Concept project

1. Concept project National Complex Programme Supporting the Development of Ukrainian Rural Areas

2. Goals • 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.

3. Tasks • To ensure stable development of the agrarian sector of national economy • To ensure stable development of rural areas and communities

4. Methodology State programme “DARUkraine” Agroindustrial markets Land relations Education Budget Science Quality, Safety Integration Information Public administration Social sphere Human Land Production

5. LAND PRODUCTION FINANCE MARKETS EDUCATION,SCIENCE, TECNOLOGIES HUMAN Methodology Standard of living Land quality BRAND OF AGRICULTURAL UKRAINE Quality product

6. 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

7. Tasks – success criteria

8. Methodology Stabilization Raise Republic of South Africa Europe Malaysia Ukraine Recession Комісія “Аналіз та консолідація”

9. Main problems Public 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

10. Main problems Land 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

11. Main problems Social 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

12. Main problems Agroindustrial 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

13. Retail buyer – final consumer RETAIL MARKETS SHOPS UNORGANIZED TRADING CLOSED INSTITUTIONS PROCESSING ENTERPRISES CATERING UNORGANIZED INTERMEDIATE PARTIES 1% FARMS AGRICULTURAL ENTERPRISES SMALL FARMS Main problems –markets of agroindustrial complex • Lack or weakness of market infrastructure – wholesale markets of agricultural commodities Agroindustrial markets 14% 85% • Result: lack of pricing transparency, unorganized markets, unsatisfactory quality level

14. Main problems Agrarian 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

15. Main directions of the programme • Defining priorities of agroindustrial development of the country with the concentration of all the main efforts in competitivebranches • Intensive developmentof rural areas and local self-government, introduction of the participation strategy, which would help to consolidate efforts of the State and local communities

16. Planned actions – in the sphere of public administration • 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

17. 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 )

18. Level of competitiveness Bakery, confectionery High Sunflower Ріпак Forage wheat, barley Poultry Soy Oil Average Grapes Honey Fruits Bread-grain Leguminous plants Milk Sugar Beef Low Flax Corn Vegetables Low Average High Production volumes Milk products - Low - Average; Value added: - High; Pork Eggs Potatoes Planned actionsin the sphere of agroindustrial markets’ development А Seeds Б В

19. Level of competitiveness Хлібобулочні, кондитерські вироби High Соняшник Ріпак Фуражні пшениця, ячмінь М’ясо птиці Соя Олія Average Віноград Мед Фрукти Зерно продовольче Зернобобові Молоко Цукор Яловичина Low Льон Кукурудза Овочі Low Average High Production volumes Молоко- продукти - Low - Average; Value added: - High; Свинина Яйце Картопля А Intensification of production, deepening the level of processing, strategic export Attraction of investments, sufficient state support, creation of market infrastructure Насіння Б Attraction of strategic investments, branch restructuring В

20. 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 to4,5 mln. tonesin 2010; cereals - from 38 mln. tonesin 2005 to65 mln. tonesin 2010; • It is planned to increase production volumes of poultry from 0,58 mln. tonesin 2004 to 1,2 mlntonesin 2010, porkfrom 0,46 mln. tonesto 1,1 mln.tones, milk products – from 13,9 mln. tonesto 18 mln. tones, eggsfrom 11,8 bln. eggsto 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.

21. 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 implementcorporatization 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%

22. 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.

23. 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% to70%)and complex implementation of Ukrainian technologies in production (from 20% to50%) and in processing from 60% to80% • Bringing the share of GDP spent for scientific investigations from 0,16 to0,5 percent • Creating national banks of genetic resources of plants, animals and microorganisms • Creating national fund of science intensive products

24. Planned actions – Budget regulation

25. Planned actions – finance and investments • To ensure attraction of funds amounting to 16 bln. UAHper yearinto agroindustrial complex on the basis of short-term credits • To ensure attraction of funds amounting to 10-12 bln. UAHper year into agroindustrial complex on the basis of long-term credits • To ensure attraction of funds amounting to 5 bln. UAH per year due to introduction of leasing

26. Planned actions – International integration • 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

27. Planned actions – products’ qualityand safety • 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

28. Planned actions – Information and monitoring • 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

29. Planned actions – education in agriculture • 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

30. Expected results • 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

31. Expected effects 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 - 2 529,0mln. UAH • - in the sphere of education and management of human resource -1 500mln. UAH • - in the sphere of science – 13 760,0 mln. UAH • - in the sphere of branch-wise and regional development of agroindustrial complex - 11 200mln. UAH • - in the sphere of investments – up to100 bln. UAH

32. Expected effects

33. Summary • The 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

34. Action plan 1. 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– till01.09.05. To start purposeful negotiation process with investors from01.07.05.

35. Action plan 6. 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.