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  • 1. 1. DRAFT VERSION OPPORTUNITIES FOR USAID ASSISTANCE TO AGRICULTURE IN UKRAINE January 2009 This report was produced for review by the United States Agency for International Development. It was prepared by Robert Fries of ACDI/VOCA, Ryder Rogers of USAID/Kyiv, Jason Wolfe of USAID/EGAT/PR/MD, Stephen Wright of MEDA, and independent consultant Tamara Zykova.
  • 2. DRAFT VERSION OPPORTUNITIES FOR USAID ASSISTANCE TO AGRICULTURE IN UKRAINE Robert Fries, ACDI/VOCA Ryder Rogers, USAID Regional Mission to Ukraine, Moldova & Belarus Jason Wolfe, USAID Bureau for Economic Growth, Agriculture & Trade Stephen Wright, Mennonite Economic Development Associates Tamara Zykova, Independent Consultant DISCLAIMER The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. i
  • 3. TABLE OF CONTENTS 2.Executive Summary..........................................................................................................................................................1 3.Background........................................................................................................................................................................3 3.1.USAID’s Trends in Agricultural Sector Programming ...................................................................................3 3.2.About the Scope of Work....................................................................................................................................4 4.Development Challenge..................................................................................................................................................5 5.Opportunities for Intervention......................................................................................................................................5 5.1.Wholesale Markets.................................................................................................................................................5 5.2.Sound, Market-Oriented Agricultural Policies..................................................................................................7 4.3. Grain and Oilseed Market Development......................................................................................................10 4.4 Support for Crimean Agricultural Enterprises through Access to Finance..............................................14 4.5Concluding Observations and Implications of Findings................................................................................19 4.5.1Wholesale Markets.............................................................................................................................................19 4.5.2Policy Initiative...................................................................................................................................................19 4.5.3 Grain and Oilseed Market Development.....................................................................................................20 4.5.4Support for Crimean Agricultural Enterprises through Access to Finance.............................................20 6.Recommendations..........................................................................................................................................................21 ANNEX A. Individuals and Institutions Consulted..................................................................................................24 ANNEX B. Works Consulted.........................................................................................................................................29 TABLE OF FIGURES Figure 1 Number of Farms by Land Area.....................................................................................................................11 Figure 2 Share of Agricultural Land by Farm Size.......................................................................................................11 Figure 3 Agricultural Loan Portfolio for Ukraine’s Leading Banks as of January 1, 2009 Source: USAID Capital Markets Project......................................................................................................................................16 Figure 4 Agricultural Loan Portfolio as Percent of Gross Loan Portfolio for Ukraine’s Leading Banks as of January 1, 2009...................................................................................................................................................................17 ii
  • 4. ACRONYMS USED ACM Agro Capital Management AMDI Agrarian Markets Development Institute CIDA Canadian International Development Agency DCA USAID Development Credit Authority EBRD European Bank for Reconstruction and Development FAO United Nations Food and Agriculture Organization FY Fiscal year GDP Gross domestic product GLOBALGAP Global Good Agricultural Practices (originally developed and required by European supermarkets) GOST Gosudarstvenniy standart (state standards) GUAM Georgia, Ukraine, Azerbaijan, and Moldova HACCP Hazard Analysis and Critical Control Point LINC USAID Local Investment and National Competitiveness project MEDA Mennonite Economic Development Associates UCF Ukrainian Credit Fund UHDP Ukraine Horticulture Development Project USAID United States Agency for International Development UAH Ukrainian hryvnia (approximately 8 UAH = 1 USD) VAT Value added tax WTO World Trade Organization iii
  • 5. DRAFT VERSION 2. EXECUTIVE SUMMARY While Ukraine’s Agricultural sector has seen steady growth and remained stable during the financial crisis, agricultural production remains far below its potential. USAID was on track to phase out of agricultural assis- tance to Ukraine in 2009, however the global economic crisis, the Russian Georgia conflict, and global food shortages have all called attention to Ukraine’s significance as a transitioning economy and highlighted its po- tential to contribute to global food security. USAID/OEG received supplemental funds in FY 2009 to ad- dress the financial crises, plans for phase out were suspended, and future funding is projected to increase. This Agricultural Assessment was undertaken in order to evaluate the effectiveness of previous development efforts while helping to shape the next wave of USAID’s agricultural assistance to Ukraine. The assessment team talked to numerous stakeholders including Ukrainian government officials, trade associations, think tanks, both small and large producers, traders, exporters, and other US government agencies. Throughout the course of the assessment the team examined four broad areas: (1) wholesale markets, (2) agricultural poli- cies, (3) grain and oilseed market development, and (4) Crimean agribusiness development. Wholesale markets in Ukraine are widely seen as underdeveloped with the notable exception of the Shuvar market in Lviv, which is frequently cited as a model. With support from Shuvar and the Agrarian Markets Development Institute (AMDI), the Verkhovna Rada recently passed a law on Wholesale Markets that will grant legal status to wholesale markets, and authorize government subsidies for the establishment of new wholesale markets. The Shuvar model, while providing an alternative market outlet to bazaars and grocery stores, is not sufficient for increasing private farmer linkages to the market. Wholesale-retail mechanisms and facilities in rural areas are required to improve consolidation and marketing options for farmers. While Ukraine has undertaken many primary agricultural reforms, there is a substantial need for secondary re- forms. The Agrarian Markets Development Institute (AMDI), a non-partisan think tank primarily funded by USAID, has been highly engaged in policy analysis and reform for agricultural development. The assessment team looked at many policy issues affecting agricultural growth including agricultural land markets, subsidies, tax issues, cooperatives, and standards, while also looking at the overall effectiveness of AMDI as a driver of policy reform. Despite the recent rise of agriholdings, small and medium farms continue to play a significant role in Ukraine’s agricultural production, particularly in Crimea. However, constraints to increasing productivity and production amongst these producers include limited access to knowledge, technology, and credit along with a lack of price transparency. 1.1 Recommendations The assessment team presumes that the objective of future USAID assistance is to increase agricultural growth and competitiveness in Ukraine in a manner that is both sustainable and broad-based. Increased competitiveness will rely on improvements in yields, which require access to more efficient technology and improved efficiencies in moving products from the farm to markets. The team found broad consensus that private farmers, operating on farms of up to a few thousand hectares in size and managed by families and in- dividuals engaged in production, are and will remain an important source of agricultural production into the future. Given the challenges that they face in terms of productivity, including access to knowledge, technolo- gy, finance and efficient market access; USAID can add value by organizing its interventions around efforts that target these private farmers and expand their access to knowledge, technology, finance, and market link- ages. 1
  • 6. 1.1.1 Farmer Strengthening One component of the Mission’s agricultural strategy should be private farmer strengthening. The objective of this component will be to increase the productivity and profitability of private farmers in selected geo- graphical areas and value chains, in order to provide a demonstration effect for small and medium scale farm- ers more broadly. To achieve this, the component should address gaps in knowledge, technology, finance, and market linkages. Potential interventions include a wide range of technical assistance to facilitate access to inputs, training in “the farm as a business,” training through demonstration plots for high yielding technolo- gies, and technical assistance to assess and improve university research and education. The team recommends focusing resources on private farmers in Crimea and if feasible, in Southern and Western Ukraine. 1.1.2 Wholesale Markets and Storage Facilities Another promising area for investment is in market infrastructure including wholesale markets and storage fa- cilities. Providing alternatives for producers to market their products to wholesalers would require parallel in- vestments in rural market facilities, run by producer cooperatives or associations, that would offer both regu- lar and cold storage space. Improvements are also needed to increase the transparency and competitiveness of grain storage facilities. This component could include interventions such as short-term technical assistance to wholesale market development projects, developing relevant construction financing products, assessing grain warehouse facilities to evaluate issues of mistrust in the warehouses, and researching why grain ware- house receipts are not being utilized. Grants and technical assistance to warehouses could be used to improve transparency, effectiveness and competitiveness of services. 1.1.3 Policy Environment The team recommends placing less focus on big policy wins and more on regulatory improvements and effec- tive public-private mechanisms for communication. As a component of a future USAID project, resources can be used through a mechanism to tap AMDI for targeted tasks, such as fine tuning of warehouse receipt legislation to allow the creation of an indemnity fund or to address constraints identified by the assessment in the field, a legal gap analysis to identify barriers to pre-harvest financing as currently being supported by EBRD, or conflicts that exist between grain warehouse receipts and grain market legislation. 1.1.4 Access to Finance A fourth promising component of future assistance would be to increases access to financing for investments in technology and equipment that increase productivity and competitiveness. Diversification into fruit and vegetable production often requires significant up-front investment and USAID, in collaboration with other stakeholders can help to enable this value chain diversification. Given the absence of a few financial institu- tions committed to expanding agricultural lending, interventions in this component will need to be facilitated around promising and specific economic opportunities. They could include combining technical assistance and liquidity or guarantee facilities for a range of financial institutions and agribusinesses that demonstrate significant interest in financing priority upgrades. 2
  • 7. 3. BACKGROUND Agriculture comprises around 10 percent of Ukraine’s GDP and employs 23.1 percent of the total work force or 3.3 million Ukrainians. In the 2008/2009 season Ukraine was the world’s fourth largest exporter of grain and the top exporter of sunflower oil. The agriculture and food industry has served as an economic pillar of stability as one of the only economic sectors to continue to grow during the global economic crisis, overtaking the economic lead from the steel and chemicals industry in the third quarter of 2008. Agriculture is likely to continue to lead Ukraine until there is sustained economic recovery. Growth of the sector began in 2000 following significant agricultural land privatization, which dissolved col- lective and state farms and transferred control to private business. At this time the government discontinued its supply of inputs and replaced them with subsidies in the form of cash transfers and subsidized interest rates. Agricultures’ steady pace of growth masks the sector’s underperformance. An example of agriculture’s lack- luster performance is its average 3 percent per annum growth since 2000 while the remainder of the economy grew on average of 6 percent over the period. Further, rural areas are now predominately, over 75 percent, populated by people over 60 and less than 17 years of age, as those capable of working have migrated to large urban centers or left the country. The 2008 growing season was the first year since 1992 that large scale com- mercial farm production outperformed household plots in terms of value of production. Of Ukraine’s 42 mil- lion hectares of agricultural land less than 3 million hectares are farmed using current farm technology and over 7 million hectares are idle. A 2008 FAO assessment indicated that Ukraine would be a critical player over the next three to five years as a food producer that could significantly ameliorate the global food crisis. Development of the sector can help to further diversify Ukraine’s industrially oriented economy by reducing imports and increasing rural incomes. 3.1. USAID’s Trends in Agricultural Sector Programming USAID was on track to phase out assistance for most of its economic growth program areas by 2012. Agri- culture was the first area to be phased out, with programming scheduled to end on September 30, 2009. However, the global economic crisis called attention to Ukraine’s lingering need for structural and economic reforms while the 2008 Georgian-Russian conflict highlighted Ukraine’s significance as a transitioning market economy and democracy. Additionally, global food shortages have highlighted Ukraine’s potential to con- tribute to global food security while strengthening its own economy. USAID/OEG received supplemental funds in FY 2009 to address the financial crises, including funds for value chain, business enabling environment and land reform assistance for Crimea. Plans for phase out were suspended, and future funding is projected to increase. The renewed emphasis on agriculture in Ukraine has provided an opportunity for fresh thinking on agricultural assistance. This assessment took stock of many of USAID’s previous agricultural assistance projects while considering possible areas for future work. Agricultural sector assistance can play an essential role in achieving the FY 2010 Mission Strategic Plan (MSP) goal of helping the Ukrainian Government foster private sector economic growth and develop an investment climate favorable to foreign and domestic capital by fostering the agricultural enabling environment and creat- ing market linkages. This will help to achieve the long-term stability, independence, and prosperity that the U.S. seeks for this region. It will also help Ukraine complete its transition to a market-based, open economy and live up to its considerable economic potential. 3
  • 8. 3.2. About the Scope of Work The Agricultural assessment was tasked with examining four main areas: (1) WHOLESALE MARKETS, (2) AGRICULTURAL POLICIES, (3) GRAIN AND OILSEED MARKET DEVELOPMENT, and (4) CRIMEAN AGRIBUSINESS DEVELOPMENT. The guiding questions for exploration in each of these areas are outlined below. 1. Wholesale Markets  Does Ukraine’s recently adopted wholesale markets law provide an adequate regulatory framework for development of wholesale markets?  How could a project best facilitate the establishment of a wholesale market?  Is the environment right to assemble investment groups in places like Odessa or Simferopol to stim- ulate development of wholesale markets and is it wise to match investments funds to facilitate the in- vestment?  What is needed in terms of capacity building to support wholesale markets?  Are there opportunities for credit enhancements, such as a DCA, to facilitate the startup and success of a wholesale market? 2. Develop Sound, Market-Oriented Agricultural Policies  What are the top agricultural reforms that need to be addressed in order to ensure a more competi- tive sector that adds to Ukraine’s economic security and integration with the European Union?  What are the various stakeholders’ roles in each of these reforms?  What is the role of the Agrarian Markets Development Institute (AMDI) and what is their capacity?  What is the capacity of AMDI’s public private dialogue mechanisms? 3. Greater Food Security through Grain and Oilseed Market Development  Can Ukraine become a major contributor in the efforts to ensuring global food security?  How is the Grain Warehouse System functioning in Ukraine and how does it enable farmers to ob- tain credit?  What are the overall constraints for increasing the supply of grain from Ukraine?  What other avenues exist for cooperation with EBRD to improve access to agricultural credit? 4. Support for Crimean Agricultural Enterprises through Access to Finance  How is finance accessed within various agricultural sectors?  What banks and credit unions operate in the agricultural sector and what is their capacity?  What are the opportunities for value chain financing?  What is the capacity of the MEDA leasing facility and does it represent an opportunity for invest- ment? In addition to theses specified areas for investigation, the team was given a broad mandate to look at other possible opportunities for USAID intervention that may not have been considered. Some of these findings will be discussed later in the paper. 4
  • 9. 4. DEVELOPMENT CHALLENGE The assessment team formulated the following development challenge to guide field research and prioritize opportunities for USAID support of Ukrainian agriculture: PROMOTE AGRICULTURAL GROWTH AND COMPETITIVENESS THROUGH IMPROVEMENTS THAT ARE BROAD-BASED AND SUSTAINABLE. This development challenge implies that USAID support should incorporate all of the following dimensions:  GROWTH: stimulating growth and competitiveness within agricultural subsectors as well as maximizing agri- culture’s overall contributions to national economic growth  EQUITY: ensuring that growth opportunities involve and benefit as many Ukrainians as possible without further exacerbating income inequality that is prevalent in Ukraine  SUSTAINABILITY: securing local leadership, ownership, and investment in strategies to assure that results continue beyond the life of USAID’s assistance 5. OPPORTUNITIES FOR INTERVENTION 5.1. Wholesale Markets The assessment team formulated and tested the following hypotheses based on USAID/Ukraine’s guiding questions:  Wholesale markets are a missing critical link between small producers and larger buyers in Ukraine.  The recently adopted law on wholesale markets unlocks opportunities for expanding such markets in Ukraine.  Investment is the primary constraint to establishing more wholesale markets in Ukraine. 5.1.1. Types of Wholesale Markets Generally, wholesale markets are physical spaces or structures for buyers and sellers of specific products to interact, discover prices and negotiate transactions. Such markets typically play aggregation and/or disaggre- gation roles enabling external traders to purchase and consolidate loads from local suppliers or to sell off their  Producers and middleman can operate directly  Cold storage facilities add value to retailers of from their trucks selling in bulk to individuals, as well meat, fruits, and vegetables; vendors can rent the as some restaurants and smaller markets. amount of space needed. 5
  • 10. incoming loads to localized buyers, often in smaller volumes until their stock is depleted. The four types of markets that can be found in Ukraine are listed below. Type of Market Locations 1) Rural retail and assembly markets  Widespread, primarily on major roadways 2) Urban retail markets (“bazaars”)  Spread throughout major cities 3) Urban “wholesale markets” (in reality a large  Large urban areas including Simferopol, Sev- combined wholesale & retail market) astopol, and Zaporizhzhia 4) Regional wholesale market  Kherson Type (1) (wholesale assembly) predominates. Conducted in informal settings, these are spot markets where price is the central determinant of the sale. Type (1) markets also supply the other market types described hereafter. Value addition (product uniformity, standards, and packaging) is absent. The limitations of spot markets for farmer and buyer alike are well known. Type (2) is not a wholesale market but rather a retail mar- ket. Vendors may be farmers or traders. In Type (3), also a spot market, ‘wholesaling’ trade is generally com- pleted in the morning hours (providing time for the goods traded to be transported to other locations in time for retailing later in the day. Morning wholesaling gives way to retail trade later in the day on the same site. Situated in or very close to major urban centers, wholesale trade in these markets involves both disaggregating large incoming loads destined for retailing in the city and aggregating large loads that are shipped ‘regionally’ to other ‘disaggregation markets’. Trade at type (4), also a spot market, is predominantly of large incoming and outgoing loads, reflecting mainly wholesale trade and reshipment of all goods to other final markets. 5.1.2. General Roles of Wholesale Markets The major role of wholesale markets in agriculture is the consolidation of produce from numerous smaller producers into saleable quantities demanded by larger buyers outside of the immediate area. A variety of structures and arrangements can facilitate this consolidation function, including cooperative marketing through formal or informal producer groups, sales agents or brokers acting on behalf of producers or buyers, and conventional traders who purchase at the farmgate. Wholesale markets clearly play a major role in reduc- ing costs and increasing marketing efficiency, primarily by reducing search costs for buyers. The key benefit for suppliers is access to a pool of potential buyers. The importance of wholesale markets in developed coun- tries ranges from as little as 25 percent of total trade in the UK to higher amounts elsewhere. In developing countries the importance of wholesale markets are expected to continue for quite some time until more for- mal supply networks and arrangements develop. In many places, the rise of supermarkets is putting the role of wholesale markets into question; for instance, EBRD has stopped lending for them in favor of funding re- tail expansion. In Ukraine, however, supermarkets have low market penetration and a generally poor reputa- tion among consumers. Nevertheless, wholesale markets are widely seen as underdeveloped with the notable exception of the Shuvar market in Lviv, which is frequently cited as a model. Shuvar is a well developed and functioning facility with very good logistics, infrastructure (including some cold storage), a range of services, and a diverse combination of wholesale and retail operations. Their target consumers are institutional buyers (such as restaurants), smaller retailers in Lviv and nearby municipalities, and households seeking quality products at a good value. Transactions occur in much smaller batches than other wholesale markets around the world with typical purchases ranging from a box to a pallet of produce. In this respect, Shuvar currently operates more as a consumer-oriented wholesale retailer (trucks come in, boxes go out) rather than a traditional producer-oriented wholesale market (boxes come in, trucks go out). While this may be an appealing and effective business model for Shuvar’s investors, it offers fewer benefits to producers (in terms of the consolidation function) than expected. Rather than increasing competition for farmer’s products and aiding producers in price discovery, this model benefits producers less directly by pro- viding a new type of outlet for fresh fruits and vegetables, one that can increase demand and offer a premium for locally grown products of higher quality. 6
  • 11. Apart from the Shuvar model, a range of wholesale markets does exist throughout Ukraine (including Crimea), though most are informal and inefficient. 5.1.3. Wholesale Markets Law The Verkhovna Rada recently passed a new Law on Wholesale Markets with support from Shuvar and the Agrarian Markets Development Institute (AMDI). The main provisions of the law are (1) to grant legal status to wholesale markets, and (2) to authorize government subsidies for the establishment of new wholesale mar- kets. The new legal status is intended to facilitate land acquisition for constructing markets, as local govern- ments reportedly had difficulty classifying land for this purpose. State funding, if actually made available, would most likely flow to municipalities for investment in new markets. AMDI has suggested that joint ven- tures between municipalities and private developers would be good models for putting these resources to use. It is not completely clear whether the legal status afforded by the law will, by itself, make available new land for wholesale markets in urban areas. The subsidies authorized by the legislation will require budget appropri- ations and secondary policies to make these funds available. Given the austere budgetary environment, the team seemed skeptical that the GOU woul dreally be able to afford these subsidies. Moreover, there seem to be few models (as highlighted by AMDI) and weak incentives (noted by private developers) for public-private partnerships between municipalities and the private sector to develop wholesale markets in this fashion. 5.1.4. Investment for Wholesale Market Development Access to long-term funds for investment is one of several constraints to expanding wholesale markets in Ukraine. Other donors, such as FAO and the World Bank, have had a longer history than USAID of sup- porting wholesale market development in the E&E region. Their collective experience points to the following general success factors:  Location is everything – market locations must relate to transport routes, potential markets, and conve- nience for buyers.  Key traders may be reluctant to shift to new markets.  Buy-in from local authorities is critical, which may explain private sector reluctance to date  Don’t build too much too soon; the debt overhang will be impossible to cover with revenues. For in- stance, the Renk market in Poland is operating at only 30 percent of its capacity. Long-term financing can be difficult to secure at the best times, much less in the wake of the financial crisis in Ukraine. Private developers pursuing wholesale market opportunities (including Shuvar) have devised their own strategies to address this issue. Their general approach is to develop markets in an incremental or modu- lar fashion as they are able to access tranches of investment funding. While perhaps not ideal, the advantage of this method is that it aligns very well with past lessons learned from developing markets in other locations. Developers consulted in this assessment demonstrated little interest in partnering with local authorities to in- vest in wholesale markets as they have little confidence in government motivations or capacity; they would prefer to rely on private investment even if it prolongs the development process. Their most pressing request was for technical assistance, especially from more established wholesale markets in the region, rather than debt or equity financing. 5.2. Sound, Market-Oriented Agricultural Policies The assessment team formulated and tested the following hypotheses based on USAID/Ukraine’s guiding questions:  The significant but incomplete structural reforms begun in 2000 have not fully unlocked agricultural po- tential: further policy reform is required.  The public-private dialogue mechanisms established by USAID have been effective.  AMDI has been, and should continue to be, an instrumental local partner in policy reform. 7
  • 12. 5.2.1. Needs for further policy reform While Ukraine has undertaken primary reforms of many key policies affecting agriculture, there is a substan- tial need for secondary reforms. According to Ukraine’s policymaking process, primary reforms involve the legislative actions taken up by the Verkhovna Rada that provide direction and authority for government initia- tives. In many cases, however, further policymaking is required by the Cabinet of Ministers and/or within specific line ministries to implement or administer the requirements of primary legislation. Reforms of these secondary policies are frequently incomplete, ambiguous, or weak. The following policy issues present the most significant constraints related to agricultural growth and compet- itiveness in Ukraine:  AGRICULTURAL LAND MARKETS. Ukraine has maintained a moratorium on the buying and selling of agricultur- al land since the breakup of collective farms in 2000. The only recourse for agribusinesses looking to con- solidate land for production and rural non-farming households seeking to derive value from their land is an informal, and often corrupt, market for leasing land. Many farms are formed from hundreds of leases, yet there is no standardization of lease agreements. These leases can range from year-to-year, informal agreements to 49-year contracts that allow for the eventual purchase of the land if the moratorium is lift- ed. There is however a minimum annual amount that must be paid for these leases (currently 2.5 percent of the land’s value as determined by the government). These assessed values however, may distort the true value of the land, which can vary greatly according to location, soil content, and other factors. Some small farmers support the land moratorium because they doubt their own ability to purchase the plots they current lease. Others oppose the moratorium because of the inefficiencies and corruption it intro- duces into agricultural production. Politicians inevitably invoke land issues as a political tool to garner electoral support and disparage their rivals, resulting in widespread misinformation, uncertainty, and ap- prehension. The general consensus is that the land moratorium will be lifted in the next three years out of financial necessity, but the timing is very difficult to predict.  SUBSIDIES. Ukraine frequently uses government regulations and resources to artificially control the terms or outcomes of market interactions, notably demonstrated through the wheat export quota of 2007, ongoing price controls for bread (as well as new price controls for meat and dairy products), and purchasing sur- plus grain to support farmgate prices. While public subsidies are a common component of agricultural policies, Ukraine’s use of subsidies is frequently driven by political purposes rather than economic or sci- entific evidence and with little consultation with the private sector. Unlike other policy issues, the applica- tion and discontinuation of subsidies in Ukraine often seems arbitrary and unpredictable so that the pri- vate sector cannot adequately absorb their effects into their business models. This climate of uncertainty introduces extensive inefficiencies in private sector operations and discourages some longer-term private investments in the agricultural sector.  VAT REFUNDS. The government significantly under-budgets for VAT refunds to Ukrainian exporters as a means to balance the overall national budget (e.g., 20 billion UAH budgeted for VAT refunds in FY2010 against projected refund requests of 53 billion UAH). This issue affects grain exporters in particular given their large export volumes. Given the extraordinary shortfall in VAT refunds available, there are substan- tial incentives for corrupt practices to secure a refund. Exporters who do not receive refunds will pass these costs on to small farmers (the producers) in the form of lower purchasing prices for grain.  COOPERATIVES. The Verkhovna Rada is expected to pass a law on non-profit cooperatives to augment the legal status of cooperatives and intensify government promotion of cooperatives in Ukraine. Allowing cooperatives to form as non-profit entities would remove perceived problems with double taxation for cooperatives (where taxes are applied both when members sell products to the cooperative and when the cooperative sells products to external buyers). However, non-profit entities in Ukraine face a range of other taxation issues related to ambiguous interpretations of “profit” and burdensome tax-reporting pro- cedures that force these entities to limit their financial reserves. The planned surge in government sup- port for establishing and developing cooperatives (reportedly in the billions of hryvnia) is expected to dis- tort incentives for cooperative formation. Successful cooperatives need to meet a demonstrated econom- ic need of their members, require investment and buy-in from members, and apply democratic practices of management, governance, and decision-making. The opportunity to secure large subsidies from the 8
  • 13. government is likely to undermine these principles and yield a new generation of unproductive coopera- tives that provide little value and few services to their members.  STANDARDS. Ukraine’s recent accession to the WTO has prompted a spate of reforms to bring the manda- tory health and safety standards of its food products in line with international conventions. WTO guide- lines assert that national food safety systems “should be no more restrictive of trade than is necessary to achieve the required level of protection” for public health. Ukraine inherited its system of standards and monitoring (known as GOST) from the Soviet era, which defines criteria for each specific product and requires virtually constant testing of each production batch or shipment. GOST has not been updated in 20 years and is widely considered to impose unnecessary costs on business without achieving public health and safety results. International standards have shifted to more process-oriented standards and risk-based monitoring procedures. A number of efforts are underway to reform and harmonize aspects of this system, reflecting the scale and complexity of required reform in standards. Moreover, a range of vol- untary standards required by specific industries (such as GLOBALGAP and HACCP) can be a significant barrier to accessing higher-value export markets. A closer review of existing support is required to deter- mine if USAID can add value to the efforts with a targeted intervention that complements European as- sistance. Despite these pressing needs for further policy reform, it is not clear that sufficient constituencies and politi- cal will exist to support such changes in the near-term. Many of these policy issues are highly politicized and are popular tools among candidates for public office, particularly in light of presidential elections expected to be completed in February 2010 and parliamentary elections expected to follow soon thereafter. Political con- stituencies are likely to be fragmented and polarized over the near term with politicians focused on consoli- dating their electoral victories and fulfilling campaign promises rather than making difficult policy decisions. Opportunities for engagement, dialogue, and reform are expected to emerge over the next three years, but at this time it is difficult to outline a concrete reform agenda that has good prospects for traction with a new government. 5.2.2. Public-Private Policy Dialogue Through AMDI, USAID facilitated the creation of four public-private dialogue mechanisms, know as “advi- sory councils”, to boost private-sector participation in developing agricultural policies. These advisory coun- cils correspond to four branches of government involved in all levels of the policymaking process: the Verkhovna Rada, the Presidential Secretariat, the Council of Ministers, and the Ministry of Agrarian Policy. Each of these governmental bodies influences different policies, and the Ukrainian system of checks and bal- ances brings about complex interactions between these entities. The advisory councils are convened as an instrument of their respective government bodies with members drawn from professional associations, NGOs, and academia. Their role is to vet proposed policies and to provide feedback on newly implemented policies at the request of the government. They do not have an au- tonomous mandate or role to mobilize their members to formulate or advance policy agendas from the pri- vate sector. Their most notable success to date was overturning the grain export quotas in 2007. Apart from these councils, independent private sector mechanisms to advocate for policy reform are frag- mented and weak. Where they do exist, advocacy organizations are set up along horizontal or functional lines, a situation which dilutes their influence, promotes dissension within industries, and encourages rent-seeking behavior. For instance, the grain subsector features organizations of producers (Association of Farmers of Ukraine, Agrarian Confederation) and traders (Ukrainian Grain Association) but no entity representing the in- terests of the entire industry. Greater vertical coordination and organization, more member-oriented services, and stronger financial sustainability would significantly increase the effectiveness of these institutions. 5.2.3. Local Partners in Policy Reform The Agrarian Markets Development Institute (AMDI) was established in 2005 by a team of experts experi- enced in Ukrainian agricultural policy issues. As a non-partisan think tank, AMDI is highly engaged in policy analysis and reform for agricultural development. As an advocate for private sector and broader civil society 9
  • 14. participation in the policymaking process, AMDI has played a key role in advancing public-private dialogue mechanisms. AMDI has a strong track record of performance. In the past three years, AMDI has actively pursued targets of opportunity for policy reform and had success in advancing a range of issues from wholesale markets and the warehouse receipts system to grain export quotas. Moreover, AMDI was instrumental in establishing the four private-sector advisor councils engaged in agricultural policies and continues to facilitate their opera- tions. AMDI has made less progress in tackling other policy issues, such as privatizing Khlib Ukraina and moratorium on agricultural land markets, but it is arguable that few organizations could have made much more headway with these entrenched issues. The preponderance of AMDI’s efforts have been funded by USAID. Though AMDI continues to diversify its funding sources among a variety of donors, its institutional sustainability could be further strengthened by tapping a broader market. Given the institute’s focus on policy issues of interest to the private sector, it could prove worthwhile for AMDI to build a larger funding base among the local and multinational agribusinesses. Beyond AMDI, the most influential players in agricultural policy reform seem to be the many professional as- sociations representing private sector interests. As noted previously, the fragmented nature of these groups dilutes their potential influence. However they speak for important constituencies that can advance policy agendas. While this time of political transition in Ukraine obscures the prospects for a concrete policy agenda, bolstering the capacity and sustainability of these entities, including AMDI, could build a solid foundation for advocacy and reform as opportunities begin to emerge. 4.3. Grain and Oilseed Market Development In developing the scope of work for this assessment, the Mission asserted the following hypotheses: 5. Ukraine, by increasing grain and oilseed production, can contribute to global food security. 6. The Grain Warehouse Receipts system developed in Ukraine contributes to increased credit and produc- tivity, and more efficient trade. Expanding this system through the development and harmonization of the system in GUAM will make grain trade in the Black Sea Basin more efficient and more insulated from government intervention. 7. Building on the groundwork laid by the Grain Warehouse Receipts system, it may be useful to collaborate with EBRD in its desire to support the development of a product and legal framework for pre-harvest fi- nancing, adapting positive experiences in Brazil. 4.3.1 Contributing to Global Food Security The assessment team’s findings confirm the first hypothesis. Ukraine can contribute to global food security by increasing its production of grains and oilseeds. Ukraine is a significant producer of these crops in the world market, with significant potential for increasing both yields and area of production. According to FAOStat, in 2007 Ukraine was the world’s second largest producer of sunflower seeds, the fifth largest pro- ducer of potatoes and rye, the seventh largest producer of barley, the ninth largest producer of canola, and the eleventh largest of corn. At the same time, it has significant room for expanding its production. Yields are significantly lower than yields in Europe and North America. According to a recent FAO/EBRD study, av- erage yields for grains in Ukraine were 2.4 tons per hectare, compared with 6.4 in the United States, and 6.7 in Western Europe. (FAO/EBRD 2008) Yields within Ukraine vary significantly, as well. According to a major sunflower seed processor and exporter, yields range from 1 metric ton (MT) per hectare for many of the small to medium scale producers, up to more than 4 MT per hectare on the most efficient farms, which tend to be managed by agricultural holding companies. Furthermore, the same FAO/EBRD assessment estimates that Ukraine can increase the area under production by 21%. In addition to the potential for increased productivity, Ukraine has the potential for increasing production by extending its cultivated area. According to FAO, Ukraine’s area of agricultural production declined by 3 mil- 10
  • 15. lion hectares since the break-up of collective farms, and roughly half of that area, or 1.5 million hectares, could be feasibly recovered in the short-term. While production by large agricultural holdings has increased in recent years, private farmers account for sig- nificant areas and levels of grain production. Agricultural production in Ukraine is carried out by four distinct types of producers:  Household farmers – Individuals or families that farm on their own property less than 5 hectares (that they obtained through the privatization of collective farms) who are not registered as farm enterprises.  Private farmers – Farm enterprises registered by farmers who received approximately 50 hectares of land through the privatization process, who also lease plots from other landowners and rely on family la- bor. These producers may have several hundred or up to three or four thousand hectares in production.  Corporate farms – Farm enterprises owned by incorporated groups of private farmers, which constitute several thousand hectares.  Agricultural holdings – Production units owned by a group of investors, often including foreign in- vestors, comprising very large amounts of leased land—tens of thousands of hectares, and operated with a professional management team and modern technology, equipment, and inputs. As illustrated in Figures 1 and 2, farms between 5 and 3,000 hectares in size account for 85 percent of all agri- cultural entities and 58 percent of cultivated land. While accounting for 12 percent of farm entities, farms up to 5 hectares in size account for only 0.1 percent of the agricultural land of registered entities. Conversely, farms larger than 10,000 hectares, while only 0.2 percent of all farm entities, occupy more than 8 percent of the land. Given the magnitude of grain produced by private farmers, the amount of land to which they have access, and the relatively lower yields they have vis-à-vis agricultural holdings, investments at that level within the chain can contribute to significant increases in Ukraine’s production of grains and oilseeds. Figure 1 Number of Farms by Land Area Figure 2 Share of Agricultural Land by Farm Size Source: State Statistics Committee of Ukraine, 2008 Source: State Statistics Committee of Ukraine, 2008 Constraints to increasing productivity and production by this segment of the value chain include:  Limited access to knowledge and technology (equipment and inputs) for obtaining higher yields and maintaining quality  Limited access to credit that facilitates investments in technology  Limited transparency in prices offered to farmers combined with high degrees of distrust toward traders and warehouse elevator operators, hampering consolidation and providing disincentives to producers to change their practices Each of these constraints is discussed in further detail below. KNOWLEDGE. Actors throughout the value chain cited inadequate access to knowledge. Producers interviewed by the team demonstrated knowledge of international prices of grains and oilseed traded internationally, but 11
  • 16. expressed confusion and frustration over the gap between those prices and the ones received for their prod- uct. The failure of the government to reliably refund the 20% VAT payments made by exporters results in significant downward pressure on the price ultimately offered to producers. The non-refunded taxes are fac- tored in as a cost of business by exporters. This was acknowledged by exporters, traders, and some producers. In addition to these challenges to clear market signals, interviewees cited a number of factors constraining the dissemination of technical information that could increase yields and reduce losses for grain producers:  Outmoded methods of research and education at the university level, resulting in ineffectively trained extensionists  A lack of budgetary resources to allow extensionists to reach the large number of producers  A reluctance on the part of associations and other non-profit sources of information to charge fees for their services, compounded by tax policies which insure that these organizations have no cash on hand at the end of a quarter, undermining the development longer term budgeting and sustainable services  A value chain with many buyers and a preponderance of spot market transactions, minimizing the incen- tives for suppliers and buyers to embed the provision of inputs and extension into their services. As a result, farmer access to critical information for increasing the quality and yields of their grain production is spotty. Associations, innovative farmers, and the internet are sources of information for some producers. For example, one of the larger members of the Crimea Producer and Landholder Association has developed a Ukrainian-language website to disseminate information on no-till technologies. TECHNOLOGY. A CIDA-funded grain program observed that many producers rely on outdated and nearly obso- lete farm implements and equipment. These items, originating from collective farms, are at the end of or be- yond their useful lifespans. When this equipment ceases to operate, producers will be forced to invest in new equipment, or face lower levels of productivity. Farmers interviewed in the Crimea are using homemade equipment for their low and no-till production because of limited access to investment resources. These pieces of equipment are less productive than the manufactured equipment they are modeled on. Use of high- yielding seeds, fertilizer and pest management inputs is constrained by farmer access to working capital. For larger producers with greater access to capital, investments to the land that could enhance yields, such as more effective grading, are discouraged by dependence on leased land as a result of the moratorium on the sale of agricultural land. Investments are also needed off-farm in order to facilitate increased productivity, and to manage the handling and flow of increased production. Theoretically, cost-effective sharing of equipment can be facilitated by reli- able service cooperatives, though few viable cooperatives currently exist in Ukraine. Storage equipment is de- manded by farmers, as an alternative to elevators. Increased production will require significant increased stor- age capacity by elevators and port facilities. Licensed elevators and port facilities are operating at full capacity, resulting in limited competition for elevator services, which in turn undermines farmer confidence in the ef- fectiveness of their services and fairness of their prices. If Ukraine increases its production to a consistent lev- el of 80 MT of grains and oil seeds, as currently set forth as a Ministry of Agrarian Policy target, elevators and ports will need to further increase their storage capacity. This increased production will also require invest- ments in transportation: trucks, rail cars and barges with the capacity to move this increased volume. ACCESS TO CREDIT. The financial crisis that first hit Ukraine in the last quarter of 2008—characterized by a rapid and significant devaluation of the hrivna, a deterioration of the loan portfolios of and the dramatic tightening of liquidity by banks and credit unions—has virtually eliminated credit for agriculture. However, even prior to the crisis, private farmers had very limited access. This topic is discussed in detail in Section 4.4.2 below. 4.3.2 Warehouse receipts While this hypothesis is logical, it is at best premature. The assessment team found that the warehouse re- ceipts system developed in Ukraine contributes marginally to credit and productivity. The basic reason for this marginal benefit is the fact that the warehouse receipts system is operating on a very limited scale. 12
  • 17. With assistance from USAID and EBRD programs, Ukraine has put in place most of the legal, regulatory and operational elements of a functioning warehouse receipts system. The regulatory environment recognizes the validity of a warehouse receipt as a security. Selling or signing over the receipt to a new owner entitles the new owner to the grain that the receipt backs. There is a network of certified warehouses, with a state entity charged and staffed with 625 inspectors to certify warehouses, and to inspect them for compliance on an on- going basis. Starting with 282 certified elevators in 2004, there are now 762. An additional 34 have lost their certification because of violations. There is also a registry, managed by a government-owned enterprise that allows warehouses to register deposits and receipts, and allows banks and traders to verify the validity of de- posit tickets and warehouse receipts. A final piece of the system, an indemnity fund into which each elevators pays in order to ensure the system against fraudulent acts (other risks such as fire are covered by insurance policies required by certified elevators), has not been put into place, as the enabling legislation has not been enacted. While this final piece of the system could be an assurance to banks and traders relying on the validity of warehouse receipts, its absence has not been identified as a significant constraint on the use of warehouse receipts. In fact, banks are accepting these receipts on a limited basis. The more significant issue is that depositors in the elevators are not readily demanding warehouse receipts, but are instead relying on a ticketing system similar to the system that was in use under Soviet times. These tickets document the fact that a deposit has been made. They are cancelled when the deposit leaves the ware- house. They are less formal documents, and do not carry the weight of a warehouse receipt as a legal title to ownership. Unlike warehouse receipts, tickets do not enable grain deposits to be used as collateral for access- ing credit. Yet they account for most of the transactions that take place in certified warehouses. In 2008, 5.3 million MT of grain was certified by 4,280 receipts. In the first 10 months of 2009, 5.6 million MT were certi- fied by 5,627 receipts. The registry could not specify the total volume of grain that had been deposited in the system because multiple tickets can be issued to reflect the same grain deposited in the system. 1 However, to provide some point of reference, in December, 14 million MT of grain was being stored. Most producers, traders and buyers interviewed did not understand the difference between a ticket and a receipt and the con- cept of a receipt as a security was not broadly appreciated. Since the ticket system was simpler to implement, and more similar to the Form 13 which was used in the Soviet era, it remains the documentation of choice. While not stated, the ticket has one advantage for buyers of deposits, as well. The depositor must use the tick- et to remove the grain before it is sold, so the buyer does not have to take on the risk of making purchases sight unseen. A lack of confidence in grain elevators was a repeated theme. Producers view the price of services as extreme- ly high and essentially cost-prohibitive for most of them. There are service charges for entry, sorting, storage and drying. Compounded with currently high interest rates, most producers interviewed avoid depositing their grain in elevators. They also have little confidence in getting a fair weigh-in or a fair assessment of grain quality. Buyers also expressed skepticism on the reliability of elevators. One large oilseed processor has in- vested in a network of its own elevators and a team of its own inspectors to verify the quality of private eleva- tors. They do not rely on the certification process as guaranteeing a basic standard of service and reliability. 4.3.3 Pre-harvest Financing Mechanism The basic concept behind this mechanism is to establish a collateral instrument that, like a warehouse receipt, is easy for a bank to execute in the case of default. In the case of Brazil, this instrument linked a crop pledge, which has been accepted within the legal framework of Brazil since the 1800s, with a promissory note. Under a promissory note, a lender has the right to foreclose on a borrower without going through time-consuming court procedures. This mechanism has been used in Brazil to facilitate an estimated $5 billion per year in lending for agriculture. Given the constraints faced by Ukrainian producers in using land as collateral, the EBRD is interested in fa- cilitating the development of a similar product, and a regulatory framework that supports it, in Ukraine. The idea is to build on the progress made through warehouse receipts. If crops could be used as collateral before harvest, and not just after being deposited in certified warehouses, producers could access financing for 1 For example, if a producer or trader deposits 5 MT in the system, and them removes 2 MT for a sale, the elevator cancels the first 5 MT ticket and issues a new ticket for 3 MT. 13
  • 18. longer terms, and banks could expand the crops they use as collateral. In our discussions with the EBRD, they also expanded the concept to include the possibility of linking the collateral documentation to forward sales, with buyers and producers agreeing to future transactions at pre-established prices. In 2010, the EBRD plans to program a study visit to Brazil for stakeholders—government officials, bankers and traders. They would welcome complementary technical assistance funded by USAID in order to support needed legal reforms. While the benefits of expanding options for collateral and the terms of associated loans are potentially significant for private farmers in Ukraine, the assessment team has a number of reservations about its near term feasibility. As one buyer approached by the EBRD expressed it, this is an elegant concept but it assumes away many op- erational challenges. There is limited use of the warehouse receipts documents, which allow crops that are safely stored by a third party to serve as collateral. The idea of implementing this becomes more complex when you recognize that producers may not get a pledge on the crop coming from all of his farmland. This will raise the transaction costs and risks for a buyer, who will be unsure whether the crop has a lien placed on it or not. But ultimately, this may be addressing the wrong constraint. It is less a lack of collateral that is keep- ing private farmers from accessing loans than it their limited ability to quantify and document the cash flow and profitability of their operations. Bankers make their loans based on screening up front. Collateral only serves as security for loans that go bad. But if the book-keeping skills, ownership structures and documenta- tion of farmers do not allow banks to assess the risks of a loan application, collateral is not an issue. 4.4 Support for Crimean Agricultural Enterprises through Access to Finance In developing the scope of work for this assessment, the Mission asserted the following hypotheses: 1. Access to finance is a critical constraint to the competitiveness of agricultural enterprises in Crimea. 2. A range of financial institutions exist in Crimea to serve agricultural enterprises. 3. Value chain financing is an opportunity to expand access to finance for Crimean producers. 4. The new Agro Capital Management leasing facility is an innovative new model for agricultural finance in Crimea. 4.4.1 Comparative Advantages and Constraints to Competitiveness Farmers in the Crimea face a number of unique conditions when compared with other parts of Ukraine. The size of grain producing farms in the Crimea is relatively smaller. 1,500 hectares of land under grain produc- tion is considered large in the Crimea but considered small in most other regions of the country. There is no significant influence from large agricultural holdings in the Crimea, reflecting both the size of the farms and the fact that drier climatic conditions result in lower yields of grain. However, the same climatic conditions contribute to higher quality for some grains. Wheat grown here has high gluten contents required for bread production. Agroclimatic conditions in the Crimea also allow farmers a longer growing season, particularly for fruits and vegetables. They begin planting approximately two weeks earlier than other regions in Ukraine, and the growing extended by approximately two weeks in the autumn. While more distant from large mar- kets in Kiev and Russia, fruit and vegetable producers have a summer market among the restaurants and ho- tels serving the region’s beach resorts. Because of these conditions—farm size, location, and climatic condi- tions, small and medium scale grain producers have added incentives to diversify production and invest in higher cost but more profitable horticulture. Unfortunately, the private farmers of the Crimea also share in the constraints faced by grain producers in oth- er parts of the country. As outlined in Sections 4.1 and 4.3 above, they have very limited access to knowledge (from tilling and horticultural production techniques to business management skills), technology (quality seeds, new equipment from tractors to irrigation and greenhouses), and market linkages (from price informa- tion to wholesale markets and reliable storage facilities). They also have very limited access to finance, whether for improving productivity, replacing equipment, or investing in diversified production. Without ad- 14
  • 19. dressing these constraints, small and medium producers in the Crimea are unable to take advantage of the comparative advantages they enjoy. 4.4.2 Access to Finance A number of factors have constrained banks’ interest in lending to agriculture, not only in the Crimea, but throughout Ukraine. As in many countries, these factors include:  The risks inherent in financing agricultural production  Limited sources of collateral, exacerbated in Ukraine by the moratorium on the sale of agricultural land  A history of government interventions, from government-run agricultural banks and attempts to control agricultural prices, to programs to reduce and subsidize interest rates to farmers  A general appreciation that risks were lower and returns higher in financing other sectors of the econo- my These factors have resulted in limited lending to agriculture. In 2008, banks made 15,000 loans to agricultural enterprise totaling 13.5 billion UAH. In 2008, the Statistical Yearbook for agriculture reported just over 59,000 agricultural enterprises. In 2009, the banks made 1,700 loans to these enterprises, totaling only 4.3 billion UAH, to agricultural enterprises. These loans tend to reach larger scale operations. In 2009, the average loan was 2.5 million UAH, or more than $300,000. In 2008, assuming most of the loans were made prior to the rapid devaluation against the dollar, loans averaged 900,000 UAH or approximately $200,000. As of October 2009, agriculture loans accounted for 6.4% of the banks’ total loan portfolio. Availability in Crimea, despite the significance of agriculture in the region (60% of its contribution to GDP) was even more constrained, with agricultural loans accounting for 3.08% of the banks’ total loan portfolio. (FINREP Snapshot Analysis) USAID’s FINREP project provided analysis of these aggregate amounts, identifying the banks with more significant lending to agriculture, both in absolute terms and as a share of their overall portfolios 2. Recognizing these limitations, the data seems to indicate that, among the top 38 financial institutions (these institutions account for more than 85 percent of banking sector assets), the largest lenders to agriculture are: Financial Initiatives and Raiffaizen Aval Bank, each with more than 3 billion UAH in outstanding loans to agriculture; and, PrivatBank, OTP Bank, UkrExim Bank, PromInvest Bank, Unicredit, and Pivdenny, each with more than 1 billion UAH. As Figures 3 and 4 illustrate, the volume of loans for five of these larger lenders to agriculture is more a re- flection of their overall size in the banking sector than a strategic focus on agriculture. Of the eight banks with the largest agricultural loan portfolios, only Financial Initiative, Unicredit and Pivdenny have agricultural loan portfolios that account for more than 7 percent of their gross portfolios. 2 As the report points out, there are some elements in the data reporting that make it vulnerable to overstatement and inconsistency. These factors include banks that label loans as belonging to more than one sector, so a loan made to a company with a limited amount of agricultural activity could still be labeled as an agricultural loan; or banks that include loans for land purchase, food pro- cessing, or some restructured loans as agricultural loans. 15
  • 20. Figure 3 Agricultural Loan Portfolio for Ukraine’s Leading Banks as of January 1, 2009 Source: USAID Capital Markets Project City Bank Ukraine 0 Pravex Bank 3 Erste Bank 3 Universal Bank 12 Kredobank 33 Sw edbank 71 VAB Bank 81 Industrial Bank 126 Kreschatik 134 Dongorbank 243 Rodovid Bank 268 FUIB 280 Creditprombank 313 Russia Sberbank 370 Alpha-Bank 424 ING Bank Ukraine 461 VTB Bank 490 UkrSibBank 505 Ukrgazbank 596 Forum 838 UkrSotsBank 862 Finance and 889 Savings Bank 990 Pivdenny 1 140 Unicredit Bank 1 565 Prominvestbank 1 666 UkrEximBank 1 744 OTP Bank 1 972 Privatbank 2 151 Raiffaizen Bank 3 130 Financial Initiatives 3 257 0 500 1 000 1 500 2 000 2 500 3 000 3 500 UAH mm Financial Initiative appears at the top of both figures and warrants more analysis. However, as a smaller over- all bank with a more limited branch network and more rapid growth in agricultural lending in 2008 (nearly 150 percent, compared with growth rates that kept up with or trailed devaluation rates for other leading agri- cultural lenders), Financial Initiatives’ name did not surface in field interviews. Conversely, Raifaissen/Bank Aval’s presence in the market has been significant for a longer period of time and its name frequently surfaced in field interviews with producers and buyers alike. The assessment team in- terviewed members of Raifaissen/Bank Aval’s corporate and agricultural lending team. They estimated their agricultural portfolio at 5 billion UAH (a significant increase over the January 2009 figures, larger than their stated objective of keeping their portfolio constant against inflation), with loans to 5,000 agricultural produc- ers. This would make their average loan balance smaller than the national average, at approximately $125,000. However, by policy they do not reach smaller farmers. They reported increased interest rates over the last year, from an average of 15 percent to a current range between 21 percent and 26 percent. To manage risks, they do not lend to agricultural entities with less than 1,000 hectares. As far as collateral, they use both equipment and grain, but prefer to use stored grain as it is highly liquid in the event of foreclo- sure. They use warehouse receipts. At the same time, they indicated their portfolio in agriculture has per- formed better than in other sectors. Still, their strategy is not to increase it faster than the rate of inflation. 16
  • 21. Figure 4 Agricultural Loan Portfolio as Percent of Gross Loan Portfolio for Ukraine’s Leading Banks as of January 1, 2009 City Bank Ukraine 0,00% Pravex Bank 0,05% Erste Bank 0,10% Universal Bank 0,17% Sw edbank 0,50% UkrSibBank 0,90% Kredobank 0,95% VAB Bank 1,31% Alpha-Bank 1,69% UkrSotsBank 1,94% VTB Bank 2,00% Creditprombank 2,59% Rodovid Bank 2,66% Privatbank 2,89% Savings Bank 3,60% Kreschatik 3,90% UkrEximBank 4,51% Dongorbank 4,61% Industrial Bank 5,20% Finance and Credit 5,53% Raiffaizen Bank Aval 5,66% OTP Bank 6,26% Ukrgazbank 6,33% Prominvestbank 6,80% ING Bank Ukraine 7,00% Forum 7,22% Pivdenny 12,42% FUIB 13,78% Russia Sberbank 15,85% Unicredit Bank 20,11% Financial Initiatives 72,04% 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: USAID Capital Markets Project In order to facilitate expanded access to financial services for farmers, they identified the following develop- ments:  An end to land moratorium  Technical assistance in the development of loan products suitable for small farmers  Guarantees  Insurance products  Legal changes that will allow for more expedited collateral proceedings As one of the major players in agricultural lending, Raiffaissen does not appear eager to expand its agricultural lending or to deepen its services with loans to smaller players. With most of the top banks’ agricultural loans accounting for less than 5 percent of their loan portfolios, their relative attention to the sector is still better than the credit unions, which average 3.1 percent of their lending reaching private and household farmers. However, there are a few farmer-oriented credit unions in the Crimea and southern Ukraine that should be analyzed for their fit as potential partners. Producers in the re- gion identified Chikasa, Ismael and Gramada as notable exceptions to the credit unions’ limited lending to agriculture. The Chikasa credit union is also one that has received training and wholesale loans from the Ukrainian Credit Fund (UCF), a Lviv-based finance company regulated by the National Commission for the Regulation of Financial Service Markets. UCF is a small entity originally launched with USG support that provides loans and training to credit unions in order to expand financing to agriculture. With a limited asset base of Hr 1.3 million, it targets credit unions with the strongest ability to lend to farmers. While small, UCF 17
  • 22. has built a reputation in the market with the Netherlands-based Oikocredit approving a loan to them to ex- pand their operations. In addition to these entities, farmers interviewed in the Crimea mentioned recent developments by ProCredit Bank, which was launching a loan for small equipment. Raifaissen Bank was cited as a traditional lender that, during the crisis, was not extending loans to new or smaller clients. State programs and subsidies were identi- fied as currently illiquid, unreliable, or not functioning. 4.4.3 Value Chain Financing Given the financial sector’s limited interest in credit, businesses that supply to and buy from farmers are a po- tential source of financing. As with the financial institutions, access to these financial services is limited. Netafim, an international supplier of farm inputs and equipment—including irrigation and greenhouse equip- ment—offers partial financing to its dealers and the larger clients it services directly. Smaller farmers buy their equipment from dealers. Some of these dealers also provide sales on partial credit. However, a small percentage of their clients receive financing. Access to financing and guarantees are a constraint to expanded lending, along with a lack of trust. The businesses are reluctant to lend to customers they do not know, and building up a loyal customer base takes time. Because of its international standing and financial position, Netafim was able to obtain a guarantee from a European Bank and use this guarantee to sell a loan portfolio to a Ukrainian bank. The portfolio consisted of loans to tomato farmers for seed and equipment. This mechanism, which combines international and domestic actors with guarantees and factoring, could be one appropriate for other international agribusinesses in their attempts to manage risk and expand access to fi- nance. There are however risks associated with value chain financing. One example is provided by a large buyer of tomatoes that also became a source of financing for tomato producers. Pre-financing for inputs was included in a package of services to farmers entering into annual products with the buyer, a processor in southern Ukraine. The contract also established purchase prices for production, according to quality standards. Faced with reduced and delayed production due to weather, the processor was forced to offer higher prices than those defined by the contract defined. Otherwise they feared the producers would side-sell their harvest to other buyers. Another buyer interviewed by the team has decided that the cost of managing loans to farmers is not worth the benefit. A large sunflower seed processor and exporter had offered pre-financing in the past. The credit was covered through a 10 percent discount on the price paid for seed delivered to them after harvest. The cost involved in pursuing side-sellers prompted them to cease lending. They noted that since stopping the pre-financing, they have encountered no problem in securing their needed supply of seeds. These examples underscore both the limited availability of credit through agribusinesses and the factors that make it more likely: relationships and mechanisms that can manage risks, as well as the proper incentives needed for agribusinesses to find the credit delivery worthwhile. Value chains with more pronounced and consistent links between buyers and sellers, and the need to protect these relationships over time, are more likely to offer this financing alternative. Entities with unique capacities to manage risk—through their inter- national presence or a strong market position—are the actors more likely to consider it. 4.4.4 Leasing Facility Agro Capital Management (ACM) is a new company established in 2009 by MEDA (Mennonite Economic Development Associates). ACM has the mandate to provide financial services, similar to a leasing company, to clients of the Ukraine Horticulture Development Project (UHDP). ACM products include Table Grape production packages for table grapes and berries, and tunnel plastic film for greenhouses. Client payments are based on a variable cash flow schedule. At the end of the contract term the assets are owned by the clients. Financial costs built into the product represent less than 2% per month. Under the current structure, farmers who pay off their contracts on time receive a rebate, reducing the financial costs. 18
  • 23. ACM shows a great deal of promise. In its first season of operations last fall, it had $370,000 in sales. Sales this spring are expected to exhaust much of its $1.4 million in initial investment. Continued expansion will require additional investments, and time is needed to verify the quality of the portfolio. This promising launch of activities warrants further monitoring. As it grows, ACM should also consider modifications in its pricing, its use of the CIDA guarantee fund (currently structured as a 100% guarantee against losses), and in its ability to qualify as a licensed leasing company once its capital reaches minimum requirements. 4.5 Concluding Observations and Implications of Findings 4.5.1 Wholesale Markets It is in the interests of farmers and buyers alike to develop alternatives to spot markets. Larger commercial farmers and buyers seeking stable supply of large volumes of uniform product are establishing one-to-one trading relationships (load collection at the farm-gate). Smaller farmers lack sufficient volume (individually) to attract stable buyers. While offering an alternative to supermarkets and bazaars, the model illustrated by Shu- var does not provide maximum benefit to small farmers, either, due to its urban location and its focus on in- stitutional buyers, small retailers and consumers. Accordingly, there is a general need to establish new wholesale-retail markets in rural, under-served locations. While blended ‘wholesale-retail’ markets exist, these are few in number. Most retailing is ‘roadside’ and tech- nically illegal. A modest effort by municipal leadership to designate open air locations with easy consumer ac- cess as occasional farmers retail markets (e.g.: block off a specified section of road on Wednesday and Satur- day mornings) would be a significant improvement on the status quo. For creating more formal alternatives, private investors are unlikely to enter business joint ventures with public entities to co-own such markets. Farmer partnerships, through cooperatives, associations, or corporate structures may be a more promising al- terative. Private farmer-entrepreneurs are trying to establish privately-owned and operated assembly points. Buyers like this approach because currently supply volumes are too small. The farmer-entrepreneurs con- cerned want to aggregate farm produce from other farmers and consolidate uniform loads to meet their large buyers’ demand. This kind of investment leads to stable trading patterns that, in turn, open up opportunities for adding value to products handled and, over time, achieve higher returns to investment and labor for sup- pliers along the chain including smaller farmers. Rather than making a significant investment to promote additional wholesale markets like Shuvar, USAID ef- forts to improve the linkages between small farmers and large buyers would be more effective if focused on assisting promising farmer groups in organizing rural wholesale-retail markets and assembly facilities. Market linkage development could also be promoted with targeted short-term technical assistance to address related policy, market and finance constraints, e.g. ones designed to facilitate advocacy and education on targeted is- sues related to the management and taxation of cooperatives, to develop and disseminate pro-forma market business plans, and to increase the availability and facilitate the delivery of construction finance. 4.5.2 Policy Initiative For an effective program, it is imperative for USAID to maintain linkages with key policy stakeholders, and with entities that research policy issues and promote public-private dialogue. Effective and targeted advocacy on constraints to efforts on the ground in such areas as cooperative legislation, property registration, and reg- ulations that limit or enable the introduction of new financial products can expand the impact of interven- tions with the private sector to promote agricultural growth, A project focused on big policy wins at the na- tional level does not look promising at this point in time, however, due to the entrenched, politicized nature of key issues like the land moratorium and the VAT tax. Furthermore, changes in the regulatory environment while necessary, are not sufficient for broad-based growth if the changes are not adopted in the field. 19
  • 24. AMDI’s significant achievements in creating an enabling environment for warehouse receipts is one example where technical assistance to actors in the field can help Ukraine take fuller advantage of past improvements in the enabling environment. 4.5.3 Grain and Oilseed Market Development The assessment team concurs that Ukraine has the potential to contribute to increased global food security. However, in order to contribute to this objective, USAID should consider the most cost-effective mecha- nisms for increasing private farmer access to knowledge, equipment, finance, and improved relationships with other market players that increase the farmers’ access to market linkages, consolidation services, and opportu- nities to enhance income. Concerning Ukraine’s warehouse receipts system, a solid groundwork has been laid. However, understanding and implementation on the ground lag behind the development of this framework. In order to be effective, education, improved or more transparent practices and pricing, and increased competition between elevators is necessary. Continued policy work is advisable to instill an indemnity fund, since progress on the ground could be undermined by a damaging case of fraud. Additional adjustments that would allow for a more user- friendly registry system, particularly in the process for indicating liens against receipts, are also advisable. However, attempts to take the Ukrainian system to the next level through a synchronized warehouse receipts system for each of the GUAM member countries are premature. Until the system is functioning in practice, and not just in the policy, the team asserts that USAID support of a GUAM initiative does not promise meaningful results. Expanding collateral is necessary, but not sufficient to expanding private farmer access to financing. A legal analysis that identifies the gaps in existing legislation that prevent the implementation of a pre-harvest financ- ing makes sense, in terms of scale and potential benefit. It would spell out the changes that eventually would be needed. However, in light of the current operational issues related to the warehouse receipts system, in- vesting significant resources in legal reforms for pre-harvest financing is also premature. 4.5.4 Support for Crimean Agricultural Enterprises through Access to Finance The Crimea, due to its comparative advantages, has significant potential for expanding a diversified produc- tion unit for small and medium-scale private farmers, one that mixes high value horticulture production with the production of higher quality grain. To pursue these opportunities, private farmers require increased ac- cess to knowledge, technology, and market linkages, as well as finance. Given the limited credit reaching the sector at this point, and the absence of a silver bullet partner or financial product, facilitating credit in order to expand the productivity of private farmers will require a flexible and op- portunistic set of interventions. There is no obvious partner, as both banks and credit unions remain cautious in lending to agriculture, and agribusinesses are hesitant to lend on any significant scale. Technical assistance is required for innovative products:  Ones designed for banks and credit unions that have demonstrated a greater willingness to lend to agri- culture, in order to finance working capital needs of private farmers.  Loan, leasing and factoring products (like one developed for larger customers of the equipment supply firm) that tap relationships with suppliers and facilitate needed upgrades in equipment.  Construction loans for elevators and storage facilities  Land purchase loans, which will be critical for private farmers to maintain their production areas with the lifting of the land moratorium  Guarantees and long-term credit lines offered by international players (e.g., DCA, EBRD) that allow fi- nancial institutions to buy down the risk and match the terms associated with these new products. 20
  • 25. 6. RECOMMENDATIONS The team presumes that the objective of future USAID assistance is to increase agricultural growth and com- petitiveness in Ukraine in a manner that is both sustainable and broad-based. Increased competitiveness will rely on improvements in yields, which require access to more efficient technol- ogy, and improved efficiencies in moving products from the farm to ultimate markets. Investments by hold- ing companies in huge farming units are one way to bolster production and productivity. These investments are proceeding, taking advantage of Ukraine’s fertile soil, available land (via lease arrangements), and a strate- gic location on the Black Sea. There is little value that USAID can add to the private funds and investors in this area. The team found broad consensus that private farmers, operating on farms of up to a few thousand hectares in size and managed by families and individuals engaged in production (rather than by more complex man- agement structures used by the holdings) are and will remain an important source of agricultural production into the future. Increases in productivity for private farmers can have a significant impact on productivity and competitiveness that reaches a broad base of Ukraine’s agricultural producers. In 2008, private farmers man- aged more than half of the production area for grain and oilseeds. Their average yields ranged between 2 and 3 MT per hectare, compared to more than 4 MT on the largest units.3 Private farmers play an even more sig- nificant role in fruit and vegetable value chains, where even the largest production areas are significantly smaller. Given the challenges that private farmers face in terms of productivity—access to knowledge, tech- nology, finance and efficient market access—USAID can add value by targeting private farmers. Given their large numbers and USAID’s limited resources, it will be important to focus assistance on strategic interventions with a high likelihood for substantial impact as well as on synergies with the investments and re- sources of other donors on the ground. In order to increase the sustainability of the interventions’ results, the interventions should use a private sector development approach, as opposed to more traditional government- led models. With this in mind, one component of the Mission’s agricultural strategy should be private farmer strengthen- ing. The objective of this component will be to increase the productivity and profitability of private farmers in selected geographical areas and value chains, in order to provide a demonstration effect for small and medium scale farmers more broadly. To achieve this, the component should address gaps in knowledge, tech- nology, finance, and market linkages. Potential interventions include:  Technical assistance to facilitate development of market relationships that enhance farmer access to in- puts and markets in the most promising value chains, through cooperatives and associations, or expanded links to lead firms and farmers  Training in “the farm as a business,” focusing on bookkeeping and basic business plan development  Training and demonstration plots in higher yielding technologies  Technical assistance to assess and recommend improvements to university research , extension and agro- nomic education We recommend focusing resources on private farmers in the Crimea and, if feasible, in oblasts in south and western Ukraine. In these areas, private farmers are engaged in producing both grains/oilseeds and fruits and vegetables. Opportunities for diversification are important for Ukraine’s small and medium scale private farmers. Further collaboration with EBRD, CIDA and USAID’s LINC Project will be critical in selecting ge- ographical areas and partner institutions, in order to optimize the impact of these interventions. 3 46 percent of the area, accounting for 56 percent of production, was on farms averaging 2400 hectares. These farms accounted for 6 percent of farms engaged in grain and oilseed production. Their average yield was 4.3 MT per hectare. By contrast, 25 percent of the area accounting for 24 percent of grain and oilseed production, was on farms averaging 966 hectares. These larger private farms, with average yields of 3.35 MT per hectare, accounted for 8 percent of the farms engaged in grains and oilseeds. The next most productive group of private grain and oilseed farms, representing 20 percent of area and production, operated on an average size of less than 200 hectares. Combined, these producers account for 2/3 of grain and oilseed farms, and 99 percent of production. (Agriculture of Ukraine Statistical Year- book, 2008, p. 85) 21
  • 26. A second promising area of USAID’s investment in agriculture is in the area of market infrastructure. Two key areas are wholesale market and grain storage facilities. As we indicated in our earlier findings, the whole- sale market model we saw in Lviv and under consideration in Odessa provides an alternative for urban con- sumers and small retailers, and has the potential for increasing the demand for quality fruits and vegetables in Ukraine. It does not, however, offer a significant alternative to producers for marketing their products to wholesalers. This would require parallel investments in rural market facilities, run by producer cooperatives or associations, that offer space and cold storage facilities. We also observed that improvements are needed to increase the transparency and competitiveness of grain storage facilities. In order to improve the capacity and efficiency of market infrastructure, this component could include the following interventions:  Short-term technical assistance to wholesale market developers and local governments, in order to map out effective business plans and funding strategies  Incorporating in the access to finance component a series of specialized technical assistance interventions with policy makers, market investors, and financial institutions in order to develop relevant construction financing product  Assessment of three to five grain warehouse facilities in selected geographic areas, both those with a high and a low use of warehouse receipts, in order to determine critical factors and constraints to the broad adoption of warehouse receipts  Grant and technical assistance program with competitively selected warehouses to improve transparency, effectiveness and competitiveness of services  Collaboration with farmer strengthening component to integrate rural wholesale markets assistance in co- operative/association development strategy While the Mission has made significant investments in improved policies for agriculture, and while important policy-related constraints exist, we recommend a more pragmatic approach to policy in the coming years, one more focused on regulatory improvements and effective public-private mechanisms for communication than on big policy wins. Political factors beyond this program’s scope will dictate the timing of the end of the land moratorium. Large, multinational companies have incentives to improve VAT reimbursement and can, if they desire, contribute significant resources to the task. It would be a better investment of USAID resources, then, to develop a smaller project component that includes such interventions as:  A mechanism to tap AMDI for targeted tasks, such as fine tuning of warehouse receipt legislation to al- low the creation of an indemnity fund or to address constraints identified by the assessment in the field, conducting a legal gap analysis to identify barriers to pre-harvest financing as currently being supported by EBRD, or addressing conflicts that exist between grain warehouse receipts and grain market legisla- tion  Collaboration and advocacy capacity building with key think tanks or value chain actors, in order to ex- pand and maintain effective communication between the government and private sector on policies or le- gal matters that significantly constrain development of promising value chains  Including in an access to finance component specialized technical assistance for the development of land mortgage policies and products, so that, upon lifting of the land moratorium, private farmers have a source for financing land purchases  Targeted technical assistance, focusing on rural land, as needed to complement the pilot improvements in property registries being undertaken in the Crimea by the LINC project A fourth promising component of a future assistance program is one that increases access to financing, espe- cially for investments in technology and equipment that increase productivity and competitiveness. The equipment that farmers obtained through the privatization process is fast approaching the end of its useful life. Diversification into fruit and vegetable production often requires significant up-front investment. As al- ready mentioned, investments in land purchases or construction require new products and policies. There is no clear partner or pool of partners for developing and expanding products for these types of investments. It will be important to take an opportunistic approach to increasing agriculture’s access to finance, with mecha- nisms that allow for close collaboration with actors in the other project components, and for partnering with a range of financial service providers, so that project interventions facilitate investments in key upgrades re- 22
  • 27. quired to take advantage of the most critical value chain upgrades in the targeted program areas. Interventions in this component could include:  Combination of technical assistance and liquidity or guarantee facilities for range of financial institutions that demonstrate significant interest in financing priority upgrades, including banks, finance companies and credit unions  Specialized technical assistance to map out key policy constraints and propose practical follow-on inter- ventions with government and financial institutions for introducing financial products for land purchase and construction  Facilitating relationships and agreements between key input providers (especially farm equipment providers) or buyers in priority value chains and financial institutions in order to reduce costs, improve screening and manage risks of lending to private farmers  Collaboration with policy dialogue facilitators on key policy constraints and barriers to expanded financ- ing  Technical assistance to the warehouse receipts registry and financial institution that addresses constraints to expanded use of warehouse receipts as collateral for loans  Collaboration with DCA, EBRD, the Ukraine Microloan program, and CIDA, to optimize impact of technical assistance, liquidity and guarantee mechanisms for promising financial institution partners 23
  • 28. ANNEX A. INDIVIDUALS AND INSTITUTIONS CONSULTED Agrarian Markets Development Victor Andrievsky T: +380 (44) 490 70 78 Institute (AMDI) Director M: +380 (50) 469 10 21 Kyiv vandrievsky@amdi.org.ua Aleksander Buryak T: +380 (44) 490 70 78 Deputy Director M: +380 (50) 358 53 23 buryak@bcu.com.ua Roman Korinets ??? ??? Natalia Seperovych T: +380 (44) 490 70 78 Consultant nseperovich@amdi.org.ua Tamara Ostashko T: +380 (44) 490 70 78 Consultant tostashko@amdi.org.ua Vitally Volivach ??? ??? Yelena Protchenko ??? ??? Agro Capital Management Andriy Vorobyov T: +380 (65) 226 38 86 Simferopol General Director M: +380 (67) 406 16 82 vorobyov.ua@gmail.com Allseeds Group Ljubomir Mudric T: +380 (44) 568 57 13 Kyiv Chairman of the Board Ljubomir.mudric@allseedsgroup.com Vladymyr Vynnychenko ??? Head of Supervisory Board Ton Huls T: +380 (44) 238 65 65 Financial Director, Ton.huls@allseedsgroup.com Sunflower Seeds Department Association of Farmers and Pri- Sergey Tour ??? vate Land Owners of Crimea President Simferopol Nikolay Gavrilyuk T: +380 (65) 261 89 68 Vice President M: +380 (50) 398 91 07 gawrilyk57@mail.ru Association of Farmers and Pri- Yevgeniy Stepko T: +380 (32) 252 02 48 vate Land Owners of Lviv President M: +380 (50) 377 84 08 Lviv 24
  • 29. Bohdan Chomiak Consulting Bohdan Chomiak M: +380 (67) 403 02 58 Kyiv President chomiak98@yahoo.com Canada-Ukraine Grain Project Sergiy Kurditskiy T: +380 (44) 270 60 38 Kyiv Area Manager, Rural Credit and M: +380 (97) 170 96 41 Markets kurditskiy@cugp.com.ua Cargill Grain & Oilseed Supply Vassiliy Lysenko T: +380 (65) 261 89 83 Chain Europe Regional Representative in Crimea M: +380 (50) 469 92 36 Simferopol Region Dragon Capital Tomash Fiala T: +380 (44) 490 71 20 Kyiv Managing Director fiala@dragon-capital.com European Bank for Reconstruc- Graeme Hutchison T: +380 (44) 270 61 32 tion and Development Deputy Director & Head of Corpo- M: +380 (50) 443 75 40 Kyiv rate Sector in Ukraine HutchisonG@ebrd.com Alina Havrysh T: +380 (44) 270 61 32 Banker M: +44 (75) 40704 262 HavryshA@ebrd.com European Bank for Reconstruc- Peter Bryde T: +44 (20) 7338 6245 tion and Development Deputy Director, Agriculture M: +44 (7912) 594598 London BrydeP@ebrd.com Food and Agriculture Organiza- Dmitry Prikhodko T: +39 (6) 570 523 66 tion of the United Nations (FAO) Economist, Investment Centre Divi- dmitry.prikhodko@fao.org Kyiv sion Goldblat Oleg Khomenko T: +380 (48) 233 60 36 Odessa M: +380 (50) 390 97 36 khomenko@goldblat.com.ua Government Agrarian Policy Co- Volodymyr Demyanchuk T: +380 (44) 278 58 18 ordination Council Executive Secretary dem@minapk.kiev.ua Kyiv GUAM Organization for Democ- Sabuhi Tamirov T: +380 (44) 206 37 37 racy and Economic Development Program Coordinator, Economic Is- secretariat@guam-organization.org Kyiv sues International Finance Corporation Ebbe Johnson T: +380 (55) 232 12 98 Kyiv Project Manager, Ukraine Fresh M: +380 (50) 396 97 82 Fruit and Vegetable Project ejohnson@ifc.org Oksana Varodi T: +380 (43) 252 54 95 Project Manager, Vinnytsa Fruit M: +380 (50) 396 97 84 Project ovarodi@ifc.org International Tax and Investment Alexander Savitsky M: +1 (703) 981 8282 Center Advisor M: +380 (67) 408 15 15 Kyiv asavitsky@iticnet.org 25
  • 30. Khlib Ukraina Boris Dvorkin ??? Odessa General Director, Khlib Export Local Investment & National Howard Ockman T: +380 (44) 425 47 47 Competitiveness Project (LINC) Chief of Party M: +380 (50) 416 97 33 Kyiv hockman@linc.com.ua Farhat Youwakim Farhat T: +380 (44) 425 47 47 WTO Specialist M: +380 (50) 698 35 36 fyfarhat@eif-inc.com Ken Nachbar T: +380 (44) 425 47 47 Senior Enterprise Competitiveness knachbar@linc.com.ua Advisor Allan Slipher T: +380 (44) 425 47 47 Land Market Advisor & Task allanslipher@hotmail.com Leader Pavlo Kulynych T: +380 (44) 425 47 47 Land Market Reform Task Leader M: +380 (50) 351 57 34 pkulinich@linc.com.ua Local Investment & National Daniel Themen T: +380 (65) 224 81 34 Competitiveness Project (LINC) Crimea Field Director M: +380 (99) 270 90 04 Simferopol dthemen@linc.com.ua Oleksandr Lekhno T: +380 (65) 224 81 34 Agribusiness Specialist M: +380 (50) 398 66 24 olekhno@linc.com.ua Borys Shadrin T: +380 (65) 224 81 34 Business Process Specialist M: +380 (50) 175 73 79 bshadrin@linc.com.ua Lviv Regional State Administra- Yaroslav Panyura T: +380 (32) 299 93 05 tion Vice-Chairman M: +380 (67) 671 12 56 Lviv panyura@loda.gov.ua 26
  • 31. Mennonite Economic Develop- Stephen Wright T: +380 (61) 925 24 62 ment Associates (MEDA) Project Manager, Ukraine Horticul- M: +380 (97) 618 4456 Melitopol ture Development Project swright@meda.org Sergiy Grygor’yev T: +380 (61) 925 24 62 Value Chain Manager, Ukraine M: +380 (67) 613 72 57 Horticulture Development Project sergiy@ua.meda.org Anatoliy Maksymyuk T: +380 (61) 925 24 62 Financial Solutions Specialist, M: +380 (67) 613 37 50 Ukraine Horticulture Development anatoliy@ua.meda.org Project Dmitry Lipchin T: +380 (61) 925 24 62 Post-Harvest Technician, Ukraine M: +380 (67) 613 76 45 Horticulture Development Project dmitry@ua.meda.org Mennonite Economic Develop- Oleg Osaulyuk T: +380 (65) 261 89 90 ment Associates (MEDA) Crimea Manager, Ukraine Horti- M: ??? Simferopol culture Development Project oleg@ua.meda.org Vasfiye Mamutova T: +380 (65) 261 89 90 SME Development Specialist, M: +380 (67) 613 04 73 Ukraine Horticulture Development vasfiye@ua.meda.org Project “Minimum” private farm Alexandr Topolsky ??? Odessa Private Farmer Netafim Sergey Savransky T: +380 (67) 507 35 73 Simferopol Sales Manager Sergey.savransky@netafim.net.ua Raiffeisen Bank Aval Victor Gorbachev T: +380 (44) 490 8817 Kyiv Deputy Chairman of the Board Cor- vgorbachev@aval.ua porate Banking??? Shuvar Oleksiy Chumak T : +380 (32) 295 36 06 Lviv Director, Wholesale Market M : +380 (67) 674 39 38 chumak@shuvar.lviv.ua SigmaBleyzer John Shmorhun M: +380 (67) 344 57 67 Kyiv Agricultural Director jshmorhun@sigmableyzer.com State Registry of Ukraine Igor Khodakovskiy T: +380 (44) 400 96 43 Kyiv Director ip@dru.kiev.ua Ukraine Micro Lending Pro- Holger Wiefel T: +380 (44) 289 10 37 gramme Programme Manager Ukraine M: +380 (50) 384 15 49 Kyiv wiefel@microcredit.com.ua 27
  • 32. Ukrainian Agrarian Confederation Leonid Kozachenko T: +380 (44) 287 65 66 Kyiv President kozachenko@agroconf.org Sergii Stoianov T: +380 (44) 287 65 66 General Director stoianov@agroconf.org Ukrainian Agrarian Investments Peter Thomson T: +380 (44) 594 94 40 Kyiv Chief Operating Officer M: +380 (67) 404 66 32 pthomson@ukragrinvest.com.ua Ukrainian Credit Fund Ernest Ishchuk M : +380 (91) 300 25 55 Lviv Director ernest@fdf.lviv.ua Ukrainian Grain Association Volodymyr Klymenko T: +380 (44) 246 62 01 Kyiv President M: +380 (50) 334 50 10 klymenko@uga.kiev.ua Ukrainian Ministry of Agrarian Valentyna Zavalevska ??? Policy Deputy Minister for Agrarian Policy Kyiv Ukrainian National Association of Petro Kozynech T: +380 (44) 501 18 75 Credit Unions President president@unascu.org.ua Kyiv U.S. Embassy to Ukraine Eric Salzman T: +380 (44) 490 4000 Kyiv Economic Officer SalzmanEA@state.gov 28
  • 33. USAID Regional Mission for Paul Richardson T: +380 (44) 537 46 39 Ukraine, Moldova and Belarus Acting Director, prichardson@usaid.gov Kyiv Office of Economic Growth Terence Miller T: +380 (44) 537 46 04 Acting Deputy Director, M: +380 (50) 441 69 02 Office of Economic Growth tmiller@usaid.gov Kevin McCown T: +380 (44) 492 71 26 Private Sector Advisor, kmccown@usaid.gov Office of Economic Growth Evgenia Malikova T: +380 (44) 492 71 35 Project Management Specialist, emalikova@usaid.gov Office of Economic Growth Natalia Berezhna T: +380 (44) 537 46 75 Project Management Specialist, nberezhna@usaid.gov Office of Economic Growth Ryder Rogers T: 380 (44) 537 46 88 Private Enterprise Officer, ryrogers@usaid.gov Office of Economic Growth Peter Luzik T: +380 (44) 537 46 50 Program Development Specialist, pluzik@usaid.gov Office of Program Coordination & Strategy USAID Bureau for Europe & Glenn Rogers T: +1 (202) 712 4509 Eurasia Director, Office of Democracy, Gov- grogers@usaid.gov Washington, DC ernance & Social Transition USDA Foreign Agricultural Ser- Ann Murphy T: +380 (44) 490 40 05 vice Agricultural Attaché ann.murphy@fas.usda.gov Kyiv Oleksandr Artiushyn T: +380 (44) 490 41 21 Agricultural Specialist oleksandr.artiushyn@fas.usda.gov Zhytomyr University of Agricul- Vitaly Zinovchuk T: +380 (41) 222 89 65 ture and Ecology Director, Research and Education M: +380 (96) 222 37 42 Zhytomyr Institute of Economics and Agribusi- zinovchuk@yahoo.com ness ANNEX B. WORKS CONSULTED Artiushyn, Oleksandr. “Grain and Feed Update.” Kiev, Ukraine: USDA, 3 Sep 2009. Available: gain.fas.usda.gov/Recent GAIN Publications/Grain and Feed Update_Kiev_Ukraine_9-3-2009.pdf 29
  • 34. Food and Agricultural Organization, FAO STAT, Rome, 2009. Available: www.faostat.fao.org International Finance Corporation. “Doing Business 2010: Ukraine.” Washington, DC: IFC, 2009. Available: www.doingbusiness.org/Documents/CountryProfiles/UKR.pdf International Finance Corporation. “Investment Climate in Ukraine as Seen by Private Businesses.” Kiev, Ukraine: IFC, 2009. Available: www.ifc.org/ifcext/uspp.nsf/AttachmentsByTitle/IC_report_2009_eng/$FILE/ IC_report_2009_eng.pdf International Finance Corporation. “Reforming Food Safety Regulation in Ukraine: Proposals for Policy- makers.” Kiev, Ukraine: IFC, 2009. Available: www.ifc.org/ifcext/uspp.nsf/AttachmentsByTitle/Food_safety_report_eng/$FILE/ Food_safety_report_ENG.pdf Kosodiy, Roman and Anna Bondarenko. “Value Chain Approach to Rural Finance.” Poster paper presented at IAMO Forum 2008. Halle, Germany: 2008. Available: www.iamo.de/uploads/media/4a.4_kosodiy_CD.pdf Kutsenko, Alexei. “Agricultural Loans by Ukrainian Banks: Snapshot Analysis.” Special report prepared for the assessment team. Kiev, Ukraine: USAID Capital Markets Project, 15 Dec 2009. OECD/FAO. “OECD-FAO Agricultural Outlook 2009-2018.” OECD/FAO, 2009. Available: www.agri-outlook.org/dataoecd/2/31/43040036.pdf State Statistics Committee of Ukraine. “Agriculture of Ukraine: Statistical Yearbook 2008.” Kiev, Ukraine: State Statistics Committee of Ukraine, 2009. Available: www.eastagri.org/meetings/docs/meeting40/Agriculture_2008_Eng.pdf Tarassevych, Alexander. “Ukraine Exporter Guide Annual: Ukraine’s Food Market in Crisis.” Kiev, Ukraine: USDA, 2 Oct 2009. Available: gain.fas.usda.gov/Recent GAIN Publications/EXPORTER GUIDE ANNUAL_Kiev_Ukraine_10-2-2009.pdf USDA/FAS. “Agricultural Economy & Policy Report – Ukraine.” Kiev, Ukraine: USDA, Feb 2009. Available: www.fas.usda.gov/country/Ukraine/Ukraine Agricultural Economy and Policy Report.pdf USDA/FAS. “Grain: World Markets and Trade.” Circular Series FG 12-09. Washington, DC: USDA, Dec 2009. Available: www.fas.usda.gov/grain/circular/2009/12-09/grainfull12-09.pdf USDA/FAS. “Oilseeds: World Markets and Trade.” Circular Series FOP 12-09. Washington, DC: USDA, Dec 2009. Available: www.fas.usda.gov/psdonline/circulars/oilseeds.pdf Verzijlenberg, Wim, Wigle Vondeling, and Bjorn Schrijver. “Ukraine Agri-Finance Study: Analysis of the Po- tential Risks and Challenges of Agricultural Finance in Ukraine.” Utrecht, Netherlands: Rabo Inter- national Advisory Services, Apr 2008. 30