FAO Investment Centre

Ukraine developing new strategy to increase investment in agriculture and rural development


This summer FAO gathered together in Kiev, Ukraine, some 35 experts and representatives from the Government, civil society, rural communities and donors for a one-day workshop. The purpose was to discuss the draft Agricultural and Rural Investment Strategy (ARIS). The workshop turned out to be a very lively and timely exercise.

The ARIS has been developed as a joint effort by the Ukrainian Ministry of Agrarian Policy and FAO with the support of the World Bank. It aims to propose a coherent vision for public investment in support of agricultural and rural development. This was considered an important contribution to renewing the approach in public support to the development of rural areas, particularly now as rural poverty has sharply increased, the rural economy is facing considerable difficulties despite the potential of the country, and as the Government has embarked on a profound reform process and increased opening to the international arena.

The document was prepared by a team of local and international FAO experts and is built upon three investment priorities to ensure development of the rural economy:

a) develop an efficient family-based agricultural sector through a set of efficient services (advisory services, training, rural finance, marketing) and based on a well articulated agricultural policy;

b) create rural employment outside the agricultural sector by promoting off-farm activities, rural businesses and private rural services; and

c) re-invest in maintaining and improving rural economic infrastructure.

The ARIS was presented by Benoist Veillerette from the FAO Investment Centre who noted that the challenge was to move away from the current situation where rural investment only represents 2.7 percent of the total investment volume (compared to 25 percent in the early 1990s) and to give renewed impetus to rural development. To achieve this, the document envisages a shift in emphasis from direct price support, subsidies and protection to building human and physical capacities, and supporting rural communities and individual business initiatives.

The debate was lively. Many participants emphasized the need to join the World Trade Organization, while others were concerned about the need to prevent massive migration out of rural areas due to poverty and lack of income opportunities.

Vilayi Drobot from the Ministry of Agrarian Policy emphasized the need for the Government to move away from controlling financing and marketing of the agricultural sector to better facilitating access to liberalized sources of credit and market outlets by private farmers.

Svitlana Prokopenko, Director of the Institute for Rural Development, stated that it was now necessary for Ukraine to follow market approaches, in particular in the rural areas. “At last we are moving away from the time when investment exclusively meant central procurement of tractors and fertilizers. A key ARIS feature is investment in rural dwellers, their knowledge and skills to enable development of rural areas in the nearest future,” she said.

As a conclusion to the workshop, Leonid Kozachenko, adviser to the president of Ukraine, emphasized the need to move on from subsidy dependence by asking the participants: “In today’s Ukraine, is it better to spend the equivalent of 400 euros per hectare in direct subsidies or to invest 400 million hryvnas in human, productive and institutional assets?”