Ukraine

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8:31 AM Friday, December 15, 2017
Agriculture
PM: Ukraine Needs a GDP Jump
Time to invest, time to grow, Groysman tells investor conference; Clear the decks of bad loans; Raise rural salaries -- or lose farm workers to Poland
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KYIV – Asserting that 3 percent GDP growth “is not enough for us,” Ukraine’s Prime Minister exhorted investors at a conference here: “We have to create an economic growth jump!”

Calling for new laws to speed up privatization and to create viable industrial parks, Prime Minister Volodymyr Groysman vowed that Ukraine would soon emerge as “greatest business opportunity on the continent.”

Can Ukraine boom? Prime Minister Groysman says: watch 2018 (James Brooke)

While this year’s projected growth rate of 2.5 percent may seem anemic, conditions are in place for a growth spurt in 2018. The budget is running a surplus, the year should end with $20 billion in hard currency reserves, and general elections are to be held in March 2019.

Politicians the world over spend heavily in before elections, hoping to surf to reelection on a well-timed economic boom.

The Prime Minister spoke at the Kyiv International Economic Forum, a venue where impatience with low growth was a common refrain.

“Ukraine needs a propeller – the kind of big infrastructure projects that will provide that external stimulus to kick start from 2 to 3 percent growth or the 6 to 7 to 8 percent growth we all want,” said Sevki Acuner, Ukraine director for the European Bank for Reconstruction and Development, or EBRD.

The EBRD has the largest loan portfolio in Ukraine, often for such large infrastructure ‘propellers’ as highways and metro expansions.

Speaking at a panel on finance, Acuner said the country should consolidate its 85 surviving banks into several strong regional and national banks.

Several speakers said non-performing loans – or ‘NPLs’ are a drag on the economy.

“The system is stuck with non performing assets,” said Engin Akcakoca, a Turkish finance expert who carried out a large-scale banking sector restructuring program in Turkey in 2001. “In Turkey, we restructured 600 companies in one year.

Here, it was three in one year. Now four are in the pipeline.”

“No financial crisis is over without assets changing hands -- from bad entrepreneurs to good entrepreneurs -- at new prices,” said Akcakoca, who chairs the new supervisory board of the newly-nationalized Privatbank. “You have to stop the flow of NPLs.”

Speaker after speaker reminded the audience, largely Ukrainian businessmen, that they have to keep adapting.

“If Ukraine continues to go on the path decided three years ago, the potential is enormous,” said Peter Wagner, a German who heads the European Commission Support Group for Ukraine.

But he warned that weakness in fighting corruption carries a real economic price. He said: “Investors will always ask: Is my property safe? Are the institutions reliable?”

Then, on leaving the stage, he was buttonholed by Thomas Silleson, chairman of BIIR, a Danish engineering firm with an office in Odesa. Silleson said his company is the target of “corporate raiding” by a prosecutor and police group in Odesa.

Peter Wagner (left), the German head the European Commission Support Group for Ukraine, hears from Thomas Silleson (right), a Dane who says his engineering company in Odesa, BIIR is undergoing a corporate ‘raid’ by corrupt officials in Odesa (James Brooke)

Will Higher Salaries Reverse Rural Exodus?

At a farm panel, farm company presidents, talked frankly about the loss of workers – either through migration to regional capitals or emigration to Poland.

“How are we going to keep people in the rural areas? It is very hard to find hands,” said Alex Lissitsat, president of IMC, one of Ukraine’s largest agro holdings. “We are constantly constantly increasing salaries -- and we cannot retain people.

We have problem with low skilled personnel. They go to Poland.”

Now, he said, when the company buys a $300,000 tractor, the driver is paid more than the university trained agronomist.

In Ukraine, he said, university training is often a transmission belt for rural exodus.

“We polled 5,000 students of the agricultural university,” he recounted. “90

percent said they wanted to work in the city of Kyiv – a place where farming does not exist.”

Evoking the evolution of farming in other nations, he concluded: “Salaries are going to be the big attraction.”

“Ukrainian farm wages are going to higher than in the city of Kyiv,” he predicted. “It will be an incentive for lots of people to go back to the village.”

Zeljko Erceg, operations director for Astarta, agreed. He said: “If you pay them good salaries, they will stay on the farms.”


For comments and story tips, please contact UBJ Editor James Brooke at james.brooke@theubj.com

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