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THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND PowerPoint PPT Presentation


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International Conference “ Agricultural Wholesale Trade and Logistics Centre Development across the European Union and Implications for Ukraine”, Monday 4 th – Tuesday 5 th October 2010, Kherson, Ukraine.

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THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND

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The role and experience of government in the agricultural wholesale markets development in poland

International Conference “ Agricultural Wholesale Trade and Logistics Centre Development across the European Union and Implications for Ukraine”,

Monday 4th – Tuesday 5th October 2010, Kherson, Ukraine.

Presentation prepared for EC/TAIEX: AGR 41981 – financed by European Commission Technical Assistance Information Exchange Instrument (TAIEX), DG Enlargement


The role and experience of government in the agricultural wholesale markets development in poland

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND

Dr PiotrJ. Zaprzałek

Independent Expert

Warsaw, Poland

Presentation prepared for EC/TAIEX: AGR 41981 – financed by European Commission Technical Assistance Information Exchange Instrument (TAIEX), DG Enlargement


Summary

Summary

I. Introducing 3 governmental programs of organization, building and development of WM

  • Programs

  • Aims

  • Types of WM

  • Conditions

    II. Institutional & Financial involvement

  • Institutions involved

  • Financial input

  • Financial situation on WM

    III. Recent Activities

  • Forms & experience of WM’s

  • Valuation of the process

  • Current & planned activities

    CONCLUSIONS

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


I introducing 3 governmental programs of organization building and development of wm

I. Introducing 3 governmental programs of organization, building and development of WM

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


I 1 p rograms

I/1.Programs

“Program for organization of wholesale markets and commodity exchanges for the year 2000”, approved by the Minister of Agriculture on 17th July 1996,

The initial program from the year 1996 assumed to eliminate unfavourable factors existing on the Polish agricultural market, such as:

  • lack of dissent distribution channels,

  • luck of professional wholesale for agricultural products,

  • underdeveloped standardization and compiled deliveries,

  • undeveloped trading infrastructure,

  • high risk of contracts, luck of grower’s organizations,

  • luck of professional promotion and market information.

    This program suppose to create modern distribution channels based on wholesale markets, commodity exchanges and producer’s market.

    The initial program was a basis for two other governmental programs

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


The role and experience of government in the agricultural wholesale markets development in poland

“Governmental Program for building and development of wholesale markets and Warsaw Commodity (WC) – Phase I”, elaborated and approved in the year 1999,

This program confirmed the initial program from 1996 and approved activities for following years according to the State Budget availability.

This program was prioritised for the development of 4 “over regional” markets in the vicinity of the biggest Polish agglomerations (Warsaw, Gdansk, Wroclaw, Lublin),

It provided State Treasury guarantees for the investment loans received by markets from international and Polish banks amounted to approx. EUR 60 million.

This financial involvement has been expected to introduce:

  • higher stabilization of agricultural products prices,

  • better balance of demand/supply,

  • European standards,

  • reduce number of trade agents,

  • organize producer’s market,

  • an adjustment of agricultural production to the market requirements.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


The role and experience of government in the agricultural wholesale markets development in poland

“Governmental program for building and development of wholesale markets – Phase II” introduced and approved in 2001.

Program was prepared to meet difficulties facing by both “over regional” and “regional” wholesale markets connected to realisation of investments, activating operations and debts repayment.

The aim of this program was to assist wholesale markets as “share companies” to reach financial independence, which suppose to attract governmental agencies to buy their shares. Such process should to enable markets to pay their liabilities.

The governmental agencies financial commitment was the priority to keep the markets’ cash flow.

The Program has finished by introducing ARMA’s financial support for Tarnow wholesale market (”regional”) in 2004.

Accordingly, the governmental agencies were buying shares of wholesale markets either by paying cash (ARMA, AMA) or in-kind (land) contribution (APA).

According to the existing law APA’s and AMA’s shares were transformed to the State Treasury in 2003. Therefore, the major shareholders of wholesale markets were: State Treasury and ARMA.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


I 2 main strategic aims

I/2. Main Strategic Aims

Market aims are:

  • Trade integration and concentration,

  • Stimulating the producers integration,

  • Reduction of agents between producer and consumer,

  • Reducing an influence of the international distribution networks in agricultural trade,

  • Creation of the modern distribution channels for agricultural goods,

  • Providing market information about the supply, demand and prices of goods,

  • Introducing fresh & processed meat and fish products, and dairy products on the markets,

  • Prices stabilization,

  • Improvement of quality and food safety of offered products,

  • Abolition of barriers in free movements of goods,

  • Improving the level of customer services.

    Financial aims are:

  • Taking shares of markets by governmental agencies,

  • Financial stabilization and cash flow on wholesale markets.

    Social aims are:

  • Stimulation of farmers integration (farmers groups, cooperatives, etc.,

  • Improvement of competitiveness of the Polish trading organizations.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


I 3 types of wm

I/3. Types of WM

There were 12 wholesale markets have been established according to the governmental programs explained above, including:

  • 4 “Over Regional” (OR) WM,

  • 8 “Regional” WM,

  • 8 “Local” WM ( by the Polish Wholesale Markets Association),

  • 1 “OR” market in Poznan.

    Big “over regional” markets were established in the vicinity of the following cities: Warsaw (agglomeration with 3.370 million inhabitants), Gdansk (1.2 million), Wroclaw (1.0 million), Lublin (0.5 million), Poznan (1.0 million).

    Regional wholesale markets were located in following towns: Białystok, Elbląg, Legnica, Radom, Rzeszów, Tarnów, Wałbrzych, ZielonaGóra.

    Local markets organized by the Polish Wholesale Markets Association are located near following towns: Sandomierz, Katowice, Tychy, Łódź, Bielsko-Biała, Kalisz, Ząbki near Warsaw.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


I 4 conditions

I/4. Conditions

  • Establishing the wholesale markets infrastructure had a double-track character.

  • Sometimes new markets were established near the still existing traditional markets.

  • Producers and their organizations (groups of farmers, cooperatives, companies, crop’s associations, trading organizations) should be the major shareholders in wholesale markets.

  • An international distribution networks entering the Polish agricultural trade market competing with local wholesale markets

  • All programs mentioned above have been developed before Poland entered the European Union.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Ii institutional financial c ontribution

II. Institutional & Financial Contribution

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Ii 1 institutions involved

II/1. Institutions involved

  • Ministry of Agriculture and Rural Development

  • Agricultural Market Agency (AMA)

  • Agency for Restructuring and Modernization of Agriculture (ARMA)

  •  Agricultural Property Agency (APA)

  •  Ministry of Finance

  •  Ministry of State Treasury

  •  Local governments.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Ii 2 financial input

II/2. Financial input

Table 1. State Treasury’s guarantees for the investment loans received by Wholesale Markets (WM), December 2006*.

*Own calculations into US$ (partly from PLN or DM, at the rate US$1.3 per EUR).

Source: „Agro-food wholesale markets – the present stage, development perspectives and proposed activities”, Ministry of Agriculture and Rural Development, Agricultural Markets Department, Warsaw, May 2007, typescript.


The role and experience of government in the agricultural wholesale markets development in poland

Table 4. ARMA’s financial involvement in initial capital of WM, 31 December 2009 (estimated calculations from PLN into EUR)*.

* There was also ARMA’s financial input in “over regional” wholesale market in the vicinity of Łódź City (agglomeration over 1.0 million inhabitants). Agricultural agencies’ financial involvement in this market amounted to EUR 3.2 million. General Assembly of this company has decided to start liquidation process in July 2001.

Own calculations from PLN at rate: 3.90 PLN/1 EUR, ARMA’s share left according values in PLN.

OR – “over regional” WM

R - “regional“ WM.

Source: „Draft of legislation concerning ARMA, AMA, and other agricultural markets”, web side of MARD, April, 2010.


The role and experience of government in the agricultural wholesale markets development in poland

Other contributions:

  • Total financial commitment of ARMA in the initial capital of 11 wholesale markets amounted to EUR 32 million, which makes up approx. 34% of the total initial capital of these markets.

  • Total State Treasury involvement in the initial capital of these markets was EUR 37 million, which makes up 39% of the total initial capital of these markets.

  • Total producers’ financial involvement in the initial capital of these markets was EUR 12 million, which makes up 12% of the total initial capital of these markets.

  • Total operators’ (individual wholesalers, organizations, financial institutions) financial involvement in the initial capital of these markets was EUR 11 million, which makes up 12% of the total initial capital of these markets.

  • Total local governments’ financial involvement in the initial capital of these markets was EUR 2.6 million, which makes up 3% of the total initial capital of these markets.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Ii 3 financial situation on wm or r

II/3. Financial situation on WM (“OR” + “R”)

  • The wholesale markets in Poland have became a highly capital committed entities (Share Companies).

  • All markets under the governmental programs are carrying out operational activities and obtaining revenues from sales as well as net incomes (for the year 2008).

  • Total Shareholder’s Equity with Initial Capital amounted to approx. EUR 197 million.

  • Total assets for markets with ARMA’s financial commitment amounted to approx. EUR 140 million.

  • Total revenues reached approx. EUR 30 million, including from sales approx. EUR 26 million.

  • Total Net Profit received approx. EUR 1.0 million

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Or wm

“OR” WM

  • Shareholders Equity together with Initial Capital amounted to approx. EUR 163 million.

  • Total Assets amounted to approx. EUR 119 million.

  • Total revenues amounted to approx. EUR 23 million, including sales approx. EUR 19 million.

  • They have also reached total Net Income amounted approx. EUR 744,000, which makes up an average net income approx. EUR 190,000 per market.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


The role and experience of government in the agricultural wholesale markets development in poland

“ R “ WM

  • Shareholder’s Equity with Initial Capital amounted to approx. EUR 34.5 million.

  • Total assets amounted to EUR 21 million.

  • Total revenues from sales reached approx. 7 million, including sales approx. EUR 6.7 million,

  • Total net income reached EUR 216,000, which makes up EUR 31,000 per market.

    Detailed financial information for all WM is shown in Table 3.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


The role and experience of government in the agricultural wholesale markets development in poland

Table 3. Basic financial data for both groups of WM with ARMA’s financial involvement, in 2008 (EUR)*

*Own calculations from PLN at rate 3.9 PLN/EUR

Source: “Information on implementation of governmental programs in wholesale markets development “,

Ministry of Agriculture and Rural Development, Agricultural Markets Department, January 2010, typescript.


Iii recent activities

III. Recent Activities

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Iii 1 forms experience of wm

III/1. Forms & Experience of WM

  • WM trading with the following products:

    • fruits,

    • vegetables,

    • cut flowers,

    • pot and ornamental plants,

    • dairy products,

    • eggs,

    • meat and processed meat products,

    • processed cereal products,

    • food products,

    • seeds,

    • alcohol,

    • flower’s accessories,

    • packages,

    • some industrial and chemical products.

  • Producers and other operators are trading on the “trading areas” rented from markets.

  • WM expected to became producers’ integration places.

  • WM as a instruments of trade agents number elimination.

  • Wholesale markets are the sources of market information.

  • Wholesale markets taking care of quality and safety of products sold.

  • Wholesale markets create a modern trading infrastructure.

  • Logistic centres have not been fully introduced and fulfilled on WM.

  • Introducing wholesale trading with dairy products, meat, fish and their processed products.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Iii 2 current planned activities

III/2. Current & planned activities

  • Programs’ assumptions regarding markets’ shares.

  • Proposal to entrust ownership markets’ shares to Agricultural Property Agency (APA).

  • New possible financial support for the markets.

  • Proposal of new act on change of the bill regarding ARMA, AMA, and organization of other agricultural markets with assumptions:

    •  All ARMA’s shares will be sold to producers (farmers), their groups, and to other markets’ operators according to the Company Agreement and the Commercial Code.

    •  Minister of Agriculture and the Minister of Finance have to approve selling agreement.

    •  All authorised buyers buy shares on the same price, which is equal to par value of share or equal to book value in case it’s lower that the nominal price.

    •  It’s possible to pay the amount for shares off in instalments. However, amount of first payment shall not be lower that 20% and the rest of payment shall be guaranteed and repayment period shall be not longer than 5 years.

    •  An authorized person/entity shall not posses more than 25% votes at the General Assembly of the company (WM).

    •  Shares purchased by authorised person in accordance with this law shall not be sold during 10 years from the date of agreement.

    •  Number of shares sold at the same time shall be lower than total number of shares owned by ARMA. Therefore, ARMA will be entitled to place the second offer during next 12 months.

    •  The Council of Ministries shall describe details of selling shares, including forms of payments in decree.

    •  Draft proposal is consistent with EU law.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Conclusions

CONCLUSIONS

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


The role and experience of government in the agricultural wholesale markets development in poland

  • Wholesale markets have implemented most of the goals assumed by the governmental programs in the scope of establishing technical infrastructure suitable for professional activities.

  • Conditions for safety wholesale trading were created for the benefit of producers, and for other operators including individual wholesalers.

  • Wholesale markets’ activities are became much broader than their initial basic function which is lending well-equipped trading space and has a favourable influence on processes and phenomenon connected to goods turnover and farming.

  • High concentration of agricultural goods on the markets has a significant influence on increase of competitiveness effecting prices’ stabilization, reduction of trading agents, and an adjustment of agricultural production to consumers’ requirements.

  • Wholesale markets are providing dissent market information used by operators and number of institutions connected to the rural areas, which are very often renting offices (their sites) from the markets.

  • Besides implementation and fulfilment of the main activities, wholesale markets are providing a job and services for the local communities.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


The role and experience of government in the agricultural wholesale markets development in poland

  • Wholesale markets have failed with the goal expecting that producers (farmers), farmers’ organizations and local governments will be the leading markets organizers and the major shareholders. The main reason of this fault was luck of money on this side. Therefore, agricultural agencies had to take over this task under the Program – Phase II (year 2001).

  • There is another goal pointed out in governmental programs which has failed, it’s the assumption and expectation that markets’ shares will be sold to the producers (farmers) and their groups, cooperatives or associations. Therefore, Ministry of Agriculture takes the position to hold the State’s role as it is for the further development of wholesale markets.

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Recommended links

Recommended links:

  • www.minrol.gov.pl

  • www.mf.gov.pl

  • www.msp.gov.pl

  • www.arimr.gov.pl

  • www.arr.gov.pl

  • www.anr.gov.pl

  • www.sprh.pl

  • www.ceiwmf.org

  • www.wuwm.org

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


Thank you for your attention

THANK YOU FOR YOUR ATTENTION

THE ROLE AND EXPERIENCE OF GOVERNMENT IN THE AGRICULTURAL WHOLESALE MARKETS DEVELOPMENT IN POLAND


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