EBRD grains and oilseeds roundtable
28 October 2010
Joint statement from the EBRD, the UN’s FAO and leading grains and oilseeds companies
The EBRD, with the support of the UN’s Food and Agriculture Organization, held a workshop in London on 28 October with senior representatives from the largest global and local companies in the grains and oilseeds industry where recommendations were made to policy makers aimed at boosting investment in agriculture in eastern Europe and unleashing untapped potential.
Over recent years, countries like Russia, Ukraine and Kazakhstan have become leading worldwide grain exporters. The region’s growing influence on the global food supply was underlined this summer, when even proposals of export restrictions were sufficient to send wheat prices close to the record levels of the 2008 food crisis.
The meeting concluded that countries of the EBRD region[*] can make a large contribution to feeding the world but it still has enormous unrealised potential in grain production – a key consideration in the light of a growing world population and rising demand for food.
The modernisation of the sector in the region requires significant investment in infrastructure, technology and a clear focus on education to improve skills.
EBRD President Thomas Mirow, who opened the meeting, commented, “The transition region not only has enormous potential to contributing to greater food security worldwide – it also has a broad range of significant investors willing to further increase their engagement as long as policies are predictable and consistent with good international practices. The EBRD is fully committed to supporting these investments.”
Participants noted that in recent years private sector investment decisions have been greatly affected by the unpredictability of agricultural policies in large parts of the EBRD region. These decisions have distorted markets and created an unfavourable business environment.
They called for greater transparency and predictability, improved governance and improvements especially on legal issues, such as land ownership and property rights.
The meeting concluded: It is time to speak with one voice, and this is the first step to formulating a common approach shared by the leading grain trading companies active in the EBRD region.
The EBRD will convey these messages to local authorities and to continue to act as a platform between private sector operators and policy makers.
The meeting made the following recommendations to policy makers in order to create the sort of stable business environment that will support investment:
In order to play its role in the development of the sector, private investors need confidence that governments will abstain from ad-hoc reactions. Governments need to consult the private sector actors and set out strategies for the near and medium term development of their grain sectors and limit their intervention on the grain markets to ensuring an emergency reserve. A transparent institutionalised consultation process will positively influence policy and business decisions and help achieve the common goal of modernising the local agribusiness sector, increasing agricultural productivity and ultimately meeting the rising global demand for food.
In particular they should refrain from enacting informal restrictions to selectively accommodate interests of corporations with political connections under the pretext of pursuing social aims. These informal restrictions, while not formally breaching informal commitments and rules, have nevertheless very harmful consequences for the investment environment by incentivising companies to concentrate on their political influence rather than business.
In conclusion, the key message is that governments should act in a predictable and transparent manner, which will enable the people participating at the roundtable to increase their long term investments in the EBRD region.
In addition, following specific recommendations were made:
- Governments especially in Romania and Ukraine need to improve their VAT regimes. Exporters find themselves penalised by obstacles and long delays in recovering VAT.
- Countries in the EBRD region need to make more efforts to put in place a transparent and reliable legal system that will allow efficient contract enforcement.
- Secure property rights also extending to land ownership and the development of appropriate financial infrastructure (including legislation that facilitates collateralisation of ‘soft’ commodities and insurance instruments) will encourage much needed liquidity into the sector. This should also extend to intellectual property protection to allow development of better and higher yielding seeds.
- The companies represented called on the governments in the EBRD region to increase the food safety by improving the food testing and certification facilities such as institutes and laboratories.
- Better communication, coordination and transparency will build trust between the public and private sectors. The companies and institutions represented at this meeting offer their expertise and resources to such dialogue initiatives.
- Finally, in order to compete internationally, the countries need to improve the level of education and management skills in both the private sector as among the civil servants.
For roundtable documentation, please see: http://www.eastagri.org/meetings/index.asp?id=48 .
[*] The EBRD invests in countries in Central, Eastern and South Eastern Europe, Turkey, Ukraine, Russia, the Caucasus and Central Asia.