Kutoviy pledges overhaul of agricultural industry
18 legal recourse means it would be difficult to control pricing and who gets control of land.
His idea is for farmers to have the ability to pledge Ukraine’s 49-year land leases. This way, farmers can use leases to gain trust from banks.
“The problem... is that the commercial banks these days, having no claim over leasing rights, only deal with those who can give them pledges of real assets,” and they are usually big businesses, Kutoviy said.
In his proposed solution, if farmers default, the banks can re-sign the lease with a new entity. Banks will have access to the land cadastre, which will indicate which land plots have been pledged.
In turn, the state can give out more money, in addition to the Hr 300 million it has already provided, to subsidize interest rates for small farmers.
The process of land valuation will take time and will have to be monitored, but the minister believes this will start a new market in which smaller businesses will have more influence.
To lift the ban entirely will take time, but one thing that could be introduced soon would be the right to sell land from individual to individual, with a cap on the amount of land that can be acquired, Kutoviy said.
Organic farming niche
Once small farmers have more control over land, Kutoviy is confident that organic farming should be their niche.
While organic farming accounts for less than one percent of the market in Ukraine, it stands at 16 percent in many European countries. "For farmers to be successful they need to have a niche, and a big holding will never go organic," Kutoviy said. "I was in Japan recently, and they’re ready to pay an extra 50 to 60 percent for organic products."
But Kutoviy’s ambitious plans are overshadowed by worries about his links to Ukrainian President Petro Poroshenko. The president has come under criticism for putting his allies in powerful positions in the new government. Prime Minister Volodymyr Groysman, a business associate of the president, symbolizes the government’s loyalty.
Prior to being appointed as minister, Kutoviy was the deputy faction leader of the president's bloc and the head of the parliamentary committee on agriculture. But Kutoviy says that he was never close to Poroshenko, instead winning his seat in a single-mandate electoral district.
Kutoviy says he attracted more than $1 billion in investment to Ukraine when he worked for XXI Century, a real estate investment fund, and he was voted the best financial director in Ukraine by the Adam Smith Institute in 2007.
“(So) am I a technocrat or am I a political guy … what’s the difference? If I want to do the job, even if I’m nominated by a political party... what’s the problem?”
He said that he went into politics because for the challenge and wants to transformthe agriculture sector.
One problem is the whiff of impropriety that hangs around his ministry.
A deputy minister, Vladislava Rutytska, has remained in the new government despite previously serving as head of human resources at Mriya, formerly Ukraine's largest and most successful agroholding.
In mid-2014 it was revealed that the company had debts worth hundreds of millions of dollars. The company's former director and co-owner, Mykola Huta, has since disappeared and is wanted by Interpol on suspicion of fraud. Rutytska's background does not seem to be in line with the ministry's new philosophy.
"It was the decision of a previous ministry, it was not my decision. Right now Rutytska is involved in a number of projects,” Kutoviy said.
Another problem for Kutoviy is the stateowned ethanol enterprise Ukrspyrt, regarded as one of the most corrupt companies within the Ministry of Agriculture.
In October 2015, its temporary CEO Roman Ivaniuk said that if the enterprise was not sold by the third quarter of 2016 “it will be a lost cause.” Yet Ukrspyrt is still on the list of state entities that cannot be privatized and its assets have still not been transferred to the State Property Fund.
Recently Ukrspyrt was supposed to appoint a new CEO, but a court decision banned the nomination procedure, a typical scenario among large state-owned enterprises slated for privatization. This was the fourth failed attempt to appoint a new director out of a list of five nominees.
“This company has to be privatized,” Kutoviy said. “Nobody has managed to do this since independence. But I do believe that I’ll be able to do this.”