Yevhen IMAS: Ukraine to Face Domestic Shortages of Sugar for The First Time in 100 Years

Yevhen Imas's public announcement that Ukraine is experiencing a sugar shortage for the first time in the past 100 years has shocked many people. In response, Ministry of the Agro-Industrial Complex officials firmly reassured us that there is nothing to fear: the output of sugar will be 1.8 million tons, and not 1.2 million, as some people forecast. The Day correspondent Vladyslav MIKHALIOV has interviewed President of Ukrintertsukor JV Ye. Imas.

“We must keep our eyes open and see what is going on. When Ministry officials deny what I say and promise the output of 1.8 million tons, I am prepared to explain, with respect to each oblast and district, why this will not happen. The point is that, in spite of official claims that 850,000 hectares of sugar-beets were sowed during the autumn deep plowing, 300,000 hectares were in fact sowed during the spring plowing, which is, as they say in Odesa, ‘two different things.' As soon as the outside temperature touches — 5C degrees, the sugar-beet loses its sugar content, and some areas in Ukraine recorded —7C degrees on the surface in spring. This is why the sugar-beet yield will be 120 double quintals per hectare, and not the expected 180-190 double quintals. The experience of the past few years also shows that 20-25% of the beet is left over in the field during the harvest. And so on. The Ministry of the Agro-Industrial Complex is afraid to talk about this. But I am not afraid, for I am not an official, I work on the soil every day, and every day we invest money in this soil.”

“How come Ukraine, until recently Europe's leading producer and exporter of sugar, is more and more becoming the importer of the latter?”

“But Ukraine has also been the importer before. In the best year (1990), this country produced 5.5 million tons of sugar and imported 2 million tons of raw sugar. The question is in the ratio between imports and exports. Raw sugar can be imported if it is to be used to our benefit. But when you become an importer out of desperation, this is an entirely different thing. So we should not fear the word ‘importer,' we must fear the word combination ‘forced importer.'

“I repeat: Ukraine is going to have domestic shortages of sugar for the first time in the past 100 years. This is the main thing. In 1917, Ukraine produced 1.6 million tons of sugar; 1.7 million tons in 1948, three years after the war; and 5.5 million tons in 1990. This year will see 1.2 million tons, with the domestic requirement being 1.7 million tons.”

“What caused the present situation?”

“There is a whole range of causes. Horizontal and vertical ties have been disrupted. 80-85% of our sugar-beet sowing and harvesting equipment is outdated. Also obsolete are the fixed assets of sugar factories: out of today's 192 facilities, many were built in the last years of Taras Shevchenko's life. For example, in the Vinnytsia region, once referred to as ‘sugar Donbas,' the equipment of factories has an 87-% wear-and-tear index. The whole sugar-beet sub-complex is becoming obsolete.

“We have not been putting mineral fertilizers in the soil for 5-6 years. Crop rotation has been totally broken... A lot of land is now absolutely empty. So one idea we are struggling to fulfill is to take under a lease and cultivate this land. This would settle the debts that so far nobody has tried to pay off. We will be cultivating sugar-beet, while our partners are raising other crops. We will thus observe requirements for the maintenance and cultivation of land within a complete crop rotation cycle. We intend to implement this in seven districts of the Vinnytsia oblast.”

“Are there any other ways out?”

“One of them is an Ukrintertsukor project which we have been working on with German partners for over six years. In today's Ukraine, every 10th hectare sowed with sugar-beet is part of this project. And while the average nationwide yield of sugar-beets is 180 double quintals per hectare, Ukrintertsukor ensures 340 d.q./ha. But this a mere 10%. You cannot build ‘communism' in an isolated company, when it is not available all over the country. And what is very important exactly in the current crisis situation is the fact that the Germans are satisfied with the work under this project and are giving another 100 million euros for the next 5 years. They invest in us because we possess huge potential, in terms of land, industry, and intellect.”

“The week before last, the law on sugar came into force. How would you assess it?”

“Positively, for we lobbied it as much as we could. The law at least defines what the Ukrainian sugar complex is, how quotas must be distributed, and many other things. In reality, there is nothing new there at all. The basics of sugar business were laid by our grandparents a hundred years ago, when Ukraine was the world's first sugar power. At that time, everything was distributed quota-wise, and the state took part in the process: it gave credit in spring and recovered it, with interest charged, in the fall. Export was subsidized: the domestic price increased at the expense of tax, and the latter was used to subsidize exports. In other words, there was a system, an order.”

“Those favoring limited state involvement in the sugar market draw the following pattern. When sugar was being overproduced in this country, prices for it were constantly dropping, as were sugar- beet-sowed lands. Interest in this commodity was also dwindling. As a result, the production of sugar was decreasing with every passing year, which created its shortage. Given the shortages and increase in sugar prices, as does the attractiveness of working with it. The industry begins to receive investments. What do you think about this kind of market mechanism?”

“Those who say so have nothing to do with market-style production. This is pure theory, a textbook. I am saying this as an economist. A market mechanism is, above all, concrete flesh-and-blood people, material assets, decisions, and responsibility. Of course, the market will one day rescue us, but what shall we do until that time? Starve? Some say: this is the law of the jungle, when wolves will only eat the sick. But the wolves will also eat up the healthy, should they come across them. Nothing will come out unless we apply our own hands to overcome the crisis: we should take loans, bear liability for them, and improve production. This is a market- style way out.

“Do you know who the biggest sugar seller in this country is? It is the Tax Administration. The second seller is the State Reserve, and the third is the Pension Fund. These three organizations hold 60% of all Ukrainian sugar. They have to, of course. The cash- strapped factories are in no position to settle accounts with these establishments, so the latter take sugar. But let us state clearly that our sugar industry is in dire straits. It will take us 5 or 10 years to gradually recover. But there should be no chaos, when the strongest will take the sugar. We will thus kill the factories.

“The state is not to govern the sugar industry, but it should regulate the sugar market in a centralized and systematic way, and support the national commodity producer who cultivates and processes sugar-beets. This will yield effect. Let us not forget that this country's safe food situation depends on the state of affairs in the sugar industry.”

THE DAY 'S REFERENCE

Yevhen Imas was born in 1961 and graduated from pedagogical and economic higher-education institutions. He has been in business for 10 years, dealing with sugar for seven of them. Since 1994 he has been president of the Ukrintertsukor Ukrainian- Austrian-German JV. Professor at the Moscow-based International Business Institute. Corresponding member of the Academy of National Progress, Ukraine. Meritorious Economist of Ukraine.