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Ukrainian agro-industrial complex as seen through the eyes of Deloitte experts: analysis of the current situation and what needs to be done next
4 September 2018
Agro-industrial complex of Ukraine is the world's leader by a number of certain indicators. Agricultural sector of Ukraine is undergoing major changes and upgrade of agricultural practices, as well as implementation of innovations across all production chains. In addition, a large-scale state program designed to assist agricultural producers has been gaining momentum lately.
Ukraine is among the top-10 world leaders in terms of the area of arable land, and is the world's leading producer and exporter of sunflower oil. Agro-industrial complex of Ukraine represents approximately 18% of added value GDP. According to unofficial government estimates, it has a growth potential of up to 25%.
Nevertheless, in many ways, Ukrainian agribusiness remains at the level of 90's. Doing of business, redistribution of capital, reallocation of resources, discussion of operational issues and protection of assets – all of these aspects are out of step with the current trends and standards.
Except for a number of agro giants, middle-market agrarian companies of Ukraine are only now starting to realize the need for transformational changes. In addition, up to 90% of food products in Ukraine are produced by small rural enterprises and farms that are accustomed to working under the old rules.
Among the features that are still inherent in Ukrainian business are:
- Immaturity or lack of business strategy
- Complicated ownership structure and imperfect management structure
- A wide range of 'special' practices used for tax optimization purposes
- Contractual relations at the level of verbal arrangements
- Contractual relations for the use of land are not formalized or formalized improperly
- Lack of developed corporate culture and corporate social responsibility programs, as well as a vision of the brand and its impact on the market and the state as a whole
All of these features are present in other industries, but they are more prominent in the agricultural sector since 30% of the world's black soil reserves are located in Ukraine (as suggest general estimates). Therefore, any agriculture-related aspects have an enormous potential and will always be a key factor for Ukrainian economy and a strategic direction for the state.