Ukraine’s food security. A new plan
A tax holiday for agrarian enterprises?
The government is preparing a new plan to ensure the country’s food security. The bill No. 8370 “On Foundations of Food Security” contains a list of measures needed for this. Its authors suggest applying it to the sectors which produce, store, process and sell agricultural products.
The author of the bill believes that in order to increase the amount of food products in the country agrarian enterprises should be provided with a tax holiday and a moratorium on bankruptcy of agricultural enterprises should be introduced. Other measures include renewing agricultural subsidies, the introduction of minimal guaranteed purchase prices, and the launch of trade or dealer loans (which should be paid off after harvesting is over). The document also suggests the consolidation of unions of small village farms into big ones within raions, oblasts and regions; the introduction of a moratorium on the import of food produced in sufficient quantity in Ukraine and developing the system of state purchases. The concluding provisions address the necessity to elaborate and adopt a strategy for ensuring food security in Ukraine for 2011-15 and a food security policy for 2011-25.
As it is known, this is already the second bill on food security this year. The previous one was registered by a group of people’s deputies on April 28, 2011. Are the conditions for the improvement of the country’s food security really being met? What measures can increase it? The Day asked agrarian sector experts.
“The issue of food security is not as urgent today as it is depicted. Ukraine exports ten billion dollars’ worth of agricultural products, and imports only six billion. In other words, the net foreign trade balance for agribusiness is plus four billion dollars. That is the sector sells more agricultural products than the country gets from abroad,” Volodymyr Lapa, director general of the Ukrainian Agrarian Business Club, told The Day. According to him, citric plants and seafood which are not grown or produced in Ukraine constitute most of the imports. Therefore it is impossible to replace them with Ukrainian counterparts. However, meat and fruit and vegetable (especially apples) products can be replaced by Ukrainian produce. But for this one needs to think over thoroughly and organize the state and crediting policy because these areas are very capital-intensive, Lapa explains. Generally, he believes, the norms stated in the bill are more of a declarative character. And their efficiency will depend on whether they will really be included in appropriate places. In particular, Lapa argues, the norm on a tax holiday will only work if it is included in the Tax Code.
The president of the Ukrainian Agrarian Confederation Leonid Kozachenko thinks that the problem of food security in Ukraine lies not in the availability of products but in the purchasing capacity of the population. “If one speaks about food security, I don’t see any danger today. The major risk lies in the fact that people cannot consume a sufficient amount of food because of a lack of money, not a lack of food,” he told The Day. Therefore, in Kozachenko’s opinion, the government needs to work on this. Indeed, at present the state takes more from agriculture than it puts back. According to him, in 2010 almost 40 billion hryvnias from agribusiness went to the state budget, while state support for the sector amounted to only 12 billion hryvnias. According to Kozachenko’s estimates, manufacturers lost 17 billion hryvnias on the ban of grain crop exports alone. And if one takes a look at the last three years, the budget received 11.8 percent of the value of total gross production.
The proposal to forbid bankrupting unprofitable agricultural enterprises, Kozachenko believes, will only harm the field. In this case, he explains, agrarians will have a temptation to raise a loan, and then declare bankruptcy, and not return the loan. Then banks will lose. Conversely, Lapa thinks that such a moratorium leaves open the question of how these problematic enterprises should be made profitable.
At the same time, Viktor Slauta, advisor to president of Ukraine, former deputy prime minister for agribusiness, said in his comment to The Day that no additional laws should be adopted to improve the food security in the country. “Let the Cabinet of Ministers fulfill the Law ‘On Foundations of Agrarian Policy by 2020’ and ‘On Support of Agriculture’ (effective since January 1, 2005). This will ensure the country’s food security,” he explained. In Slauta’s opinion, the only thing the ministry should improve today is agrarian insurance, leasing and lowering the interest rates of commercial banks, so that agrarians can get loans at less than 7-9 percent, with the remaining 10 percent being compensated by the state.
