Concept project

National Complex ProgrammeSupporting the Development

of Ukrainian Rural Areas

To preserve peasantry as a bearer of Ukrainian identity, culture and spirit of the nation.

Complex development of rural territories and solving social problems of the villages.

Making agriculture highly effective, competitive at internal and external markets sector of Ukrainian economy.

Ensuring food security of the country.

Goals

Tasks

To ensure stable development of the agrarian sector of national economy

To ensure stable development of rural areas and communities

MethodologyState programme “DAR Ukraine”

Human Land Production

Agroindustrial markets

Budget

Socialsphere

Publicadministration

Information

Science

Integration

Quality,Safety

Education

Landrelations

Methodology

HUMAN

EDUCATION, SCIENCE, TECNOLOGIES

MARKETS

FINANCE

PRODUCTION

LANDStandard of living

Land quality

Quality product

BRAND OFAGRICULTURAL

UKRAINE

Methodology Working out success criteria in two main areas:

1 Development of the agro-industrial complex (AIC)

2 Development of rural communities and areas Analysis of factors of influence Exerting influence on 10 main areas – groups of factors Working out requirements for program activities as to their

compliance with requirements of WTO and EAP Elaborating a plan of action within RADU Activities efficiency analysis and their correction by means of

feedback

Tasks – success criteriaSuccess criteria Present

situationDesirable

figures

Profitability in agroindustrial complex 4-6% 18-20 %

Export share of agroindustrial complex commodities

9,8% 20-25 %

Level of direct foreign investments into agroindustrial complex

120 mln USD per

year

1 bln.USD per

year

Ukrainian share at international markets of agroindustrial commodities

2,8% 6-8 %

Level of income per capita employed in agroindustrial complex

50 USD

300USD

Level of employment in rural areas 54,7 85%

Level of income per one household in rural areas

80 USD 480 USD

Level of social infrastructure objects’ availability in rural areas

42.5 % 50 %

Level of youth employment 54,2% 80%

Methodology

Комісія “Аналіз та консолідація”

Stabilization

Raise

Recession

Europe

UkraineMalaysia

Republic of South Africa

Main problemsPublic administration and branch-wise

policy The strategy of agroindustrial complex

development is based upon the criteria of increasing production volumes in all branches

The concept of food security assumes satisfying 95% of own consumption with the help of own production

Outcome Wrong priorities and inconsistent state

policy in rural areas and agroindustrial complex

Main problemsLand relations Social strain and lack of trust between the subjects of

the market Lack of measures and stimuli which could contribute

to joining of land share owners Nonoptimal public administration, lack of effective

state control over quality and the state of land resources

Outcomes Fear to loose land property from the side of peasants

and public opinion based on the fear of agriculture capitalization

Difficulty of practical problem solving in the sphere of rent relations in rural areas

Disastrous decrease in land fertility and increase of soil erosion processes

Main problemsSocial and economic development

of rural areas Nonconsistent policy and state

support of rural areas development

Not identified sources and mechanisms of funding for the realization of the state policy in the sphere of rural areas development

Outcomes Low level of life, unemployment,

decrease birth rate in rural areas, ageing of rural population

Threatening decrease in the number of rural population, village depopulation, loss of national traditions of village life, family values

Rural population lives in a limited informational space, very low level of knowledge about rights, possibilities and innovative technologies from the side of peasants; lack of knowledge how to implement their rights to protect own interests

Валова додана вартість сільського господарства, 1990р.=100%

8374 79

71 67 61 60 53 51 5771 71 70

0

25

50

75

100

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

%Cтруктура валової продукції

67%60%59%62%57%56%53%52%45%

33%40%41%38%43%44%47%48%55%

0

20000

40000

60000

80000

1995 1996 1997 1998 1999 2000 2001 2002 2003

млн

.грн

.

господарства населення сільськогосподарські підприємства

C

Main problemsAgroindustrial markets Products and branches of international competitiveness are not

identified No branch priorities outlined No balance between demand and supply, unorganized market

with low level of infrastructure development and elements of command and administration system

Lack of organized sales channels with transparent pricing mechanisms and mechanisms stimulating production

Outcomes Predominating unprofitableness of agricultural production Lack of structural balance in the export of agricultural commodities

with prevailing export of raw materials Failure of agricultural commodities to meet international standards

of quality and safety Increase of expenses on consumption of non-recoverable resources

and decrease of competitiveness of agricultural enterprises Deficit of food consumption in comparison with the level of rational

consumption norms Decrease in the value added production

Lack or weakness of market infrastructure – wholesale markets of agricultural commodities

85% 14%

Result: lack of pricing transparency, unorganized markets, unsatisfactory quality level

SMALL FARMSFARMS

1%

AGRICULTURAL ENTERPRISES

Retail buyer – final consumer

RETAIL MARKETS SHOPSUNORGANIZED TRADING

CATERING

CLOSED INSTITUTIONS

PROCESSING ENTERPRISES

UNORGANIZED INTERMEDIATE PARTIES

Main problems – markets of agroindustrial complex

Agroindustrial markets

Main problemsAgrarian science Ukrainian agrarian science has a low level of

integration into contemporary European and international science

Low level of scientific base in some of the scientific investigation institutions of agroindustrial complex

Lack of implementation mechanism between fundamental science and practice

Outcomes Potential of scientific investigations is not

implemented in the practice of agricultural production

Brain drain of scientists to other countries or other branches of national economy

Main directions of the programme

Defining priorities of agroindustrial development of the country with the concentration of all the main efforts in competitive branches

Intensive development of rural areas and local self-government, introduction of the participation strategy, which would help to consolidate efforts of the State and local communities

To adopt the Concept of the country’s food security on the level of legislation;

To decentralize management in agroindustrial complex and to introduce operational standards of taking state decisions, controlling the implementation of these decisions and assessing the results;

To start structural reorganization of state institutions in order to proceed from paternalistic principles of agroindustrial complex development to complex system of state support given to competitive branches;

To ensure the development of state system of special training and education of specialists to be employed in agroindustrial complex and Ukrainian rural areas

Planned actions – in the sphere of public

administration

Planned actions – in the sphere of land relations

Improvement of land legislative base and management system in the sphere of land relations (budget expenditures - 0,75 mln. UAH, effect – value added increase by 53,0 mln. UAH. )

Rationalization of the land tenure by way of organization of the land usage (budget expenditures - 516,5 mln. UAH., effect - value added increase by 1624,0 mln UAH)

Recovery of soil quality and ensuring soil protection (budget expenditures – 174,5 mln. UAH, effect - value added increase by 555 mln. UAH)

Creation of conditions for agricultural lands market and the improvement of investment climate (budget expenditures - 225 mln. UAH, effect - value added increase by 365 mln. UAH )

АБ

ВLev

el o

f co

mp

etit

iven

ess

Production volumes

HighAverageLow

- Average; - Low- High;Value added:

High

Average

Low

Poultry

Seeds

Forage wheat, barley

PotatoesCorn

Beef

Pork

Sugar

Fruits

Grapes

Eggs

Ріпак

Honey

Leguminous plants

Milk products

Oil

Bakery, confectionery

Soy

Bread-grain

Vegetables

Milk

Sunflower

Flax

Planned actionsin the sphere of agroindustrial markets’

development

АБ

ВLev

el o

f co

mp

etit

iven

ess

Production volumes

HighAverageLow

- Average; - Low- High;Value added:

High

Average

Low

М’ясо птиці

Насіння

Фуражні пшениця,ячмінь

КартопляКукурудза

Яловичина

Свинина

Цукор

Фрукти

Віноград

Яйце

Ріпак

Мед

Зернобобові

Молоко-продукти

Олія

Хлібобулочні, кондитерські вироби

Соя

Зернопродовольче

Овочі

Молоко

Соняшник

Льон

Attraction of strategic investments,

branch restructuring

Attraction of investments,

sufficient state support,

creation of market infrastructure

Intensification of production,

deepening the level of processing,

strategic export

Planned actionsin the sphere of agroindustrial markets’

development Priority development of production of sunflower,

cereals and products of its processing. It is planned to increase production volume of sunflower from 3 mln. tones in 2004 to 4,5 mln. tones in 2010; cereals - from 38 mln. tones in 2005 to 65 mln. tones in 2010;

It is planned to increase production volumes of poultry from 0,58 mln. tones in 2004 to 1,2 mln tones in 2010, pork from 0,46 mln. tones to 1,1 mln. tones, milk products – from 13,9 mln. tones to 18 mln. tones, eggs from 11,8 bln. eggs to 15 bln. eggs, accordingly.

Strategic focus on dairy farming with constant beef production on the level of 2005 based on a principle of derivative product. At the same time the demand for beef will also be present due to import.

Planned actions in the sphere of agroindustrial complex branch-wise policy

To work out development strategies for branches of international competitiveness – cereals, sunflower , confectionery, organic products, poultry

To work out programmes aimed at competitiveness creation in potentially competitive branches – pig-breeding, dairy farming, milk processing, eggs production

To implement corporatization of the sugar branch To work out model investment projects for competitive

branches To work out regional policies for agroindustrial complex

based upon cluster models To form branch-wise investment proposals fro branches with

capital payback over 20%

Planned actions – social and economic development of Ukrainian village

Creating favorable conditions for the development of private initiative and entrepreneurship in rural areas as basic mechanisms for the increase of life level in villages.

Creating conditions and possibilities for rural communities to solve social and economic problems of rural settlements.

Working out mechanisms of supporting social and economic development of rural areas.

Planned actions – agricultural science

Increase in the gross value added in agriculture by 30% due to more effective usage of plants’ and animals’ genetic potential ( increase from 50% to 70%) and complex implementation of Ukrainian technologies in production (from 20% to 50%) and in processing from 60% to 80%

Bringing the share of GDP spent for scientific investigations from 0,16 to 0,5 percent

Creating national banks of genetic resources of plants, animals and microorganisms

Creating national fund of science intensive products

Planned actions – Budget regulation

Directions of budget usage and usage of international

funding

2005 2006 2007 2008 2009 2010 Total

Support and restructuring

of agriculture and

agroindustrial complex

2435,4 5186 5760 5348 6976 7449 33 154,4

Including the “yellow basket”

1061,7 2280 2534 2351 3068 3277 14 571,7

“green basket” 1373,7 2906 3226 2997 3908 4172 18 582,7

Management and upkeep of

budget institutions

562,2 570 580 580 580 590 3 430,2

Science and education

618,5 1053 1520,6 1761 1692 1902 8 547,1

Social sphere in rural areas

721,9 2900,46 3036,56 2865,86 2957,46 3079,6 15 561,84

TOTAL 4 338,05 9 709,46 10 897,16 10 554,86 12 205,46 12 520 ,66 60 225,65

Planned actions – finance and investments

To ensure attraction of funds amounting to16 bln. UAH per year into agroindustrial complex on the basis of short-term creditsTo ensure attraction of funds amounting to 10-12 bln. UAH per year into agroindustrial complex on the basis of long-term creditsTo ensure attraction of funds amounting to 5 bln. UAH per year due to introduction of leasing

Receiving the status of the country with market economy;

Becoming a member WTO Creating a free trade area between

Ukraine and the EU Defining perspectives and realization

of measures aimed at regional integration

Realization of an Agreement about free trade within the CIS

Planned actions – International integration

Forming a unified state policy in the sphere of quality and competitiveness of agricultural commodities;

Bringing National normative and legislation system in the sphere of agroindustrial products’ quality and safety in accordance with the requirements of WTO and EU;

Entering external markets with Ukrainian agricultural commodities being of the high quality and ecologically clean

Planned actions – products’ qualityand safety

Finalizing the development of automated system of land cadastre of Ukraine containing new data about the quality of soils

Creation of the automated system of agro-market monitoring

Creating the system of agricultural knowledge management and distance learning

Planned actions – Information and monitoring

Development and implementation of the effective system of personnel management and personnel development for agroindustrial enterprises

Reforming the system of agrarian education Introduction of the system of business

education as the basic factor of entrepreneurship development in rural areas

Development and implementation of the system designed to stimulate the desire to learn and receive education

Planned actions – education in agriculture

Creating institutions and mechanisms of social protection of rural population at the level of standards typical for highly-developed European countries

Creating developed and secure internal agrarian market

Creating agroindustrial production with high profitability

Creating the image of Ukraine a s a country with highly developed agroindustrial sector

Forming ecological brand of Ukraine Creating internal stock market Sufficient increase in the incomes to the state budget

Expected results

Increase in value added gained as a result of the planned actions implementation will amount to :

- in the sphere of land relations and land preservation - 2 529,0 mln. UAH

- in the sphere of education and management of human resource - 1 500 mln. UAH

- in the sphere of science – 13 760,0 mln. UAH - in the sphere of branch-wise and regional

development of agroindustrial complex - 11 200 mln. UAH

- in the sphere of investments – up to 100 bln. UAH

Expected effects

Expected effects

0

2000

4000

6000

8000

10000

12000

14000

16000

2005 2006 2007 2008 2009 2010

years

mln

UA

H

budget expenditures expected effect

SummaryThe success of all changes in rural areas depend by 80% upon the Успіх перетворень на селі та АПК на 80% залежить від трьох основних складових:

побудови стратегічних пріоритетів галузевого розвитку АПК з перерозподілом державних ресурсів за основними пріоритетами

комплексного розвитку територій з визначенням галузевих спеціалізації, побудовою регіональних кластерів, розробкою програм розвитку територіальних громад та підприємництва на селі

розвиток інфраструктури ринку землі та умов для залучення великого та середнього капіталу в с\г виробництво, створення системи моніторингу, охорони та відтворення земельних ресурсів

Action plan1. To approve the complex development programme for rural areas and agroindustrial complex – till 01.07.05.2. To develop branch-wise policies and strategies for agroindustrial complex. To identify as top-priority the following branches: cereals, sunflower, poultry, pig-breeding, cattle-breeding, dairy farming and sugar production – to develop policies and strategies till 01.08.05.3. To implement restructuring of state expenditures for agroindustrial complex in 2005 and to develop the budget for 2006 with redistribution of expenditures aimed at the development of branch-wise priorities and attraction of investments into processing and intensive production of cereals, sunflower, pig-breeding, milk farming, dairy production and processing, sugar branch restructuring. To declare changes in the concept of food security and refuse from the subsidy policy in agroindustrial sector – till 01.09.05.5. To develop investment proposals and the programme of investments’ attraction and improvement of funding conditions for agroindustrial complex until the end of 2005 – till 01.09.05. To start purposeful negotiation process with investors from 01.07.05.

Action plan6. To declare political will of the government to improve the investment climate in the form of addressing to World Bank and European Commission for technical help and international credits – till 01.07.05. To use funds in the form of international credits and technical help in 2005 for the development of programmes, agroindustrial complex restructuring and for the participation of model branch-wise and cluster regional projects році на розробку програм, реструктуризацію АПК та участь у інвестиційному капіталі модельних галузевих та кластерних регіональних проектів.7. Прийняти закон про проведення державного експерименту та провести експеримент по галузевих модельних інвестиційних проектах та кластерах розвитку територій у Дережнянському районі Хмельницької області, Харківській області та одному з депресивних регіонів. Розпочати експерименти з 01.07.05. 8. Створити оперативний орган державної виконавчої влади щодо термінових дій по розвитку села та АПК, наділити його необхідними владними повноваженнями та надати ресурсне забезпечення для реалізації заходів за пунктами 1 -7 – до 15.06.05. Необхідний обсяг ресурсів для реалізації перелічених дій до 01.10.05 складає близько 5 млн. грн.