COMMENTARYPOINTS
“Review of key investment projects and needs in the agricultural sector”
SLIDE 1 – TITLE
SLIDE 2 – GLOBAL FOOD SAFETY
The world population has a stable tendency to increase, along with the growing level of consumption. By 2050 the world population will go from 7 to 9.2 billion people. 805 million people suffered from chronic hunger in 2014.
According to FAO, production of foodstuffs should increase by 60% until 2020.
Ukraine strengthens its position as a global agricultural producer. Ukraine in a group with other country-leaders makes a significant contribution to solve problems of hunger and malnutrition in the world.
For the last 10 years Ukraine has increased exports of agricultural production by 3.6 times up to 17 billion U.S. dollars.
Ukraine possesses a favorable climate, 30% of world reserves of black soil and a skilled labor force.
SLIDE 3 – RECORD UKRAINIAN EXPORTS IN 2015
Even with less farmland and fewer ports due to the annexation of Crimea,Ukraine boosted its grain exports more than 4.5% to 34,8 million metric tons in the 2014-2015 marketing year
Thus Ukraine is the 3d biggest exporter of grain of the world after the USA and the EU
Ukraine is the world market leader in export of sunflower oil (No. 1), corn (No. 3), barley (No. 4), wheat (No. 6), soybean (No. 7), and poultry (No. 8).
SLIDE 4 – CUTTING THROUGH RED TAPE & FIGHTING CORRUPTION
1. From loss-making state-owned companies to privatization of hundreds of companies
2. From commodities to added value products
3. From regulation to free competition
Privatization:
State is a bad owner and inefficient manager.
General number - 471 state enterprises in the agrarian sector. Only 40 – relatively profitable.
The Ministry carried out the deregulation of the agricultural sector.
In summary – clear rules, low transaction costs and no interference.
Reforms already completed – eliminated 42 permits & licenses (including quarantine certificate), simplified registration processes.
Due to the deregulation of agrarian sector, the logistics has improved by a week and a half.
The economic impact for business is estimated at about 5 billion UAH of savings.
Besides, strengthened investor protections, opened 106 jobs at state companies to a transparent selection process, and launched over 135 criminal investigations.
Fighting corruption is my most important mission.
Reforms coming soon – further elimination of permits, privatization of agrarian state-owned-enterprises and preparation of country for land reform.
SLIDE 5 – Fighting corruption in the agrarian sector of Ukraine as viewed by business (April-September 2015)
The agricultural sector is the leading sector of the economy, where one can observe a significant decrease in the level of corruption.
Through its integrated approach in the sphere of fighting corruption, the Ministry of Agrarian Policy has achieved the first good results and helped the business to develop freely on the territory of Ukraine.
Transparency International Ukraine, PrivatBank, LLC Audit Firm PricewaterhouseCoopers (PwC Ukraine) and GfK Ukraine conducted the sociological survey “Level of Perception of Corruption by Business. The Second Wave”.
2271 enterprises took part in the survey.
As estimated by Ukrainian businesses, the mark for the level of corruption in the agrarian field has improved from minus 0.97 to minus 0.69 points (general from minus 5 to plus 5)
Thus, during the second round of the survey, the number of respondents who had noticed an improvement in the anti-corruption struggle in agriculture increased by almost 10% (from 9.6% to 19.3%).
Additionally, for 6 previous months, the number of enterprises that faced instances of corruption in the sector has decreased from 14.4% to 12.9%, which is the lowest among all the other sectors of the country’s economy.
The results of the anti-corruption actions are the indicator that proves the ongoing reforms, and the changing of Ukraine.
SLIDE 6 – UKRAINE’S AGRICULTURAL EXPORT -LEVERAGING DIVERSITY
12 months of 2015
Ukraine has diversified its export to American, Asian, European and African vectors.
12 months of 2015
Asia - 45.1% ($6,7 bln)
EU - 28.2% ($4,2 bln)
Africa – 13,5% ($1,8 bln)
CIS - 10.2% ($1,5 bln)
USA - 0.3% ($ 43,2 mln)
Other countries - 2.6% ($ 238.1 mln)
The total export – $ 14,8 bln
Ukrainian agricultural sector has shifted and found new markets for its products. We have managed to do it.
New markets and new export positions:
Egypt – poultry
Israel – eggs
Morocco – milk
Saudi Arabia –poultry
EU – seeds – results of audit by European Commission are positive
We offer quality products at competitive prices.
SLIDE 7– EXPECTED EFFECT FROM THE DEVELOPMENT OF IRRIGATION SYSTEMS
As a result of the downgrade of irrigation systems we have got the reduction of irrigation area from 2.3 mln hectaresin 1990 down to 472 thousands hectares in 2015.
We expect the renovation and development of irrigation systems will start in 2016-2017 and have a goal to renovate the irrigation on the areas of 500-550 ths. ha till 2020.
It will increase average irrigated areas up to 1 mln Ha.
The approximate investments needed for development of irrigation systems according to expert estimates are $ 1.5 -2 bln.
Development of irrigation systems on the areas of 500-550 ths. ha will increase the agricultural production on 8-10 mln ton per year.
This project has significant social and economical effect - increase of yield, infrastructure development of the region, rural development.
In estimates for 1 mln hectares of irrigated lands – will create about 100 thousands of new jobs.
SLIDE 8 – GENERAL POTENTIAL OF BIO-FUELS
Bioethanol production should become a key direction for us in 2016
It’s a way to secure our sustainable energy independence.
The potential capacity of this direction is huge: biogas – 21.8 billion m3; bioethanol – 1.5 million tons; biodiesel – 1.2 million tons; solid fuels – 37.9 million tons.
In 2015 we exported 18.8 million tons of corn.
As example the processing of 10 million tons of corn may produce more than 4 million tons of bioethanol.
In 2016 we continue our active support on:
- preparation and drafting the relevant laws which will improve the legislation for the “Green Tariff” (electricity produced on the base of biogas and biomass);
- licensing system facilitation, for instance, in 2015 it was the cancellation of licensing on biogas and liquid bio-fuels manufacturing;
- Implementation of joint projects to produce and export of bioethanol raw materials and bio-fuels.
SLIDE 9 – UKRAINIAN SECTORS WITH ATTRACTIVE RETURNS FOR INVESTORS
Ukraine can be a big part of meeting the planet’s food need.
Ukraine: farmer’s paradise – largest arable land bank in Europe, (over 41 million hectares of farmland.), one-third of the world’s black soil, favorable weather and plenty of water.
However, Ukraine’s agricultural sector operates at only 50% of capacity due to poor inputs, outdated techniques and idle lands (over 4 million hectares).
At this stage investments are needed to increase the level of competition in all areas of agriculture.
Investment in competition will ensure the further development of the agricultural sector and harmonization of conditions for all players in the agricultural market.
To reach its agricultural potential, Ukraine needs investment in infrastructure, value-added production, precision technology and equipment lease finance and working capital for small farmers.
Focus area – Ukraine’s infrastructure must be transformed.
70% of silos are obsolete and the need for storage is growing. There is a lack of railcars to get crops to port.
Finally, there are not enough ports to meet increasing production and those that do exist are dilapidated.
The technological need in harvesting machineries is about 75 thousands units. 80% of available 50 thousand units should be renovated or replaced.
Also, there is a lack of tractors of more than 110 thousands units.
The annual demand in renovating of technical machinery park is estimated at
$1.6 billion while farmers' financial capability does not exceed $250 mln.
All of these areas contain exciting opportunities for investors to make strong returns while contributing to Ukraine’s development.
SLIDE 10 – UKRAINIAN SECTORS WITH ATTRACTIVE RETURNS FOR INVESTORS (value added products)
Cereals & oilseeds processing were the proverbial “low hanging fruit.” These are our most well developed food processing areas. Of course opportunity still exists because demand for vegetable oil, for example, continues to grow strongly. Allseeds Black Sea - $200 mln of investment
Most of our meat production is still focused on serving the domestic market. Great export potential exists.
Chicken is especially attractive given the rapidly growing populations of the Middle East and North Africa. With our low cost of production and huge ability to scale, I see Ukrainian chickens feeding mouths from Casablanca to Bagdad and beyond.
Specialty fruits & vegetables are less developed.
Sadly, much of our fruit and vegetable production spoils and goes to waste. We needto can and jar this food, process into products for export to places like China that have a huge appetite for specialty vegetables.
Finally, finished goods and food brands. Ukraine’s own food market is still highly fragmented, creating a base that can support the development of confectionary, baked goods and other foodstuffs of all kinds.
Additionally, we see our specific and socially responsible priority in development of children nutrition production to cover its domestic demands. Especially, it is children nutrition on meat and fish basis and specialized nutrition. The domestic market is estimated in $5 mln and no production of such nutrition in Ukraine.
SLIDE 11 – PATH TO SUCCESS: GOALS FOR 2020
We have ambitious goals for 2020
- Produce 100 million metric tons of grain.
- Double exports.
- Triple the production of value added
The breadbasket of Europe will become the supermarket to the world.
We need your support.
Worldknown big companies are already successfully operating in Ukraine.
I welcome you to join them and work with us to put food on the table in homes throughout the world.
SLIDE 12 – THANK YOU FOR YOUR ATTENTION!
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