Villages need daring solutions

Another “salvation” document — The National Doctrine on Agricultural Sector Development — has been prepared for Ukrainian agrarians. The new roadmap for the development of the Ukrainian agricultural sector is still unknown. At least, there is nothing official. Meanwhile, experts have ready opinions and suggestions that could fill the doctrine with real content.

For example, the vice president of the Ukrainian Academy of Agrarian Sciences Mykola Bezuhly reckons that the Ukrainian agricultural sector needs 100.7 billion hryvnias to eliminate the deficit of enterprises’ circulating assets, and some 248 billion hryvnias more will be needed within the five-year period to update their material and technical basis. In Bezuhly’s opinion, these considerable funds can be obtained through loans from international financial institutions, and providing investment companies with governmental guarantees. Another option is the refinancing of commercial banks by the National Bank of Ukraine for purpose-oriented programs in the agricultural sector (farmers will borrow the money through land mortgages, which should also be developed according to experts).

Bezuhly believes that introducing a tax for village development can become an efficient mechanism as well. He suggests paying one percent from each purchase to the special Ukrainian Village Development Fund. This will enable raising 20-22 billion hryvnias per year for the agricultural sector.

Ivan Tomych, the head of the Agricultural Service Cooperatives Union, agrees with the vice president that the sector really needs a clear set of reforms. However, today he does not see any reasons to introduce any additional mechanisms to financially support the agricultural sector. “The current legislation has enough financial mechanisms to develop the country and the agricultural and industrial sector in general,” he says. One just needs to use them. In particular, Tomych explains, it is possible to raise 40 billion hryvnias through the mechanisms that are available, only ten percent of this potential is used though. Therefore, there is a lack of daring decisions, not tools.

Oleksandr Zholud, the economist of the International Center for Policy Studies, does not support any additional taxes or duties to sustain the agricultural sector either. In his opinion, additional consumers’ expenses will cause inflation. He also suggests rethinking the problems of certain parts of the agricultural sector development. “Maybe some segments don’t develop because consumers are not interested in buying their products. Consequently, investors don’t invest in them. But in this case demand should be stimulated, that is the consumer’s salaries should increase,” Zholud explains in his comment to The Day.

At the same time, the economist of the International Center for Policy Studies supports the idea of the vice president of the Ukrainian Academy of Agrarian Sciences about using land to get mortgage loans from commercial banks.

Land mortgage is a good idea, but only if the State Land Bank is established at the same time, Tomych claims. Otherwise, the head of the Agricultural Service Cooperatives Union believes, the state will consciously provoke serious social and economic problems on the land market, since at present most land resources belong to certain agricultural holdings. “In this case we will deprive villagers of their land and will doom the country to final and irreversible extinction, making an even bigger part of Ukraine’s territory fall into disuse,” he explains, suggesting his own remedies for the agricultural sector.

For example, Tomych suggests including an item on land and natural resources inventory in the national doctrine and adopting a package of laws (on cadastre, land market, village societies for agricultural land market regulation, the role of local communities in market operations, and the state land mortgage bank). He also suggests fundamentally reforming the institution implementing the land policy and establishing a special ministry or the State Committee for Land Resources.

However, all experts interviewed by The Day are unanimous in one thing: these reforms are needed as soon as possible, as inactivity is causing losses for the sector.

According to Bezuhly, due to the lack of a definite state policy and lack of funds, only half of all acreage planted saw mineral fertilizers in 2010. The situation with organic fertilizers is utterly catastrophic. While one hectare requires 9 tons, in fact only 0.6 tons are provided for only 2.5 percent of all acreage planted. Two thirds of the crops grow without pesticides and herbicides. In other words, one can forget about killing pests and record crops. Outdated equipment results in considerable losses for farmers during the harvest season. For instance, according to Bezuhly, for the last three years Ukraine lost about 35 million tons of grain crops just on the stage of harvesting, which is equal to the average gross grain yield for the five last years. Generally, the impact of all these negative factors leads to a situation when only 25-40 percent of winter wheat’s genetic potential, the key Ukrainian export crop, is used.

The vice president of the Ukrainian Academy of Agrarian Sciences assures that the potential of Ukrainian grain production is huge. In particular, he said that for six years the Academy’s employees were growing different grain crops observing all norms on eight plots in six natural climatic zones, spending 5,100 hryvnias for the cultivation of one hectare of land. What did they get? On average, for example, the yield of winter wheat is 70-90 quintals per hectare (at this its quality never deteriorates to the third class), with the cost price of 664 hryvnias per ton. This means, he adds, that the money spent on cultivating one hectare will pay for itself nine times in the first year. At this, Bezuhly says, in 2009, the best year for agrarians (in financial terms), expenses for cultivating one hectare of land were no more than 2 thousand hryvnias. The situation in the livestock sector is even worse.