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Ukraine: Poor Harvest Hurts Farmers And Creditors

Prague, 5 November 1998 (RFE/RL) -- An expert on Ukraine's agricultural development says that preliminary grain-harvest estimates show there is no marketable grain available in the country this year.

Don Van Atta, who heads the Kyiv-based Center for Agriculture Rural Development, sponsored by USAID (the U.S. Agency for International Development), says Ukraine's low grain harvest will be used entirely to pay off state debts. That will leave Ukrainian farmers with no income from their crops and a two- to three-million ton grain debt for 1999. Van Atta also said that Western companies loaning farm equipment and money to Ukraine will n-o-t be paid in full.

This year, Ukraine faces its worst grain harvest since the end of World War Two. The Ukrainian Agriculture Ministry predicts farms will produce 28 to 30 million tons of grain --a seven-million-ton drop from last year. Corn yields are the worst they have been since 1980. Yields are as low as 1.9 tons per hectare, compared to last year's yields of 3.7 tons per hectare.

Van Atta cited the discouraging harvest statistics in Prague this week at a conference of the international agro-business alliance known as the Citizens Network. More than 200 top U.S., European and CIS agro-business entrepreneurs and government officials attended the two-day meeting.

Ukrainian officials have blamed poor weather conditions for declining harvests for the last several years. But Van Atta put the blame for Ukraine's poor 1998 harvest on grain-price fixing by Ukrainian authorities and bartering by both government and private farmers. The government and private sector rely on barter to keep grain flowing into the state monopoly Klib Ukrainy (Bread of Ukraine). But Van Atta said the grain monopoly has hurt farmers by losing billions of hryvna on the world market.

"Klib Ukrainy managed to buy grain at the highest price in the last two years, and to claim it was paying that price and to sell grain at this year's price. It's lost millions, if not thousands of millions of hryvna for the Ukrainian state. The only thing worse than a monopoly is a monopoly that doesn't work."

Western business leaders also used the conference as a platform to demand that Ukraine pay back capital and equipment loans. Mark Mertz, market manager of the U.S.-based international company Novartis, was one of those making the demand. He also called on the Ukrainian government not to interfere with the export of crops.

Mertz said "Western companies who are providing crop-protection products worth more than $100 million to Ukrainian agriculture as interest-free credits cannot accept that the government dictates who will pay back their credits and when".

Rada (parliament) member Vitaly Tsechmistrenko told Mertz and other Western agro-businessmen that the parliament is working on measures that would speed the payment of Ukraine's debts to its creditors. Tsechmistrenko said the Rada is now considering a bill that would allow land to be used as collateral for farm loans. He said "a law to regulate the use of land as collateral will lower the risk to those who provide credits to Ukrainian agriculture".

But analysts say that the bill faces an uphill battle in a parliament dominated by a strong Communist Party faction. The sale of land remains illegal in Ukraine, and Communist Party members have said they are, in their words, "categorically against" buying and selling land.

One Ukrainian agricultural expert told the meeting that, despite the poor domestic harvest and the financial crisis in neighboring Russia, the news coming out of the nation's farm sector is not all bad. Bohdan Hawrylyshyn, the chairman of Ukraine's International Center for Policy Studies, said that the Russian crisis will reduce imports and thereby give Ukrainian producers a chance to become more competitive, make profits, pay wages and improve their purchasing power.

Hawrylyshyn also said Ukraine now has a very strong incentive to diversify its exports. He said Moscow's financial crunch provides Ukraine with an unique opportunity to break away from Russia's current monopoly of Ukraine's grain exports.

"This unilateral dependence is not that healthy and certainly would not facilitate the very friendly relations all of us in Ukraine hope we would have with our northern neighbor. So this kind of diversification both on the export side (and) on the import side actually may be forced on the government because there is really no other way out."

Hawrylyshyn suggested that Ukraine's economic future after the crisis will depend both on domestic changes and support from the West. He said Ukraine's government must reduce the nation's political bureaucracy, including the number of ministers in its cabinet.

"Ukraine needs a strong government, not a big government. It has to reduce the size. It has to increase the competence. Right now we have the wrong people, in the wrong structure, doing the wrong things."