AGRICULTURE CAN BE PROFITABLE If the state learns to help those able to work
Russia already has been practicing bank loans to the agricultural complex for at least two years. The scheme is fairly simple: banks sign contracts with regional state administrations, which guarantee the repayment of commercial loans.
Experience shows that there have been no cases registered where someone failed to pay off the loan. Moreover, huge financial institutions launched leasing operations. And the state intends to restructure agrarian debts to secure the pay off of old debts.
The Day turned to the Slavutych Board Chairman and the Head of the Exchange Committee of the Agricultural Exchange Bohdan Hubsky for comments on the perspectives of agricultural reforms.
According to him, the main problem is that Ukraine and Russia have different financial situations. To finance the agrarian sector, banks should at the very least have the money. Loans granted by Bank Ukrayina can hardly be called commercial. They are granted without any system and are not given a second thought. In addition, such loans cause losses throughout the economic system because they are politically motivated. Bank Ukrayina should not be granting loans to those not able to pay them back.
The government and the Ministry of Agriculture also encourage ineffective use loans. Numerous debt write-offs do not stimulate effective investment of loans. Granting bad loans denies access to credit to smart managers and thus causes direct losses to agriculture as a whole.
Commenting on the mechanism of state guarantees for bank loans, Hubsky said that all regional administrations in Russia are legal entities and thus able to sign agreements and grant financial guarantees. Ukrainian administrations have not yet been given the same rights. However, according to Hubsky, administrations should not participate in commercial activity, because in case of financial losses, they will have to cover them at the expense of salaries’ funding and other budgetary funds. Local administrations should organize the proper economic environment where market mechanisms can be used most effectively.
So-called regional orders also are a considerable obstacle to effective functioning of the agricultural business. Hubsky says, “For instance, local administrations order grain from peasants. This means that after the harvest is brought in this amount has to be delivered to the grain elevators. If money were paid for the grain, there would be no problem at all. But the thing is that the state wants 100% of the order for 50% payment. Here also would be no problems, if farmers worked only with the state. But, the situation is different. Businessmen who invest as much as the state or even more are unable to get a return because of the obstacles created by the state.
“Formally, state administrations have no right to collect from agricultural firms grain they haven’t paid for. But it turns out that after numerous instructions and regulations, farmers are forced to sell to the executive authorities on credit. At the same time they start owing their own suppliers. Then the situation gets even more absurd than it was in Soviet times. You see, in the past district committees never dictated from whom and to whom the elevators could give and take grain.”
The state has announced attempts to decisively overcome barter, but, if you take this seriously, this means that mechanisms of cooperation with farmers will be transformed. The question is how?
Hubsky added, “if the state really wanted to eliminate barter, it would have done so in one day: they need only prepare and pass the needed documents. In particular, transfer to the exchange system of state purchase should be accompanied with the list of exchanges, requirements on them, financial order, and regulations. Today no one works on these questions in the state structures, which means no one will trust such announcements. Barter will never die on its own, but the point is that by prohibiting it, the state actually stimulates it.”
According to Hubsky, barter is not as huge a problem as it seems to be. But the determination to convert to cash accounts should be accompanied by the creation of an exchange infrastructure, auctions, and credit lines. Naturally, if no one works on this, nothing will change. Note that in 1997 agriculture suffered losses totaling Hr 2 billion. What will 1998 year bring us, if the harvest is worse?
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The process of impoverishment in the village has also touched chicken farming, and the fowl population is declining. Is it not time for a return to raw nature as a recipe for surviving?
