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A look at the investment prospects in the Ukranian agricultural sector

by Maria Sheviakova

Abstract

 Ukraine has a huge potential to develop in the sector af agriculture. Its output is far below what can be achived through better organization and technologies. This is a look at week and strong sides wich are to be faced by Kiev to overcome the present productive obstacles in the agricultural field.
Despite the efforts of Ukrainian governments to build a positive image in the eyes of foreign investors, the negative investment appeal of its economy is evident. Some experts suggest that the lack of a free market for agricultural land may be the main cause of the difficulties in this sector of the Ukrainian economy. According to the Land Code (the principal law governing land issues in Ukraine), foreign individuals, legal entities and foreign states are allowed to own, use and dispose of certain non-agricultural land in Ukraine, but are explicitly prohibited from owning agricultural land.
At present no one doubts that an official land market is necessary, because the moratorium stems the tide of investment in the agricultural sector. The present situation prevents effective use of the land and improvement and modernization of techniques because small and middle farmers do not have the means to invest money in land improvements (it is well known that productivity gains in agriculture can only be achieved by using modern technologies on large land plots).
The arguments in favour of a land market collide with imperfections in the legal and regulatory framework and the lack of a unified cadastral system in Ukraine. Two new laws – Concerning the Land Market and Concerning the Land Cadastre – should create optimal conditions for the agricultural land market in Ukraine, as they strictly define the procedure for the conduct and registration of transactions.
Ukraine has the second largest territory in Europe (after Turkey) with a total of 60 million ha. of land. While 76% of Ukraine’s land has no crop restrictions, nearly one-fifth (over 12 million ha) is classified as land of special value. There is a technological gap of approximately 40 years between Ukraine and developed countries, illustrated by the fact that currently only 2% of agricultural land is cultivated with land-saving technologies. Crop losses reach 30% due to technical backwardness.
According to The Food and Agriculture Organization of the United Nations forecast, over the next 10 years food prices will rise by 15-40% in view of the fact that developing countries’ food needs as well as the demand for biofuel will grow considerably. All these factors confirm that in the nearest future agriculture is going to be one of the most profitable businesses and Ukraine, with its rich land, has a great investment potential in this field.
In this regard we should also mention the problem of eco-fuel use and production in Ukraine. Biofuel production worldwide is expected to triple by 2020 and Ukraine can establish itself in this business segment.

Original title: A look at the investment prospects in the Ukranian agricultural sector

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