Halle (Saale), 30 January 2014 – Russia and Ukraine are among the largest grain exporters worldwide. At the same time, both countries have considerable potential to increase their agricultural production, due to abandoned land and low land productivity. If Russia and Ukraine can manage – with their specific social, economic and ecological challenges – to establish suitable agrarian policy framework conditions, the two countries could make a vital contribution to global food security. Development opportunities and risks in agricultural production in Eastern Europe were discussed at an expert panel comprised of high-profile representatives in politics, business and academia. The event, titled ‘Eastern Europe as key region to contribute to global food security,’ was hosted by Leibniz Institute of Agricultural Development in Transition Economies (IAMO) together with the Committee on Eastern European Economic Relations as part of the Global Forum for Food and Agriculture (GFFA) on 17 January 2014.
Dr. Eckhard Cordes, Chairman of the Committee on Eastern European Economic Relations (OA), emphasized in his opening address the substantial yield potentials in Russia and Ukraine for global food security. Following Cordes, Dr. Dietrich Guth, Head of Department, Federal Ministry of Food and Agriculture, explained that investments into modern technologies, education and advanced training of skilled labor as well as legal clarity and transparency are important factors for increasing agricultural production. Extension of existing bilateral cooperation of Russia and Ukraine with Germany as well as convergence to the fundamental political values of the EU would make an essential contribution to strengthening the agricultural sector in these countries.
Development potential for raising land productivity
IAMO Director Professor Alfons Balmann stated in his introduction that the increasing worldwide demand for agricultural products is attributable to population growth, increasing consumption of high-value products such as meat and milk, as well as production of renewable energies and raw materials. Increasing agricultural production and satisfying the growing food demand could be achieved by both extending land used for agriculture and by intensifying production on existing farmland. Each strategy contains a different set of potentials, as wells as associated environmental risks and social impacts. Balmann quoted current research studies at IAMO which identify the actual potential of re-cultivation and enhancing productivity. An 80 per cent exhaustion of yield potentials combined with modern technologies and production equipment would result in an average increase in wheat production of 50 per cent. Successful intensification and modernization of farming businesses, however, would require lowering export and import restrictions, creating reliable political framework conditions, as well as improving infrastructure, education, research, and living conditions in rural areas.
Closer alignment of Ukrainian agriculture to EU standards
The expert panel was also addressed by Oleksandr Sen, the Deputy Minister of Agricultural Policy of Ukraine, who detailed agrarian policy strategies and measures designed to contribute to global food security. The agricultural sector in Ukraine is operating in a market economy environment without any substantial government subsidies. Dr. Alex Lissitsa, CEO, Industrial Milk Company, Kiev, criticized the unpredictable agricultural policy of Ukraine. From an entrepreneurial perspective he identified major problems for sustainable development of the sector notably in the fields of financing and difficulties in access to credits as well as unclear value-added tax regulations and a general lack of legal certainty for transactions. As a further substantial obstacle for agricultural development, he emphasized the pending liberalization of the land market. Deputy Minister Sen underlined that it will be necessary to improve quality in production, notably among family farms and small-scale producers. The Deputy Minister quoted comprehensive establishment of standards and their harmonization in target export countries as a key objective.
Considerable challenges for small and medium-sized agricultural businesses in Russia
Russia is aware of its potential for contribution to the global food supply and thus its position as a global player. Various resources and favorable ecological conditions of the country cannot veil the fact that the political changes in the 1990s caused the setting-aside of a high percentage of land formerly used for agriculture. Aleksandr Petrikov, Deputy Minister of Agriculture of the Russian Federation, pointed out that there has been no further decline in cultivated farmland in Russia after 2006. Petrikov explained that improvement of the investment climate, adaptation of agricultural producers to meteorological and economic circumstances as well as improved access to national and international agricultural and food markets are the core elements of Russia’s agricultural policy aiming to enhance economic growth in agriculture. Stefan Dürr, President of the EkoNiva group of companies, assessed the framework conditions in Russian agriculture as very good from a business perspective and for an entrepreneur even better than in the EU. Major challenges faced by large-scale enterprises and agroholdings in Russia are in the fields of in-house management and standardization of intra-corporate processes. According to Dürr, smaller farms, and even operations with several thousand hectares, are facing major challenges with regard to financing and market access, training of skilled labor, as well as overcoming imbalanced bureaucracy.
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The Leibniz Institute of Agricultural Development in Transition Economies (IAMO) analyses economic, social and political processes of change in the agricultural and food sector, and in rural areas. The geographic focus covers the enlarging EU, transitional regions in Central, Eastern and South Eastern Europe, as well as Central and Eastern Asia. IAMO is making a contribution towards enhancing understanding of institutional, structural and technological changes. Moreover, IAMO is studying the resulting impacts on the agricultural and food sector as well as the living conditions of rural populations. The outcomes of our work are used to derive and analyse strategies and options for enterprises, agricultural markets and politics. Since its foundation in 1994, IAMO has been part of the Leibniz Association, a German community of independent research institutes.
Please note that since the beginning of this year the Leibniz Institute of Agricultural Development in Central and Eastern Europe is renamed Leibniz Institute of Agricultural Development in Transition Economies. The acronym IAMO is still valid.
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About Committee on Eastern European Economic Relations
The Committee on Eastern European Economic Relations (OA) is a joint organization of the leading associations representing German business and acts as a central point of contact for German companies with interests in Russia, Belarus, Ukraine, Central Asia, South Caucasus and South-eastern Europe. The OA supports economic policy developments in bilateral relations with those countries and promotes trade, investments and service transfers by German companies in this region. The Agribusiness Working Group of the Committee on Eastern European Economic Relations is the only regional initiative of the German business community to have pooled the international commitment of the German agricultural and food industry since 2001. The OA organizes and hosts the GFFA Berlin.
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