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Экономические науки/12. Экономика сельского хозяйства

Dobromirova O.V., Ulyanova L.P., Rieznik M.A.

Oles Honchar Dnipropetrovsk National University

Ways of supporting agricultural investment

Ukrainian economy can function effectively as long as main strategic principles of market relations and market mechanisms are identified and substantiated, imbalance in the development of sectors of the national economy is corrected and they are provided with an opportunity to increase production capabilities. Considerable attention should be paid to agriculture which is known to bring about 22% of the national income of Ukraine and which ensures the increase in food security level of the country.

Under the transitional economy, agriculture has faced some negative effects, such as unprofitability of production, low general labor efficiency, etc. Although Ukraine is well provided with fertile soil (it has about 7% of the world's black soil), the average productivity of grain crops, which are the main crops in sowing activity in Ukraine, is inferior to the corresponding rates of market economy countries. Animal husbandry and other agricultural sectors have also been developing at a slow pace. In spite of a great variety of types of economic management (collective agricultural enterprises, state farms, farm enterprises, joint-stock companies, farmers’ associations, cooperative associations, etc.) and different financial possibilities they have, the material and technical basis of agriculture is rather old. According to the experts’ estimation, its wear factor is 70-80%. Because of a prolonged crisis, the amount of agricultural machinery has decreased by half.

One of the main reasons for all these problems is the lack of investment resources. Although 40% of the national capital is concentrated in agriculture, the investment demand of this sector is satisfied only by 8-10%. Taking this into account, the intensification of investment activity is an important way of expanding and replacement of agricultural capital assets and production facilities.

It should be noted that under unstable transitional economy, along with constant crisis manifestations, internal investment possibilities of economic entities have significantly decreased. It has happened due to both the low profitability (often even unprofitability) of the agricultural sector and the reduction in budget possibilities to subsidize it. Under the circumstances, a particular role should be given to foreign investments. The most common type among them is bank loans (short and long term ones). Short-term loans provide purchasing of resources for seasonal work and long-term loans provide for expansion and renewal of production assets. Since, under present conditions, while granting credits to agricultural enterprises, short-term loans dominate, the problem of the quantitative and qualitative renewal and upgrade of material and technical basis of the industry is far from being solved. According to the International Finance Corporation, 77% of agricultural producers use loans to purchase fuels and lubricants, 48% - to purchase plant protection products, 36% - to purchase seed grain. Only 13% of firms use loans for technological renewal of production, and 6% - for its expansion.

The important role in improving relations of enterprises and banks or other financial and credit institutions and in improving the ruling mechanism for investment should be played by the state administration, which can help the qualitative change in the nature of investments, the promotion of new sources of resource inflow, the completion of legal support for the investment market. Unfortunately, nowadays some principles of law have certain imperfections that hold back investment flows and have a negative influence on economic relations of investment subjects. They are different shortcomings, including the ones in the mechanisms of ensuring declared investment protection measures, resolving conflicts of interests in investment activities, etc.

Also there are some problems in organizing such an important direction of government regulation of investment activities as tax regulation. The present drawbacks don’t allow it to fully perform its main functions, as set tax rates, exemptions, penalties don’t allow to turn investments to the necessary direction and to ensure the restructure of social production in order to increase its efficiency. At the same time, the government support of agriculture should be one of the priorities of the modern economic policy.

Foreign investment should gradually become an important way of meeting the investment needs of agriculture. Under the current unfavorable macro and micro conditions (according to the European Research Center experts’ findings, the entrepreneurial risk of foreign investment in Ukraine is 80% in some cases), foreign investments are insignificant. The direct investments in agriculture took only about 2 % of the total amount of investments in Ukraine before 2011. In 2011, according to the Stare Statistics Service, there was no foreign direct investment in Ukraine’s agriculture at all.

Having studied the international experience, we can say that foreign capital played an active part and was a catalyst in the development and restructure of the economy in many countries (the USA, Germany, France, the UK, etc). This trend is typical for the economies of new industrialized countries of Southeast Asia as well.

To create an effective system of attraction of foreign investors to Ukraine, it is necessary to study characteristics of effective functioning of systems in different countries. On the basis of these studies, it is essential to identify the weakest points of the foreign investment organization. Among them are the imperfections of the market mechanism, political instability, lack of attractive investment projects, destructive tax system, lack of a rational system of investment insurance, low level of business and professional qualification of entrepreneurs, unresolved issues of land markets, etc. The timely response to these obstacles in the organization of foreign investment will help to activate the process of foreign investment in the Ukrainian economy and thereby will contribute to its dynamic development.