IMPROVING INVESTMENT CLIMATE FOR AGRIBUSINESSES IN UKRAINE HEINZ STRUBENHOFF March 2015 In partnership with
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
IMPROVING INVESTMENT CLIMATE FOR AGRIBUSINESSES IN UKRAINE HEINZ STRUBENHOFF
March 2015In partnership with
Points for discussion
• How competitive is Ukrainian agribusiness?
• Are the costs of doing agribusiness too high?
• How to reduce compliance costs in agribusiness value chains?
1
What makes agribusiness competitive in Ukraine?
• Available and cheap farm land
• Black Sea ports
• Farm structures
• Short distance to major importing countries
2
Source: ADM/Toepfer/APK-Inform
2015: 49.8 mln tons
3
What constrains agribusiness competitiveness in Ukraine?
• Regulations (permits, licenses, registrations, certifications, inspections)
• Market interventions
• Export restrictions
4
Regulations are excessive
55%
84%
0
10
20
30
40
50
60
70
80
90
Permits Inspections
% of agriculture businesses that received at least one permit and were inspected at least once in 2013
Source: Representative survey of agriculture sector companies performed by IFC. Reference year is 2013.
5
Obtaining permits and certifications is too costly for agribusinesses
$95.9 million
$15.4million
$34.4 million
$50.6 million
$18.7million
Permits
Technical inspection of agrimachineryCertification of grain quality
Certification of grain silos
Inspections
Source: Representative survey of agriculture sector companies performed by IFC. Reference year is 2013.
Total annual direct cost for given procedures for all affected firms (gross), including staff time, fines, official and unofficial payments
6
Costs of the whole value chain determine competitiveness
Figure 1 Corn marketing costs in Ukraine and USA, in % to the world market price
Source: USDA Feed Grains Yearbook Tables; CTS report
Figure 2 Wheat marketing costs in Ukraine and France, in % to the world market price
Source: World Bank (2014)
7
Wheat logistics costs in USDUkraine Germany France
Field to silo 14.78 6.75 8.15
Silo to port 23.38 16.38 15
Port logistics 19.88 6.64 6.78
Total 58.03 29.77 29.93
Source: own calculations, Cargill, ADM, data from 2010/11
Field to elevator: acceptance, cleaning, drying, storage, loadingElevator to port: railcars, fees, inspection, certificates, forwarderPort logistics: loading, fumigation, surveyer, customs
Wheat logistics costs in USD
8
Corruption is ingrained in agribusiness-related compliance procedures
50%
65%
25%21%
0
10
20
30
40
50
60
70
% of agribusinesses thatbelieve that firms like theirs
resort to unofficialsettlements while getting a
permit
% of agribusinesses thatbelieve that firms like theirs
resort to unofficialsettlements when dealing
with inspections
% of annual revenue ofagribusinesses spent on
unofficial settlements
% of agribusinesses thatgave presents or used other'creative means' to deal with
public officials
Source: Representative survey of agriculture sector companies performed by IFC. Reference year is 2013.
9
The costs of doing agribusiness - Wheat in Ukraine
Production costs: 120 USD plus 60 USD logistics costs per ton
Current export price at Black Sea: about 200 USD/ton
Difference of logistics costs Ukraine/France: about 28 USD/ton
Thereof: X USD market inefficiency, Y USD compliance costs and corruption
Business Case for Ukraine: 60 m t of cereals => 1.68 billion USD annually
Solution: investments in agri-logistics and regulatory reform
10
Can river transport become competitive in Ukraine?
Mode of Transportation USA (in 2007/08 MY), m t Ukraine (in 2013/14 MY), m t USA (in 2007/08 MY), %
Ukraine (in 2013/14 MY), %
Truck 7.658 12.8 8.5% 36.0%Rail 34.735 21.7 38.5% 61.0%Barge 47.804 1.1 53.0% 3.1%
Source: own calculations, Nibulon, USDA, Texas Transportation Institute, Hermes-Trading11
Regulatory constraints on inland waterways
Source: Hermes-Trading12
Related Documents
