New strategy, old methods?
“If we really want the countryside to be affluent, we should make it open to investments from all economic sectors, including IT”
The Ukrainian countryside is going to catch its second wind as a result of measures to be taken as part of Native Village, a new strategy of the socioeconomic development of rural territories. This was disclosed to the general public by Mykola Prysiazhniuk, Minister for Agrarian Policies and Food. The document was drawn up on the initiative of the branch ministry, the All-Ukrainian Association of Rural Councils, the related NGOs, international experts, and agrarians.
In the minister’s view, the program will help reverse the tendency of decline in the countryside, establish cooperation between the state and the rural community, and enable small- and medium-scale rural producers to profitably sell their produce on the market. Besides, the agrarian producer will become an active participant in the economic process because it is in the private sector that a considerable food reserve is concentrated. For example, last year private farms produced 80 percent of all milk, 47 percent of meat, 99 percent of potatoes, and, in addition, farms of this kind keep 77 percent of cows, 56 percent of swine, and 47 percent of fowls. “We must tap this resource,” Prysiazhniuk says.
Farming cooperatives are the main principle of the Native Village initiative. “The project calls for shifting the focus of governmental support onto the medium- and small-scale commodity producer who is the backbone of this country’s food security,” Prysiazhniuk said at the presentation ceremony. Cooperatives will also help farmers and peasants put their produce into the marketing chain, increase the added value of the produce, and improve the quality and safety of agricultural products. The minister says the state is determined to support the rural middle class. “The complementary production system will make it possible for the small-scale producer to receive governmental support and donors’ assistance as well as gain access to loan resources. For this to be done, the Ministry for Agrarian Policies and Food will not only bring into play the existing mechanisms of governmental support, such as subsidies and loans, but also aim its efforts at the development of small- and medium-scale business in agriculture. We are going to support all the small- and medium-scale producers, even those who work on 20 to 30 acres or keep one cow,” the minister promised. But, taking into account the “residual” principle of funding the agrarian-industrial complex from the state budget, his promises do not sound very plausible.
Yet the initiators of this strategy believe that it will work because cooperative movement among small- and medium-scale producers is one of the effective European instruments of stable development. For instance, agrarian cooperatives market 80 percent of farming produce in Scandinavia, 65 percent in the Netherlands, 52 percent in Germany, Spain, and France. In the US cooperatives are responsible for processing 82 percent of milk, marketing 30 percent of products, producing 51 percent of sugar, maintaining 40 percent of wholesale cattle markets, supplying 45 percent of fertilizers and 44 percent of fuel. Cooperatives in China and Japan sell more than 90 percent of farm produce on the domestic and foreign markets.
Experts approve of all the governmental steps aimed at improving life in the Ukrainian countryside. Yet they believe there are a few obstacles which the abovementioned initiative will be unable to remove.
According to Mykola Fursenko, chairman of the All-Ukrainian Association of Rural Councils, the countryside has slipped to the fringes of development because, although it puts out a great deal of produce, it is unable to sell it on the market. “This means there are no wages for one to pay full-fledged taxes and thus fill a village’s budget. We will not save the countryside unless there is economic growth,” Fursenko emphasizes.
Alex Lissitsa, president of the Ukrainian Agribusiness Club, is also skeptical about fast results of the new initiative. But if the program gets financial backing, there are bound to be positive changes in the medium term, he says. “Therefore, the main question will be whether Ukrainian and foreign companies will be crediting these cooperatives. As long as banks refuse to fund small-scale businesses, the latter will have very slim chances to survive,” Lissitsa says. In his words, cooperatives are so far thriving in the grain sector only. “By all accounts, the cooperative movement will develop in narrow segments, such as dairy cattle-raising and the fruit and vegetable industry. I doubt that cooperatives will be able to compete with big farms in the production of grain, vegetable oils, meat, and eggs. The latter have the advantages of production price, skilled personnel, and export opportunities. If we really want the countryside to be affluent, we should make it open to investments from all economic sectors. Why not introduce, for example, reduced taxation for various types of businesses? In the West, state-of-the-art IT technologies are being applied today in the countryside: it makes no difference where you work – in a city or in a village,” Lissitsa concludes.
In the opinion of Ivan Larin, chairman of the city council in the village of Hrechyshkino, Luhansk oblast, while a strategy is being discussed now, nobody has said anything about the way it will be put into practice. But it is very important because, for example, it is not clear whether large raw material processing businesses will choose to work with these cooperatives. He thinks that the countryside should, of course, be developed, but this strategy should be complemented with a provision that a tax be levied per hectare of the land cultivated by large commercial entities in order to meet the rural social needs. “Today, all the 11,000 village councils are in fact 70 to 80 percent subsidized,” he says. This should be put an end to in the first place.
