MYKOLAIV, FEBRUARY 26th, 2011, CONTEXT-PRICHERNOMORIE — One Ukrainian agricultural giants Nibulon LTD has stepped forward against the suggested amendments to Ukrainian agricultural legislation, Context-Prichernomorie correspondent reports.

The agency has been informed about it today, 26 February, at the press office of the company.

According to their information, on February 2, 2011 the amendments to the Law of Ukraine “On State Support of Agriculture of Ukraine” were registered at the Verkhovna Rada of Ukraine. The authors of the Bill are People’s Deputies Vitaliy Bort (Party of Regions), Maryna Perestenko (Communist Party of Ukraine), Sergiy Tereshchuk (People’s Party) and Ivan Sydel’nyk (All-Ukrainian Union “Motherland”).

The aim of the Bill was, according to its authors, the alleged concern about protecting the interests of domestic agricultural manufacturers, which is subject to state price regulation, and state interests in the process of building a civilized agrarian market of the country.

Provided that the export regulating mechanism proposed by the Bill is fundamentally contrary to the declared by its authors’ task — “solution of the problems that impede the development of the Ukrainian agricultural producer to foreign markets”.

The Company argues that at the present stage of market relations in agricultural sector, domestic producers have already enough opportunities to export their products and the Bill does not help them in any way.

The Bill absolutely unreasonably limits the range of business entities that are eligible for export of agricultural products to agricultural producers in the volume of their own production and state agent on the providing of export of subjects of state price regulation.

Thus, both domestic and foreign private wholesale grain companies are actually removed from the export market.

In respect of grain export there is a law in vigour “On Grain and Grain Market in Ukraine” today, which already provides for a State agent for the export and import of grain and its products after processing. Under this law, the State agent for the export and import of grain and its products after processing — it is a state enterprise or a business entity, the state share in its statutory fund is not less than 75 percent, which is determined on a competitive basis by the Cabinet of Ministers of Ukraine on the implementation of international treaties to ensure export and import of grain and its products after processing.

The adoption of this Bill and unjustified creation of one more State agent will inevitably lead to duplication of functions of various government agents in grain and other agricultural products export. In addition, the Bill does not specify what share should the state own and what types of transactions is newly created State agent authorized to commit, which makes the selection procedure of the State agent non-transparent and diverts it into a “shadow” one.

Another feature is the presence of certain legal loopholes that contribute to corruption.

First of all, the Bill includes a de facto compulsory transfer by the owners of a business entity of its share of nominal capital to the state, or the termination of export activity per se. It is already a direct evidence of the possibility of corruption phenomena.

In addition, delegating responsibilities to determine the State agent for the export of subjects of state price regulation to the Cabinet of Ministers shows that the introduction of additional licensing procedures and opportunity to establish artificial barriers for exporters and to overcome them may be subject to corruption.

At the same time, the Law of Ukraine “On State Support of Agriculture of Ukraine” refers not only to corn but also sunflower oil and butter, powdered milk, sugar, meat and byproduct, etc to the subjects of state price regulation.

Therefore, empowerment of the Cabinet of Ministers of Ukraine with the right to determine the list of subjects of state price regulation does not only directly contradicts the requirements of subparagraph 3.3.1 of paragraph 3.1 of Article 3 of the Law of Ukraine “On State Support of Agriculture of Ukraine”, but could also lead to destabilization of the market of agricultural products and food by blocking the work of commodity markets, which now employs a large number of companies and which ensure the country’s food security.

According to the Chief Scientific Expert Department of the Verkhovna Rada of Ukraine conclusion, the implementation of the proposed by the Bill export limits of agricultural products does not meet the Grains Trade Convention, 1995, to which Ukraine joined by the law on the 6th of July, 2010, and thus — taken by Ukraine international obligations.

Explanatory note to the Bill does not contain a clear rationale that its adoption will not result in a loss of manufacturers of subjects of state price regulation in connection with the need for conducting of export transactions directly without the involvement of major wholesalers and trading companies.

The Bill also does not meet the requirements of the Law of Ukraine Law of Ukraine “On Foreign Economic Activity”, namely: the principle of legal owelty and non-discrimination (article 2), and violates the prohibition of the establishment of any form of state monopoly on the export of goods not expressly provided for by this law (Article 20). Article 8 of the Law of Ukraine “On Foreign Economic Activity” provides that state regulation of foreign economic activity should encourage competition and eliminate monopolies in the sphere of foreign economic activity.

The Bill also does not meet the following requirements of the Law of Ukraine “On Grain and Grain Market in Ukraine” on the providing of operation of the grain market on the basis of association of free competition and government regulation in order to balance the interests of economic entities and the state (Article 2), and preventing grain movement restrictions and products of its processing (Article 9), and violates the guaranteed right of subjects of the grain market for the free disposal of their own grain resources and products of its processing, and deals on its sales, including export (Article 18).

In addition, the Bill does violence to legal guarantees of equality for all forms of property and economic competition protection, enshrined in Articles 13 and 42 of the Constitution of Ukraine, Articles 5, 6, 18 and 25 of the Commercial Code of Ukraine, as well as legislation on deregulation of Ukrainian market of agricultural products (Article 14 of the Law of Ukraine “On State Support of Agriculture of Ukraine”).

Thus, the adoption of this Bill will lead not only to exodus of investors and traders with a worldwide reputation from agricultural markets, but also to monopolization (!) of export by the state.

According to opinion of experts of the project “German-Ukrainian agricultural dialogue” at the Institute for Economic Research and Policy Consulting, the Bill will promote the growth of administrative control and reduce competition in the market. Since the export of agricultural products and food industry is a weighty part of the total exports of the country, state monopoly ceteris paribus condition will worsen the status of current balance due to a fall in export earnings. This will mean increased demand for foreign currency and a weakening of UAH. Consequently, imported foods will become more expensive in UAH, thereby increasing the level of prices in the economy as a whole. These measures will not help to ensure food security of the country.

Today it is difficult to imagine what a disruption it will cause in the established over the past 20 years market infrastructure and falling purchasing prices for the products of farmers. A sharp drop in profitability will, in turn, lead to the bankruptcy of farmers, small and medium producers, and depreciated land can be bought for a bean that will lead to further impoverishment of the peasants.

Negative consequences of adopting of such a law will be felt by other citizens of Ukraine also, whose activity is associated not only with “NIBULON”. After all, the law is the threat of further implementation of investment activity of the company. “NIBULON” carries out a unique project to restore navigation along the Dnipro and Southern Bug Rivers, which affects the building, metallurgical, transportation, shipbuilding, agricultural and other sectors of Ukrainian economy. To stop this colossal program today — it means to deprive thousands of people of work (including those suffering from unemployment construction companies, almost “dead” Ukrainian shipbuilding), and to leave national agricultural sector without a 4-Billion-dollar profit, which would bring the project.

Do not forget that the project of “NIBULON” is supported by the leading European nations and financial institutions. The obstacles that today are put in the way of investment activity of the company are negative signal for the Western states and individual investors.

Such events lead the state into a protracted crisis that could bring Ukrainian economy far back. Therefore, the adoption of the proposed Bill could be a disservice to the Government and the President in the process of stabilizing the economic situation in the country.