Due to its vast amounts of fertile land and strategic location, Ukraine has long been known of the “bread basket of Europe.” Not only does its government plan to hang on to that title, it aims to increase the efficiency and quality of the country’s agricultural production. Without interfering in private-sector initiatives to grow the industry, it is now providing support and incentives for new investment in agricultural machinery manufacturing and food processing to enhance productivity and export value. Maksym Martynyuk explains how Germany has supported Ukraine’s agricultural sector since independence, as well as the opportunities available today in an industry worth more than €10 billion a year
You took over as acting minister of agriculture in July 2017. What has been your biggest achievement to date?
I think the biggest achievement of our work over the last year is the fact that we managed to find balanced mechanisms of support. We have support programs that are being put in place this year in important areas such as livestock husbandry and crop growing. In these areas, we also foresee the creation of additional value because we would like to move from selling raw materials to prepared goods. We have also programmed budget support in 2018 for small and midsized producers. Generally, Ukraine’s agrarian sector is successful on its own, and the less intervention of the government in the sector, the more success it will have.
Statistics show that every third dollar in Ukraine comes from agricultural exports. What is your ministry’s strategy to ensure successful exports of food?
We are systematically working on the opening of new markets for our producers. Our priority markets as of today are Asia, North Africa and the Middle East. These are the markets that consume the largest proportion of our commodities. At the same time, thanks to the Deep and Comprehensive Free Trade Area agreement with the European Union, we have been increasing trade with EU member states. We are exporting our highest-quality products to the EU, including many value-added products.
What have been the recent trends in terms of FDI in the agricultural sector?
Foreign investment in the agricultural sector in Ukraine is increasing because it’s a profitable sector. Currently, I see two huge opportunities for foreign investments. The first is the production of organic goods; there is huge potential to increase the amount of land on which organic products can be harvested. At the same time, we need the technologies that are being utilized in Europe for the harvesting of organic production. This organic zone could be a very good area for cooperation, taking into consideration the fact that in Europe, organic production is rather popular. The second opportunity is the processing of agricultural products. We have a lot of raw materials, a lot of ambition and a huge potential for the production of food for both people and animals.
What are the competitive advantages of Ukraine’s agricultural sector?
Ukraine has a great geographical location, a very high level of human resources and 42 million hectares of agricultural land, which in most cases is highly fertile.
Last year, you announced that Ukraine will use blockchain technology to boost land ownership transparency as part of wider reforms. How has this project progressed, and what else can we expect in the near future?
Yes, we have launched the system of distributed databases, also known as blockchain, in the system of state land. Furthermore, the Ministry of Justice is working on the introduction of blockchain technology to increase the level of protection of ownership rights on properties. Talking about blockchain, I would like to mention that anyone can become an external auditor, and our first external auditor of the state land system is Transparency International. I think that after the Ministry of Justice finishes its work on blockchain, then the system of the protection of owners’ rights will be one of the best in the world.
What else can you tell us about Ukraine’s approach to innovation and R&D in the sector?
Ukrainian business is permanently implementing new and innovative technologies; R&D is a process that is permanently ongoing and it moves very quickly. So if, at the moment, Ukraine is included in the world’s top 10 food producers, we need to be in line with innovations to ensure we maintain our position in the market. We know that there are existing technologies that allow people to create food products even without land — vertical plantations and lab-grown meat production, for example. And that is why our ministry suggests to businesses to think of how their business and Ukrainian agriculture will be in at least five years from now. At the moment, the high profitability of Ukraine’s agricultural companies allows them to invest their funds both in research and cutting-edge technology.
In September this year, at a German-Ukrainian Agrarian Committee meeting, the two sides discussed deepening cooperation in the agro-industry. Which areas do you see as having the most potential for cooperation in this framework?
Cooperation, or more accurately, German support of Ukraine has been part of our agricultural sector since the first days of Ukraine’s independence. In fact, Ukraine and German cooperation in the agricultural sphere is one of the most successful examples of its kind. In the next year, with the support of our German partners, we are launching a huge and ambitious project with our forestry inventory. I hope this inventory will bring us closer to seeing the moratorium lifted on timber exports, which is one of the factors working against the deepening of our relationship with the EU. Also, there are veterinary issues that were discussed in the committee. Animal diseases can jump beyond borders, so we are working together to combat disease like African swine fever. The agritech sector is also very important. At the moment, German equipment for agriculture is one of the most widely imported products in Ukraine, and the network of services to maintain these techniques and the networking of educational institutions to teach specialists are also well developed. I think the next stage of this cooperation will be when more German enterprises start to locate to Ukraine.
What benefits could relocating to Ukraine have for German agritech producers?
I know there have been several conversations between agricultural producers in Ukraine and representatives of German businesses that are involved in machinery production to locate some of their manufacturing units in our country. They are discussing locating some production in the western regions of Ukraine that are strategic from a logistical point of view. They aren’t talking about moving their overall production, but producing specific parts or accessories here. In Ukraine, there is an active program of compensation and support for manufacturing agricultural equipment with some level of localization. I think this kind of cooperation would be beneficial for both sides.
Ukraine’s Deep and Comprehensive Free Trade Area agreement (DCFTA) with the EU has been in effect since the beginning of 2016. What have the main benefits been so far?
I think that this agreement is 100 percent mutually beneficial. I think this agreement, at least in the first stage of its implementation, is even somewhat protectionist towards the Ukrainian side. If we remind ourselves of the moment when this agreement was signed – we had conflict in the east of country and Ukraine had just lost the Russian market – this agreement assisted our production of agricultural products to compensate for the losses that we faced from the Russian markets. However, Ukraine is a country that produces twice as much food as it consumes, which is why we’re not seeing a major increase in our purchases of agricultural products from the EU. At the same time, this free trade agreement has facilitated the availability of European products, such as machinery, in the Ukrainian market. It provides us with an opportunity to increase the quality of our production. This quality gives us more access to the European market. The next step for us is to increase salaries to become more consistent with European standards, and to start thinking as European people and businesses do. All of that would lead to our full integration into the European Union.