15 March 2011

An Open Letter to the Government of Ukraine

Kyiv, Tuesday, March 15, 2011


from the Ukrainian League of Industrialists and Entrepreneurs,

Ukrainian Agrarian Confederation, Ukrainian Grain Association

to top officials of Ukraine

regarding the situation on the grain market of Ukraine

Kyiv, March 14, 2011

Industrialists and entrepreneurs are concerned over the state and future of the agrarian complex of Ukraine due to the negative trends emerging at a time when the country’s business community and government should be using modern methods for management and promoting development should be rallying around the implementation of the provisions of the Program of Economic Reforms for Ukraine for 2010-2014 regarding agriculture.

Government decisions passed recently are unjustified, disagree with the experience in agriculturally developed countries and are leading to excessive and non-transparent administration of the agrarian complex and reduction in investment attractiveness and competitiveness.

Particular pressure under these conditions is being put on the Ukrainian grain market, which in recent years, through cooperation between government and business, including foreign capital, has achieved great success and recognition and made Ukraine one of the top grain-producing countries in the world.

Nevertheless, despite the disparity with global experience, opposition from agricultural organizations and warnings from the Anti-Monopoly Committee and Ministry of Justice of Ukraine, the Cabinet of Ministers Resolution from Dec. 13, 2010 No. 1254 “Certain issues regarding the execution and registration of foreign economic contracts” that essentially introduced a monopoly by the State Agrarian Exchange on the execution and registration of foreign economic contracts for basic agricultural products.

Of particular concern, given their distinctive autonomy from the official position of the government, are several recent draft laws of Ukraine the main provisions of which may destroy the basic foundations of the organization and functioning of agricultural, particularly grain, markets, and proven practices introduced over the past 20 years.

Several draft laws of Ukraine have been very negatively received in Ukraine and abroad, including: No. 8053 “On amending the Law of Ukraine ‘On state support of agriculture in Ukraine’ (concerning export of goods subject to state price regulations)” and No. 8163 “On amending the Law of Ukraine ‘On grain and the grain market in Ukraine” (concerning grain export through foreign economic agreements (contracts)”.

The key common features of these bills are the attempt to monopolize the markets for agricultural exports, discrimination of leading exporters, which are major investors in the creation in Ukraine of modern agrarian logistics and processing systems, by imposing on them non-core functions and obligations which is practiced nowhere else in the civilized world.

Monopolization of agricultural, including grain, markets, eliminating competition in procurement, especially of grain on the domestic market of Ukraine for further export will lead to catastrophic loss of income for producers and, consequently, to the progressive degradation of the agricultural sector of Ukraine.

The adoption of these bills will cause irreparable damage to Ukraine ’s already tarnished image as a country with a market economy and rule of law because the regulations introduced by them would violate the rights of investors to benefit from the proper use of investment, which is a sign of expropriation.

The ULIE, UAC and UGA are categorically against the destruction of market institutions, non-transparent management of administrative processes and monopolization in the agricultural sector of Ukraine that would result from the adoptions of the above mentioned laws.

In order to prevent the irreversible consequences that may result for Ukraine should these and other bills be passed that contain similar unacceptable and harmful provisions for the further development of the agricultural sector in Ukraine , we propose:

President of Ukraine Viktor Yanukovych:

1. Require officials of Ukraine in their work to strictly adhere to the provisions and requirements of the Program of Economic Reform for Ukraine for 2010-2014 on agriculture, including the need to declare on behalf of the government the rejection of forced interference in price setting and sale, including export, of agricultural products, as a guarantee against the adoption today and in the future of bills such as No. 8053 and No, 8163, and other regulations that could return Ukraine to the sidelines of global economic development and cause irreparable damage to the European integration efforts of the country’s leadership.

Chairman of the Verkhovna Rada of Ukraine Volodymyr Lytvyn :

1. Initiate parliamentary hearings in April 2011 on the situation on the grain market of Ukraine and prospects for its development, with broad participation by professional agricultural organizations, representatives of agribusiness, investors, international institutions and agricultural producers.

Prime Minister of Ukraine Mykola Azarov

1. Review Cabinet of Minister Resolution No. 1254 from Dec. 13, 2010 “Certain issues regarding the execution and registration of foreign economic contracts” and remove the provisions that established a monopoly by the State Agrarian Exchange on the execution and registration of foreign economic contracts for basic agricultural products and provide other commodity exchanges the right to engage in such activities.

2. Establish closer communication with parliamentary committees in order to prevent the initiation and adoption without government notice of draft laws that are contrary to the provisions and requirements of President Yanukovych’s Program of Economic Reforms for Ukraine for 2010-2014 on agriculture, and may cause considerable damage to the state economy, as in the case of draft laws No. 8053 and No. 8163.

3. Restart the work of the Coordinating Council on Agrarian Issues under the Cabinet of Ministers of Ukraine with participation by agricultural organizations.

A. K. Kinakh, President of the Ukrainian League of Industrialists and Entrepreneurs

L. P. Kozachenko, President of the Ukrainian Agrarian Confederation

V. H. Klymenko, President of the Ukrainian Grain Association

The three organisations listed above called a meeting in Kyiv yesterday of their members and others concerned about the agribusiness economic development of Ukraine to discuss the very alarming situation found on the grain market of Ukraine today. The OPEN LETTER above was agreed to at the meeting.

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