You're reading: Business Sense: Ukraine’s agriculture policy: perfect for hurting farmers

Andriy Yarmak writes: Regulations are often set to benefit those loyal to government at the expense of farmers.

Ukraine’s agricultural policy has consistently been a major disappointment. In fact, I am not sure there is an agricultural policy.

The five- or 10-year programs announced now and then by successive governments have nothing to do with policy. They usually include a set of wishes that are forgotten as soon as they are articulated.

The current Ukrainian government is no different. It sees agriculture as one of its public relations tools. It also frequently adjusts regulations to the interests of their loyal business backers.

There is some progress, but it’s slow. Back in the 1990s, we fought against grain transportation bans imposed by regional governments.

Now we are fighting against the same thing on a central government level. Back in the 1990s, we successfully fought against a ban on the slaughter of animals by privatized farms.

So, things do change, but Ukraine is very far behind. Twenty years after the end of the Soviet Union, many economic and social policies that hail from that era continue to restrict agriculture sector development.

The same old questions – all of which have obvious answers for farmers, grain traders and most level- headed economists – remain unanswered by government officials.

How can such a stupid move as last year’s introduction of restrictions on grain exports, with the state aim of keeping the bread prices under control, be possible 20 years after the end of Soviet era?

Why would the government try to help wealthy Ukrainian urban consumers save 20 kopecks per loaf at the expense of the poorest part of the country – the rural population that produces the grain?

Why would the government want to push away already limited foreign and local investments from the agricultural sector to support bread prices for all, including oligarchs?

And what does corn – the export of which was also restricted – have to do with the bread prices?

Why would Ukraine, which has a huge budget deficit and whose currency is very hard to keep stable even with the billions of dollars from International Monetary Fund, want to limit its export revenues?

Regulations are often set to benefit those loyal to government at expense of farmers.

One of the answers to these questions is very simple. Some influential senior government members are developing livestock businesses and they see the cost of grain as one of their major cost items.

It also looks nice to common people to see how hard our prime minister is fighting for bread prices. So it is a done deal and kills two birds with one stone.

But this is not a policy. Having a policy means having a long-term vision about production efficiency and not about the number of tons collected.

It is about seeing Ukrainian milk products sold to 150 countries in the world and not reporting on the number of cows in the country, and so on.

Ukraine’s agricultural policy should focus on innovations, new product ideas, adding value, being environment-friendly and export-oriented, striving to feed the world, as Ukraine well could. We need to get leading international companies in all sectors to establish research and development centers in the country by creating attractive conditions.

We need to create conditions for equipment and machinery manufacturers to start production here. We need to get agricultural education up to global standards, invite the best minds here and build the knowledge base in the country.

We need to export not only products but technologies and experience to produce or process these products. This is much more profitable.

We need to make it a law that the government will let the market decide prices and will not interfere. We also have so much energy wasted in agriculture; efficiency could decrease our dependence on energy imports.

We need to develop an agricultural policy and all the activities of Agriculture Ministry should be based on it.

Until we accomplish all of this, we will continue in our frustration when trying to explain the actions of our current government, whose agricultural policy seems to be based on killing growers of grain and supporting imports.

Andriy Yarmak is an independent agribusiness expert. He has worked on agriculture development issues in 10 countries, serving as an adviser and independent board members for agribusinesses in Ukraine and has developed market information systems for APK-Inform, a Ukrainian agriculture consultancy.