Oleksiy Pavlenko: State should support only small and medium-sized business



What enterprises are supported by the State? What are the main obligations of the Ministry of Agrarian Policy and Food of Ukraine? Why will the ministry not stimulate food processing? The answers for all these questions in the interview of the Minister of Agrarian Policy and Food of Ukraine Oleksiy Pavlenko.

Oleksiy Pavlenko is the Minister, who has been constantly in the spotlight. In recent months, something has been continuously going on in his office: disclosure of the cases of funds thievery, state enterprises are put up for sale and nowise can be sold. The competitions for the positions of heads of state enterprises are conducted not very successfully. One can feel activeness at the reception desk: when the journalist of Agravery.com was leaving after the interview she met the Minister of infrastructure  Andriy Pyvovarsky in front of the door. At the moment Borys Prykhodko, the Head of State Food and Grain Corporation of Ukraine (hereafter SFGCU) was downing the corridor.

Something is always being launched or liquidated at the Ministry. There is even the concept for reforming the agribusiness industry, making provisions for changes at the Ministry of Agrarian Policy and Food of Ukraine. For this reason, the first question was: how the Minister himself foresee the future functions of the Ministry and what should be the activities of the “well-formed Ministry of Agrarian Policy and Food of Ukraine”?

In the future key tasks of the Ministry are the principles of public agricultural policy, which would ensure an adequate level of food security of Ukraine and its leadership in the global food market.

For this we radically renewed personnel. Particularly 10 previous heads of departments were dismissed and 12 new ones were appointed. Four deputy Ministers were dismissed. At the present moment two deputy Ministers have already been appointed and two more are on Cabinet of Ministers’ approval. We have shortened apparatus for 10%. Currently, the number of staffing position at the Ministry comprises 357 people (before it was 397 people). We have reduced management levels, enlarged subdivisions, optimized the quantity. Ministry should stop being agricultural fund and become the Ministry of Agrarian Policy. That’s why the maximum amount of state enterprises should take out of its control.

As for the development concept, we have worked through the program for eight month with our European colleagues. We thought about how Ukraine will look like in five years and have proceeded concrete steps. For example, what one have to do to multiply its production, how to develop regions, how to influence on job creation, how to develop cooperatives. What will be the focus on small and medium-sized business. For each project were devoted specific donors. The same conception was successfully implemented in Poland. However, it must be approved. And only then make it public.

If you ask me how to develop our village – I would rather prefer European model adapted for our reality. Big holdings are able to cope themselves. Those who have 100 thous. ha of land is only 8% of the common array. The key moment to be focused is the development of small and medium-sized business.

What steps are you going to take in this direction?

The draft law of the state support of agriculture is ready (redrafted), approved on the session of the governmental relevant committee and is waiting for approval of the government. The concept project of the key program for supporting the village is undergoing the process of approval by the central government executive bodies. We support the range of parliament draft laws as to supporting family farms. But at the beginning one must provide access to finance. Have a talk with the businessmen and they tell you what they need.

Business is always mentioning these issues. But how do you plan to realize it?

Those programs available in our country are referred to the small and medium-sized business. It is a  credit compensation for small and medium-sized business which have up to UAH 10 million of turnover. For small and medium-sized companies we have received more money from the donors than the whole State budget of agricultural industry. It is about one billion hryvnias. And it is only concerned with horticulture – the project with Canada and Israel for farms support. By the way, Canadians provided the project in four regions where they supported the farms. About USD 3.2 millions allocated USAID developing small and medium-sized agribusiness. There are projects with Lactalis and Danone which also help to develop small dairy farms providing equipment and assisting in high quality milk production.  Besides, in the nearest time we are going to sign the program with the European investment bank for providing EUR 400 million. The sum will be distributed through other banks for small and medium-sized business.

What other agreement are there?

There are different programs. We’d like to minimize the contacts with the officials. If we mention that EBRD provide one billion dollars for Ukraine and 350 million dollars will be devoted to agribusiness and distributed by its representation office in Ukraine. Recently, Astarta has signed the contract with the IFC. And this is also our contribution – we present their analysts results, negotiate, showing that Ukraine is worth for partnership.

For example, the IFC participate with us in the projects of agricultural receipts, agricultural insurance. When we returned from the USA, we had guarantee for direct investments for half billion dollars. Starting from seed production business – Monsanto and Pioneer, the NCH company stated about enlargement of the land bank, there was a project on the port logistics. For the first half of 2015 agricultural industry enhanced the capital investments by the 9.6%, with the whole economics has faced the decline by 17.5 %.

Among the state programs there is compensation program for cattle farm building. All professional associations mention about its inability. Particularly as regards the prescribes conditions which can implements only big companies.

Yes, it doesn’t work. But I can’t tell anything about it until I didn’t approve and develop it.

So are you sure that in the programs you are preparing, you take into account  the specifics of small companies?

They are being launched not just for taking into account but also with the participation of small and medium-sized businesses. We will discuss all the programs with the key associations of milk, sugar and oil industries. I have been to Poland with the EU Commissioner for rural territories development programs. We’d like to launch such a program in Ukraine but with the European money. We have to create working places at the countryside. Then the life in the villages will have the future.

Have you ever thought about Agricultural Fund as the source of support for small and medium-sized farmers? At the present moment it purchases for the state money grain from the big enterprises which could find markets themselves.

Yes, it is a widespread fact. We don’t interface in the operation management. But I’d like to notice the companies have flashbacks from the past management and attracted credits. Except forward contracts more than two billion hryvnias got stuck at “Brokbusinessbank”, pretty large sum of 399 mln. left at “Radical Bank” and Bank for Investments and Renaissance. There is agricultural fund of the state specialized budgetary institution but it isn’t financed and is not an effective operator. There is also OJSC which provide interventions, and very effectively. Do you remember how disappeared flour and sugar in February and its interventions resolved the situation?

In other words, it doesn’t receive direct instructions to purchase from small producers ?

I don’t have right to interfere in the work of joint stock companies. I am engaged in agricultural policy.

Are you going to focus on the support for small and medium-sized business, even developing the sectoral supporting programs?

We consider all the programs with the focus on small and medium-sized business. For example there is compensation program for UAH 250 million on approval at the Cabinet of Ministers – it is compensations for cattle breeding development and for farms building.

However, how do you think, what kind of cattle breeding has to be supported? For example, is it necessary to support poultry production taking into account the players’ level?

Let us talk about the level of support. At farmers’ meetings we hear from farmers that they do not need government cheese and subsidies . Nevertheless, there is a need for cheap financing as in Europe, when there are credits for 5-7 years by 3-5%. For us to build good farm and sell milk not for UAH 2.5 but for UAH 5-5.5. Besides one must know where to sell. Because one can build whatever he/she wants but not to have selling markets. For this reason, our task as the Ministry to open global markets. But not for specific enterprises as it was earlier, for example, as Chinese market for SFGCU. We are not the Ministry of SFGCU. Nowadays 24 companies sell its products on Chinese market. Recently, dairy producers have found it. It was not easy. There was an agricultural commission. There were audits of all the enterprises.

At the present moment we are opening the access for Ukrainian poultry producers to the Saudi Arabia market. If there is a demand for the production it will produce. People are not to be instructed what to do. For example, we have now problems with the red meat i.e. cattle. By the way, today we export tax for live cattle i.e. decreasing internal prices for these products and declining the demand of this direction. If there is the demand with the good price for producers we’ll see quick investments in the sector. For such cases one has to open foreign markets. The price is much higher and provides opportunity for investments. Why does everybody invest in maize production? There were times when the price for maize was 280 dollars. Today it is 167 dollars and it is still profitable, because it is revenue from abroad.

We were twice called new China at the last meetings. We have the smallest producing cost in the whole Europe. For example, for poultry.

But export mostly is raw. How are you going to stimulate production of finished output?

We are not going to provide protective tariffs – it is not the correct way. It is that what causes a market break. There should act an invisible market hand just as according to Adam Smith. By the way, in the past eight months we have prominent export increase on processing food. For example, we introduce sunflower oil to Chinese and Indian markets. The same is for dairy products. Do you remember flash mob with Ukrainian products/ We counted 190 countries where we sell processing products. It is important to open markets. It will be the push for high-quality and safe production.

If to speak about raw materials, once we have told that grain is a raw material and were going to be the witness of the fighting. Farmers feel aggrieved and tell that it is high-tech cropper. Far not every country can manage it. Each year our climate conditions are changing.

We had the interview with the representatives of French embassy. They declared about great interest from French agricultural companies in Ukrainian market. But there are problems with fiscal bodies. Do you cooperate with State Fiscal Service?

It is difficult to speak about any other authorities. We are responsible for deregulation. Recently we have met with American Chamber of Commerce. They told about our deregulation project of port logistics decreased corruption component for UAH 5 billion. Minister of Infrastructure Andriy Pyvovarsky counted that according to our mutual project the ship left the port in 10 minutes.

And the controls from State Fiscal Service arrest the grain at the port.

In the Netherlands, one says it is possible to eat the bicycle. If piece-by-piece. We are currently doing it. With the State Fiscal Service i.e. the Ministry of Finance we are cooperating on the agricultural receipts. Awesome tool that three times increased the production in Brazil.

Personally, are you ready to cancel land moratorium?

Until the Parliament do not adopt a law on transfer of agricultural lands, moratorium cannot be cancelled. Now Ukraine is not ready for land market, it is necessary to rework the cadastre. At least to define the objects (agricultural property, life-size defined at the territory) and the subjects (who and in what amount have the right to purchase the land of agricultural origin) of the market. We are preparing draft laws with Minregionbud as for relation improvement in land sphere, because today the procedure of securing the land rights can take up to two years, but it won’t be so.

Even five years. We checked out.

I know. My parents’ summer cottage in six acres registered for two years


Natalia Guzenko

photo: focus.ua

Translated by Poliglotus Language Company