Экономические науки / 12. Экономика АПК

Chudovskaya V.

The Institute of Agroecology and Environmental Management, Ukraine

FINANCIAL SUPPORT FOR THE ORGANIC PRODUCTION INVESTING

Investments, as an essential factor of the economic efficiency improving, are capable to ensure the development of an organic management type by updating the fixed assets, realization of promising projects, the implementation of appropriate technologies, etc. As an increase of fund amount invested as well as selection of the most effective ways and areas of investment play a crucial role for the the economic efficiency growth of the organic production in the process of investing. However, the practical implementation of the investment program or project is impossible without a proper financial provision, that plays a particular role for the agricultural sector. In this regard, a research in the field of financial support of the organic production investment development is a topical objective of both Economic and Ecological sciences.

Works by a lot of well-known domestic scholars are dedicated to investment in the modern agricultural science. These primarily are А. Haidutskyi, S. Hutkevych, О. Datsiy, М. Kisil, М. Koretskyi, Y. Krupka, H. Laik, М. Malik, H. Pidlisetskyi, А. Chupis, О. Ulianchenko, О. Shkuratov, V. Yurchyshyn. A great attention to the organic production development issues is also given in the works by S. Antonets, V. Artysh, N. Borodacheva, О. Borodina, Т. Zaychuk, N. Zinovchuk, М. Kobets, Y. Mylovanov, V. Pysarenko, V. Pidlisnyuk etc. However, despite the multidimensional nature of scientific research, the issue about an investment support of organic production is hardly highlighted.

One of the earliest and greatest challenges that arises in the field of the financial investment activity is to mobilize the necessary volume and composition of financial resources. Thus, it is necessary to note that the structure and principles of the financial resources formation at various levels of the economic hierarchy (macro and micro levels) differ significantly among themselves, therefore the problem of determining of investment sources and its formation should be considered from two perspectives: from the standpoint of Macroeconomics – as the primary task of the state investment strategy, and from the standpoint of Microeconomics – as one of the most important tasks of the investment strategy of enterprise [2, p. 50–51].

Traditional sources of funding for capital investments were own borrowed, attracted and budgets. Fewer budget funds, however, are allocated for capital investments at Agricultural in recent years, due to the unstable economic situation in the country. In particular, there is a need to invest the organic agricultural production, that becomes a significant relevance due to environmental degradation of the country and increasing of ecological consciousness of the society. Therefore, noncentralized capital investments, defined and approved by the organizations independently, have become as increasingly important.

According to the Law of Ukraine "On investment activity" funding sources of investment activity include [1]:

· the investor's own financial resources;

· the investor's loan financial resources;

· funds involved in financial investment;

· investment budget allocations;

· grants and charitable contributions, donations from organizations, businesses and citizens.

Given the above, Fig. 1 shows the structure of the mechanism of financial support for the organic production investing. These methods and tools, combined with regulatory and legal, organizational and information support for the mechanism, in our opinion, have the greatest impact on the basic criteria of investment attractiveness of this management type that ultimately should provide revenues in required amount and composition of financial resources.

Fig. 1. A structure of the mechanism of financial support for the organic production investing

Current approaches on providing the financial provision of investment activities predict that business entities can use different funding instruments. Within the context of this study, the choice of instrument for financing of the investment activity is quite limited. It is caused by several reasons.

First of all, the main economic activity, wherein investments are implemented, is organic farming. This type of management is characterized by poor performing for the first few years of production maintaining due to the presence of the transition period. This is reflected in opportunities of both the formation of its own financial resources and borrowing facilities in the loans and credit forms.

Secondly, the organic production has a lot of features reflected in the scale of economic. Major enterprises that manufacture organic products have various sizes – from large joint stock or business partnerships to small farms. It imposes appropriate marks on the internal and external financial capacity of such households. Large organic businesses can afford to use their own and borrowed funds, receive grants from the state or local governments, whereas the farm enterprises can rely on bank loans as well as certain repayment of interests after them at the expense of the state budget.

Thirdly, state and local finances condition can not adequately provide financial support to producers of organic agricultural products, in a contrast to developed countries where such business entities get various grants from the state. General hope lies with the search for private investors, including foreign, who would be interested to invest financial resources into investments of the organic agricultural production.

References:

1. Law of Ukraine "On investment activity" № 1560–XII September 18,1991  – [electronic resource]. – access profile: http://zakon.rada.gov.uа/

2. О.І. Shkuratov  The investment activity development in the Agricultural sector of Ukraine: [the monograph] / О.І. Shkuratov , N.V. Kyurcheva. – К.: Ltd. «Kondor», 2011. – 338 p.