and unsurprisingly the country's government is looking at the sector as a major driver of economic growth.
Indeed, at the US-Ukraine Investment Forum in Washington, DC in July it was a topic Ukrainian minister of agriculture Oleksiy Pavlenko was keen to point to as being important for FDI coming into the country. He discussed Ukraine's agricultural reforms regarding licences, regulations and food safety, the privatisation and sale of agricultural enterprises, and loans and aid from the US and other countries.
“In the past six months, we’ve been able to cancel six certificates for food licences and make more than 50 changes in regulations to simplify the [agriculture] business,” says Mr Pavlenko. “We’ve also started the process for the sale of enterprises for privatisation.”
He adds that the government expects 254 different agricultural enterprises to be privatised by the end of 2015. To encourage investment, Ukraine has introduced a seven-year land lease programme and minimised bureaucratic procedures for registering land lease agreements.
Mr Pavlenko also points out how Ukraine is working with finance groups such as the World Bank, the International Finance Corporation and the EU to improve the sector’s investment climate and synchronise Ukrainian legislation with that of the EU. “We are now involved with 24 different working groups and more than 170 experts who are involved in reforming our state-owned enterprises and SMEs,” he says.
During the forum, Mr Pavlenko discussed with officials from the US Agency for International Development processes for reforming the Ukrainian agrarian sector, including facilitating access to financing farmers, improving legal legislation, and a development strategy for the sector.
However, he is still keen to emphasise the importance of economic reforms and a transparent and predictable business climate to create favourable investment conditions in the country. “We see huge potential for investment,” he says. “But we see the Ukrainian agri-sector as undercapitalised.”
Among what is needed, he adds, is investment in harvesters, seeders, farming equipment, fertilisers and cold chain facilities. “There’s also a need for working capital,” he says.
Mr Pavlenko is keen for Ukraine to emulate France, where farmers are able to produce eight tonnes of wheat per hectare, as opposed to three tonnes per hectare in his country. “Given Ukraine’s fertile soil, however, the country's ability for growth and production is very high,” he says.
Critical to Ukraine's agricultural reforms, however, is investment in logistics and equipment: railroads, ports, road infrastructure and grain elevators. In June, the Ukrainian grain trading unit of French agricultural giant Soufflet Group signed a $70m investment memorandum with Ukraine’s fourth largest sea port, state-owned Illichivsk, to upgrade the port's infrastructure, including the building of a grain terminal with up to 1.2 million tonnes of capacity.
Last year, DuPont Pioneer invested $11m in the construction of a second corn production line at the company’s plant in the village of Stasy in Ukraine’s Poltava region. The company also expanded the capacity of its warehouse for bulk seed storage.
In addition to this, Cargill, one of largest producers of food, agriculture, financial and industrial products and services in the world, also announced in July its intention to invest $100m in the construction of a new terminal at Yuzhny port in Ukraine's Odessa region.
“Businesses are starting to see that the changes in our reforms are becoming more and more visible and tangible,” says Mr Pavlenko. “We are moving forward, and we are not stopping.”