Ku­toviy pledges over­haul of agri­cul­tural in­dus­try

Kyiv Post Legal Quarterly - - Logistics -

18 le­gal re­course means it would be dif­fi­cult to con­trol pric­ing and who gets con­trol of land.

Find­ing com­pro­mise.

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."

Poroshenko’s man?

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.

Mriya con­nec­tions

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.

Ukr­spyrt cor­rup­tion

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.”

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