U.S. Vice President Joseph Biden’s speech in Ukraine’s parliament on Dec. 8 overshadowed the passing of a crucial bill the same day that will save farmers about $300 million in overhead costs each year, reduce opportunities for corruption, streamline logistics and make certain food products cheaper.
Ukraine’s policymakers in the economy and agricultural ministries along with key sector industry groups praised the bill for slashing or limiting 22 permit procedures that its co-authors – Deputy Agriculture Minister Vladyslava Rutytska and Maryan Zablotskyy – deemed were either obsolete or duplicate.
“There were situations when one procedure was conducted at various permit agencies formally for reporting reasons (up to) four times, which created opportunities for corruption… The market was waiting for (the bill),” said Oleksandr Zhemoida, the executive director of the Ukrainian Agribusiness Club.
One measure will “break” the grip on the nitrogen fertilizer market that tycoon Dmytro Firtash has, according to Zablotskyy, the deputy head of industry group Ukrainian Agrarian Association.
Firtash’s Vienna-registered Ostchem holding company runs four of the nation’s six nitrogen fertilizer plants. Bilionaire ex-governor of Dnipropetrovsk Igor Kolomoisky runs Dnipro Azot, while the sixth plant is state-owned.
As a result, “oligarchs (now will) lose between $50 and $260 million in excessive markups on fertilizer yearly,” Zablotsky said.
Ostchem spokeswoman Nataliya Ivanchenko didn’t immediately respond to an emailed request for comment on the package of legislation that was passed.
Specifically, registration is no longer required for common types of imported fertilizer like ammonium nitrate and urea. Previously, it usually took up to 500 days for foreign-produced fertilizers to get registered, and the procedure would cost about $100,000 because testing and analyses in Ukrainian research fields, as well as other procedures, were required, according to Zablotskyy.
The huge market-entry barrier left cash-strapped Ukrainian farmers with little choice in a field that lacked competition. On the average, Zablotskyy said, farmers paid some $100 more than the export price of $200 per ton. This year he expects Ukrainian farmers to overpay $224-$249 million for fertilizers.
“I expect more players, especially from the European Union, to enter the fertilizer market. There won’t be many, but in the future this will force local producers to keep prices (at least) at export levels,” he said.
Prices for imported fruits and nuts should also drop, according to Rutytska. Approximately 15 percent of food in Ukraine is imported.
Mandatory quarantine permits from the state food safety and consumer protection agency were cancelled for fruits that were either imported or transiting through the country.
Association members told Zablotskyy that importers had to pay a bribe of $15-$35 per ton for the permit.
Another cost-saving measure is the cancellation of veterinary certificates for transporting grain internally between regional oblasts. Three other permits for internally transporting grain were removed in the past 18 months. This should further improve logistics and save time and money.
Zablotskyy said this also eliminates opportunities for corruption, since 3.5 million such certificates were issued last year. Moreover, some 30,000 farming enterprises won’t have to get licenses to apply crop protection agents. These and other measures will make it easier for new farmers to enter the market, according to the Agricultural Ministry.
Over the last year, lawmakers, together with industry groups, the agriculture ministry, state consumer rights agency and fishing agency worked on the bill.
They analyzed 110 permit procedures, eventually selecting 22 for deregulation. Eleven laws were amended as a result. Decisions were made to strike the right balance between food safety and freeing up agricultural enterprises, Rutytska said.
“This means that the government must find a ‘decision worthy of Solomon’ that will give maximum freedom to business (while) ensuring the most security for people and the environment,” she said.
Ukraine’s agriculture industry accounts for 14 percent of the nation’s gross domestic product, according to Rutytska. The Agriculture Ministry estimates that because of deregulation over the past year, the industry saved about $200 million and reduced the logistic chain by almost 10 days.
Kyiv Post editor Mark Rachkevych can be reached at [email protected].
