Document Type: Studies

This paper summarized the results of a nearly year-long analysis of the draft land circulation law under consideration by the Ukrainian Parliament. The current review of an April 2013 translation of the draft Law of Ukraine on Agriculture Land Circulation began in September 2013. The author Traveled to Kiev in early November 2013 to gather data, and interview stakeholders, experts and policy makers.

The draft law on agriculture land circulation was under active consideration by the Ukrainian Parliament until the political events of November 2013 and the subsequent change in government led to the suspension of this and many other policy debates. Despite these political events, data collection, literature review and analysis of the experiences of other countries continued through June 2014.

Even though the debate on the agriculture land circulation policy is currently suspended, the assessment of the alternatives facing Ukrainians as Ukraine establishes sales and rental markets for agricultural land will be useful to policy makers. This report describes the basic principles governing efficient land markets, identifies and explains options for satisfying these principles, reviews the experiences (both positive and negative) of other countries with alternative land market policies, and lists the advantages and disadvantages of alternative policies in the Ukrainian context. For these reasons this report is relevant for Parliament as it writes or rewrites a land circulation law.

This report begins with a discussion of the role that an efficient agricultural land market could play in Ukraine’s future. When compared to other developed and developing countries, Ukrainian agriculture has an opportunity to contribute much more to the country’s economy especially through improvements in productivity. A key step in increasing the productivity of Ukraine’s agriculture is to establish an efficient market for agricultural land.

In the following two sections the paper describes the conditions necessary to assure an efficient land market and the potential role of policy in achieving these conditions. The most important conclusion is that policy must assure that there are many buyers and sellers with equal access to information and market institutions.

Finally the paper assesses specific provisions in the draft law on land circulation. Each provision is evaluated with respect to the principles developed earlier and with the experiences of other countries with similar law and regulations. The report identifies potential advantages and disadvantages for each policy alternative. It is hoped that these assessments will be useful to Ukrainian law-makers as the draft a new law on agricultural land circulation.

AgroInvest, a project funded by the U.S. Agency for International Development, commissioned this Gender Analysis of family farms and smallholder agriculture in Ukraine in order to inform and strengthen the design, implementation and results of policies and projects. The intention was not to undertake a broad gender assessment of women in rural areas, i.e. not to identify women’s needs abstractly, and not to focus on the social dimensions of agrarian life, unless they affect the economic success of small and medium producers (SMPs). And while gender equity (or fairness) is an important social, moral and legal goal, it was relevant to this Gender Analysis only insofar as gender inequality may restrict the economic success of rural families.

The research hypothesis was that women represent specific, significant and often underestimated assets for family farms and growth of Ukraine’s agricultural sector, but that if resources are not reaching them effectively, then women’s contributions are constrained. With their focus on the economic aspects of gender roles, responsibilities and relations in agrarian areas, the researchers sought to (1) highlight disparities between omen and men, such as relating to access to and use of training, finance and machinery; (2) identify gender-blind practices that, by failing to purposefully reach and benefit from women, or to engage women and men effectively together, are limiting efficacy and results; and (3) suggest gender-related strategies by which some focus on women or men, or on gender equality or relations between them, may enhance results relating to the agricultural sector.

The field research focused on the respective roles and responsibilities of women and men, and on how they relate to one other in economic units; and applied the “six domains” conceptual framework to guide their inquiry. Access to agriculture-related resources such as information, skills and finance, was a critical concern. But because access does not necessarily mean utilization, the inquiry particularly asked about use of resources: Even when there is “access”, like a doorway that is unlocked, it does not ensure utilization, i.e. that one actually enters or crosses the threshold. Research encompassed review of laws, policies, data and studies, along with intensive field research that covered 9 of 27 oblasts of Ukraine for a representative sample. Primary data-collection relied on in-depth individual interviews and focus-groups with women and men, including women farmers or members of their families; rural households’ female or male owners; experts on agrarian development policy; gender equality experts; national and local government officials; and representatives of agricultural advisory services, farmers’ business and marketing associations, and women’s civil society organizations. It also included site-visits to agrarian cooperatives and seasonal farmers’ markets. The gender experts met with representatives of USAID and of the MAPFU at the beginning of the research, and provided separate debriefings upon completion of the field research.

The Six Domains:

1. Access to assets
2. Knowledge, beliefs and perceptions
3. Practices and participation
4. Time and space
5. Legal rights and status
6. Balance of power and decision-making

Although the Gender Analysis did not include overarching assessment of gender equality and gender mainstreaming in Ukraine, the report highlights two aspects of the gender context that particularly affect the analysis and recommendations: First, while Ukraine has adopted legislative provisions addressing gender equality at the national level relating to European standards and international requirements, and for all the efforts of gender equality advocates, Ukraine is now experiencing some “pushback” and negative campaigns against gender equality. There has been an overall weakening of the GoU’s political will for gender equality mainstreaming, persistence of traditional stereotypes regarding the roles and responsibilities of women and men in the family and in the society, mass media practice of focusing on women’s sexual appeal while not portraying women and men as equal partners in all spheres of societal development, and an increase in anti-gender activities supported by some religious factions and opponents of Ukraine’s movement toward stronger democratic processes and European integration. At the same
time, international support for Ukrainian CSOs striving to promote gender equality has decreased over time.

Second, the GoU lacks the institutional capacity to address issues relating to women’s economic contributions. Through reforms in 2010, the President eliminated the Ministry responsible for coordinating gender equality policy in Ukraine, and transferred those responsibilities to the Ministry of Social Policy; there is no institutional mechanism for focusing on women’s economic contributions. Thus, while laws and regulations affecting the economic aspects of the agrarian sector may not discriminate on the basis of sex, and while legal norms related to the development of agri-industrial production, farming, cooperatives’, and development of rural territories may be characterized as “gender-neutral”, the result is that they are gender-blind — meaning that they fail to recognize and address gender-related obstacles and opportunities.

Summary

There are strategic reasons for the GoU, USAID and AgroInvest to focus on women within their agrarian and agriculture policies and programs: (1) Women not only account for more than half of the rural population, but contribute significantly to many dimensions of family farm businesses, (2) As a matter of gender relations, women are critical partners for their husbands, in order for the family farm to be a success, and (3) The family farms will disappear if younger women and men have no reason to stay and work in agriculture in rural areas, leaving men without wives and vice versa. But focusing on women means making sure they are seen and heard, recognizing them as assets for the economic dimensions of agrarian policy, and investing in them as valuable partners. The reason for successfully engaging women and men, in their respective spheres and contributing their particular knowledge and perspectives, is not simply to respect gender equality principles or commitments. Rather, it is a critical approach for crafting effective policies and achieving national, donor and project results.

USAID/Ukraine’s 2011-2015 AgroInvest Project sets forth as the first of its three components, the ambitious aim of supporting a “stable, market-oriented policy environment” resulting in accelerated policy reforms, stronger industry associations and the protection of land rights for Ukraine’s small- and medium-scale agricultural producers, processors, traders and retailers (SMPs). This paper outlines the strategic priorities for the AgroInvest Project’s five-year policy reform agenda.

Building upon a detailed policy environment assessment that the AgroInvest Team completed in May 2011, this policy reform agenda defines five major areas for policy analysis and reform:

1. Trade policies,
2. Taxes and subsidies,
3. Financial market and credit policies,
4. Land market development,and
5. Market infrastructure investment.

These five areas further break down into a total of 18 discrete but complementary reform initiatives during the project’s five-year life, and these in turn include 37 discrete policy reform activities that the AgroInvest Team may undertake.

Section I below provides a summary review of the challenges and issues facing Ukraine in each of the five major policy areas. It points to some of the inconsistencies between the Government of Ukraine’s (GOU’s) long-range strategic goals for agriculture, and the current array of policies and regulations that on balance tend to punish agricultural producers and agribusiness in the name of protecting food consumers from high prices and assuring Ukraine’s national food security.

The balance of this paper (Section II) describes the screening process, driven by five basic criteria, by which the AgroInvest Team has identified policy reform priorities. It then lays out the resulting Component 1 strategic policy reform agenda. The policy agenda is broken down into three phases, corresponding to the AgroInvest project years, as follows:

• Short-term: years 1 and 2 (February 2011- September 2012),
• Medium-term: years 3 and 4 (October 2012 – September 2014), and
• Long-term: years 4 and 5 (October 2014 – January 2016).

The research underlying this report was carried out at the request of the AgroInvest Project in June of 2013. The report describes the current situation regarding lending to agricultural SMPs by the Ukrainian banking sector, describes key characteristics of such lending, and provides relevant conclusions and recommendations.

This report is produced in response to recommendation number 9 of the USAID Office of Inspector General Audit of USAID/Ukraine’s AgroInvest Project (audit report no. 9-121-13-002-P, dated March 31, 2013). Recommendation number 9 states: “We recommend that USAID/Ukraine work with Chemonics International Inc. to reassess AgroInvest’s future relationship with commercial banks, dedicate more resources to activities with credit unions, and document the results.” The report is therefore intended to assist AgroInvest in revising its strategy with regard to expanding agrilending to SMPs and the future development of relationships with Ukrainian banks. The study assesses the current market situation in the Ukrainian banking sector and identifies existing opportunities for increasing the volume of lending to SMPs.

To address the goals of the study, the following tasks were completed:

• Review the current situation with Ukrainian bank services with regard to SMP finance and development trends with allowance for general trends in the financial services market;
• Assess commercial banks’ interest and ability in increasing the volume of SMP financing in the short term (within two or three years);
• Provide AgroInvest with recommendations on (i) the feasibility of allocating AgroInvest resources for the purpose of fostering lending to SMPs by banks and (ii) the Project’s further strategic and tactical actions in this area of activities.

Professional publications and Ukrainian regulations affecting SMP agrilending directly or indirectly constituted the informational basis for the study. Data from informational bulletins, statistical compendia, and reports of the State Statistical Service and National Bank of Ukraine (NBU) and other publically available sources provided the factual basis for the study.

Limitations on the study: the study was limited to assessing prospects for direct agrilending to SMPs.

Based on the study the following overarching findings (detailed in the body of the report) can be stated:

• The situation in the Ukrainian agriculture sector affects not only national food security but also the situation in other sectors of the national economy and development of rural areas where one third of the Ukrainian population resides.
• Agriculture is an important export-oriented sector of the national economy which demonstrates good performance, even under crisis conditions.
• SMPs are an important category of agricultural producers, whose operations significantly affect the entire agricultural sector and social development across Ukraine.
• In the process of business operations, agriculture producers experience cash gaps for reasons beyond their control.
• SMPs may satisfy their need for finance by replenishing floating capital or reinstating fixed assets by means of direct loans from banks and/or credit unions.
• During the post-crisis period banks “expanded” their loan portfolios predominantly by converting loans in foreign currencies into loans in UAH. Despite the fact that retail deposits are the primary source of funding for banks’ loans, real retail loan portfolios do not tend to grow.
• There was no trend toward material expansion of banks’ portfolio of loans to SMPs during the last four and a half years.
• An analysis of available statistics evidences that neither banks nor SMPs are interested in lending/receiving loans at this time because of high interest rates.
• High risks and, consequently, large losses sustained by agricultural producers cause substantial uncertainty in agriculture business operations, especially those of SMPs. This leads to a higher percentage of defaults, discourages banks from lending to SMPs, and makes loans more expensive for borrowers.
• At times when production output falls, agriculture producers have to raise prices for produce, thus negatively affecting general inflation expectations of the Ukrainian population.
• Risks associated with agricultural production finance makes loans more expensive for SMPs which, in turn, increases agriculture production costs. There are no reasons to expect bank lending of SMPs to grow in the short and medium-term.

In a situation where demand for financing is high in areas outside of agriculture, banks are not sufficiently motivated to lend to agricultural SMPs, especially if their creditworthiness is doubtful. As there are other options for investing their liquidity, banks will opt for less risky alternatives rather than lending to agricultural SMPs. In addition to expensive money (deposits) banks also have the option of using cheap money (current account balances), transactions with domestic government bonds and other – less risky – transactions have become a good alternative to a search for other lending opportunities (like lending to SMPs, for instance).

Recommendations to AgroInvest:

1. It is not feasible for AgroInvest to allocate resources and make efforts to engage new partner banks for SMP lending purposes because of the low level of Ukrainian banks’ activity in this segment of the lending market;
2. It is recommended that AgroInvest not expand its collaboration with new banks and at present focus on training activities with only its four defined partner banks which already have certain developments and are willing and ready to invest their own resources in SMP lending;
3. Continue developing cooperation with credit unions so that they develop their agrilending capacities and continue activities related to drafting and implementing new laws which would improve the institutional capacities of credit unions and their SMP lending capacities;
4. Intensify activities in the identification of existing legal and economic hindrances to SMP’s access to finance. It is important to draft and lobby for changes to the current legislation which would facilitate both direct lending to SMP business operations by banks and/or credit unions and indirect finance through agriculture input suppliers;
5. Train workers and managers of agriculture enterprises, farmers, and rural residents on direct loan origination processes and agriculture cooperative organizations;
6. Further analyze the economic feasibility of implementing a DCA guarantee programs to support expanded SMP lending in collaboration with the State Committee of Ukraine on Regulatory Policies and Entrepreneurship, Ukrainian Entrepreneurship Support Fund, or other institutions whose activities would facilitate access to finance for SMPs.

There is a need to modernise the meat classification system in Ukraine to EU standards. The report provides advice to the Pig Breeders Association on current EU practices and legislation.

The support is based on questions raised by experts from the Pig Breeders Association between June and September 2015 while working out the country legislation and procedures, and on comments to the proposed draft legislation.

USAID/Ukraine asked the AgroInvest Project Team to explore Ukraine’s potential to participate in President Obama’s Feed the Future (FTF) Initiative. This memorandum addresses that question, and provides the AgroInvest Project’s analysis of the extent to which USAID/Ukraine might help to contribute to the FTF Initiative.

We conclude from preliminary investigation that the potential for USAID/Ukraine to take an active role in FTF is limited, primarily by Ukraine’s geographic situation, located in a region of the world that suffers relatively low rates of malnutrition and food insecurity. Nonetheless, USAID/Ukraine (with support from the AgroInvest Team) may wish to explore with the Ministry of Agricultural Policy and Food (MAPF) the Ukrainian government’s interest in becoming an FTF partner country. Should USAID/Ukraine decide to explore this possibility, the Government of Ukraine’s (GOU’s) commitment to this undertaking would be essential; but we would need to proceed carefully and iteratively, so as not to raise Ukrainian expectations prematurely.

Nations can participate in FTF as “priority” or as “partner” countries:

• Ukraine does not suffer from the extreme poverty and malnutrition to develop an FTF “Country Investment Program” as an FTF “priority country.”
• Ukraine, like FTF’s four “partner countries” (Brazil, India, South Africa and Nigeria), is large grain exporter with research and technical assistance potential that could benefit other countries in its region, in Africa or beyond. Ukraine’s nearest FTF partner country is Tajikistan. Were the GOU to take an interest in collaborative agricultural research or technical assistance to farmers and researchers in Tajikistan, in other FTF priority countries, or perhaps even in other food-insecure countries; then USAID/Ukraine could approach the USAID’s Bureau for Food Security (BFS) with a proposal for FTF support and funding.

This document reports on an Investment Environment and Labor Force Survey undertaken for Deloitte Consulting LLP in the framework of the USAID-funded Economic Prosperity Initiative (EPI) by ACT Research.

The objective of the survey was to study the investment environment and potential labor market for the apparel sector (as well as other sectors of the economy), in the locations of Kutaisi, Batumi, Poti and Ozurgeti.

The survey was undertaken through face-to-face interviews among the able-bodied population aged 18-35. One thousand six hundred individuals were interviewed; 280 women and 120 men in study area. The results presented within the report are based upon the active labor force; they exclude those that have not worked and are no seeking work.

The survey revealed a general willingness among the sample population toward work in the apparel sector, with residents of Ozurgeti exhibiting the highest degree of interest.

USAID economic growth portfolios have leveraged the model of an Innovation Center throughout the developing world, and with particular success in the E&E region, to increase the capacity of a nascent ICT industry. With this dynamic regional model in mind, the Economic Prosperity Initiative worked with subcontractor, SSG Advisors, to conduct this feasibility study for an ICT Innovation Center in February 2012. This report presents the findings of the feasibility study.

As readers of this report will observe, the potential of the ICT sector in Georgia is considerable. In facilitating the creation of the ICT Innovation Center, USAID has a unique opportunity to make a lasting, substantial and sustainable impact in the development of Georgia’s ICT industry and workforce.

This report is a feasibility study for Agricultural Food and Logistics Hubs (AGFLH) in Georgia and follows the pre-feasibility study. It analyzes the potential locations for the Hub while looking at the market and financial feasibility as well as making recommendations for the design and technical aspects. The report makes recommendations on the locations and design of the Hub for each location, as well as the facilities that each would need. Recommendations on potential financing scenarios are also presented.

Note: After the initial development of this feasibility study and financial model, the concept has been socialized with and presented to different investors in the January-June 2012 period. Based on their feedback, the specific financing options that are currently being discussed as of June 22, 2012 are not included in the feasibility study being presented herein.

This document is the final report on the Transport and Logistics Time Motion and Cost Study prepared for Deloitte Consulting LLP in the framework of USAID Economic Prosperity Initiative (EPI) by ACT Research.

Transport and logistics is one of the strategic sectors of Georgia. It can be pivotal and catalytic to a broad segment of the economy. In order to fully understand its potential impact on the economy, it was critical to make an assessment of the transportation and logistics sector, which has been identified as a crosscutting sector that the EPI will focus on.

In order to condcut a deep assessment of transport and logistics value chains and develop a strategy work plan in this sector it is critical to obtain baseline data using statistically relevant methodology. Unfortunately, there was no such recorded data in this sector until recently. Taking these considerations into account the research was arranged, planned, and then implemented from April till July, 2011.

The main purpose of ACT’s research was to design and develop statistically relevant methodology for a baseline measurement of transport and logistics-related factors between specific transport nodes within Georgia and then conduct a baseline survey according to the developed methodology.

The main objectives of the baseline survey were to study the timing, costs, availability, quality, and reliability of transportation and logistics in Georgia.

For this purpose ACT Research has developed an optimal research approach, which include the following main components: (a) Desk Research (in order to obtain and analyze secondary data pertaining to the nodes that are to be studied in the scope of this project), (b) Surveys of Transport and Logistics (Warehousing and Distribution) Companies (all transport and warehousing companies were studied) and (c) Tracking the Actual Transportation Process using GPS Tracking Devices.

Besides these main components, ACT has also developed a visual map, in which all transportation and logistics companies operating in Georgia are represented.

According the survey results a major part of the transport, cargo-handling and distribution is located in three main region/cities of Georgia. These are Tbilisi, Samegrelo-Zemo Svaneti (with Poti as its center), and Adjara region (with Batumi as its center).

Different types of transportation service are available in Georgia (truck/road, rail, sea, and air). The average amount of goods/freight transported during one year by companies is 18,800 tons. The cost of transporting goods one kilometer with one truck within the territory of Georgia is USD 1.88 on average, and similarly the cost of transporting freight for one kilometer with one freight car (rail) within the territory of Georgia is USD 2.56 on average.

The average time (measured by GPS) needed for trucks to move to several destinations is: 17.8 hours – (Poti-Sadakhlo), 12.5 hours – (Tbilisi-Poti/Poti – Tbilisi), 13.8 hours (TbilisiBatumi)

Warehousing companies operating in Georgia use various types of storage (dry, cold-frozen, bulk) for keeping goods. The average price of storing goods is USD 2.30 (1 ton/day) in dry storages, USD 6.70 (1 ton/day) for cold-frozen storages and USD 0.40 (1 m³/day) for bulk storage. Based on the survey results the full-potential capacity of all warehousing companies in Georgia is 1,477,690 tons. The average capacity of a company is 3,307 tons (the average number does not include data for the Poti sea port).

Port/airport-handling companies along with various services provide loading/unloading services. On average the loading/unloading time for one truck is two hours and the cost for liquid, bulk, and general cargo is USD 13, USD 9, and USD 12, respectively.