Ukraine is unlikely to resume economic growth soon, mostly due to ongoing Russia's war in the eastern Donbas. However, its agriculture industry, which generated 10 percent of the 2014 gross domestic product that could be as little as $100 billion, is expected to continue growing.
The European Union is Ukraine’s leading agricultural trading partner. In 2014 some 30 percent of Ukraine’s agriculture exports went to the EU, generating almost $5 billion. The Association and Free Trade Agreement that Ukraine signed with the EU in 2014 is expected to boost the trade if Ukraine fulfills all the requirements.
“Ukrainian companies have to modernize production systems to increase the quality of goods yet more,” Vladyslava Rutytska, deputy minister of agriculture policy on European integration said at the 2015 Food and Agriculture Export forum which brought together representatives of Ukraine’s government, businesses and international lenders in Kyiv on Feb. 12.
“We understand that it’s not an easy goal but the Ministry of Agriculture policy is making big efforts to help local companies enter the European markets,” she said.
Meanwhile, the Moldovan experience can be a good case study for Ukraine.
Since 2006, Russia has slapped several periodic embargoes on Moldovan wines. It hurt because Russia was the destination for some 90 percent of Moldovan wine exports. In 2005, the exports generated more than $200 million.
But, eight years later, only 5 percent of Moldovan wine goes to Russia, according to Vasile Tofan, a Moldovan native who works as investment director at Horizon Capital private equity firm, which invests in mid-sized businesses in Ukraine, Moldova and Belarus.
“It was a deliberate choice. We just understood that there is no way we can build a sustainable business with that market, when over the course of seven years we had three embargoes on Moldovan wines and during each embargo we lost millions of dollars,” he said.
The country used that critical situation as an opportunity to build sympathy towards Moldovan wines in the export market in Europe and focused on Romania, Poland, the Baltic states, Slovakia and the Czech Republic, which are generally quite sympathetic to post-Soviet republics, Tofan said.
Ukrainian wine producers and others should focus on Poland, Baltic states and countries of Central Europe, where “there is big sympathy to Ukraine, understanding of hardships Ukraine is facing now,” according to him. “I think it’s an important reason for the consumer to choose Ukrainian products, in particular, if you find a way to get that across to consumers,” Tofan said.
This, however, will require investment. Moreover, nowadays, due to currency devaluation which hit record since Ukraine’s independence 75 percent and no access to capital markets because of Russia’s war, many companies, including agriculture ones are facing financial problems.
“The limited access to financing will be one of the major problems for Ukrainian agriculture producers during this year,” Olena Voloshyna, head of International Financial Corporation mission in Ukraine said. In 2014 the IFC invested more than $300 million in agriculture business in Ukraine and pledges to continue support Ukrainian producers. “We expanded the offer of financial products and are working to introduce agriculture warranties. We will be supporting Ukrainian producers further on and are willing to bring in other investors to the sector,” she said.
Kyiv Post staff writer Anastasia Forina can be reached at [email protected]
