Financial aspects of state support for agribusiness: global and national experience of Ukraine

Размещено на http://www.allbest.ru/

Khmelnytskyi National University

FINANCIAL ASPECTS OF STATE SUPPORT FOR AGRIBUSINESS: GLOBAL AND NATIONAL EXPERIENCE OF UKRAINE

Kvasnytska R.S., Forkun I.V., Gordeeva T.A.

Introduction

Currently, despite russia's military aggression and related difficulties for farmers, Ukraine, with its powerful agricultural potential, remains one of the world leaders in agricultural production and guarantors of global food security. However, now the whole world is watching how russia destroys the agricultural potential of Ukraine by temporarily occupying certain territories of our country; field mining; causing significant soil damage from ammunition explosions and the construction of defensive structures and so on; destruction due to missile and artillery shelling of granaries, agricultural machinery, livestock farms; blocking ports and disrupting logistics routes; creation of a shortage and increase in the price of fuel, fertilizers, crop protection products, veterinary drugs, machinery, spare parts etcetera [1]. Therefore, considering the extremal conditions of martial law in our country, the problem of ensuring the sustainable development of the agricultural sector of Ukraine's economy is becoming more and more relevant, especially because of the significant number of modern challenges and threats. The development of agriculture largely depends on the effectiveness of the formation and implementation of the state agricultural policy, and the appropriate participation of the state in its realization in the context of state financial support for the development of both individual domestic agribusiness entities and the agricultural sphere of the country in general.

The issue of agricultural development and financial support for agribusiness is a priority both in the global space and in the space of individual countries. Thus, the world's leading financier of agriculture is the World Bank Group [2], which supports countries' efforts to transform food systems through a holistic analysis of government policies and spending on agriculture and food. Studies of the dynamics of support for agricultural producers (PSE) in individual countries conducted by the Organization for Economic Cooperation and Development (OECD) [3] are interesting. Considerable attention is also paid to the expansion of state support for agricultural producers in Ukraine, which is evidenced by the adoption of several legislative acts, including the Concept for the development of rural areas [4], and the introduction of agricultural financing programs in various directions. Despite the research conducted on this issue, today's realities call for further consideration regarding the study of the world experience of financial state support for agribusiness and the specifics of such support in Ukraine. Therefore, the purpose of the study is to analyse the condition and development of the world and national experience of financial support in the field of agribusiness, to substantiate the role of the State in the development of agricultural production, as well as to determine the prospects for the formation and implementation of various support programs for agricultural producers in Ukraine.

Main material

financial support agribusiness agricultural

Agricultural development is one of the most powerful tools for ending extreme poverty, increasing shared prosperity, and feeding the projected 9.7 billion people by 2050. Growth in the agricultural sector is two to four times more effective in raising the incomes of the poorest in comparison to other sectors [2]. However, today more than ever, food security is at risk due to multiple shocks from disruptions in agricultural production and supply caused by COVID-19, extreme weather, pests, and more. The russian invasion of Ukraine has precipitated a global food crisis that has driven millions of people into extreme poverty, and some 205 million people in 45 countries have so little food that their lives are at risk [2]. Therefore, today agribusiness is a leader in ensuring food security not only at the local level but also at the global - world level. Attracting funds for agribusiness in Ukraine is one of the most important and difficult problems for agricultural producers of various types of agricultural products. Without sufficient sources of financing, it is difficult to develop production, improve product quality, expand sales markets, and increase competitiveness. The choice of the optimal type of financing depends on many factors: the purpose and strategy of the business, financial condition, risks, tax burden, etc. Therefore, it is not surprising that the research of existing and development of new approaches to the financing (financial support) of subjects of the agrarian sector and the assessment of its efficiency have intensified in the world. As an example, we may consider the common agricultural policy of the EU, which is set out in such regulatory documents as EU Regulation 2021/2115 establishing rules for supporting national strategic plans developed by EU member states within the framework of CAP Strategic Plans and financed by EAGF and EAFRD; EU Regulation 2021/2116 on financing, management and monitoring of the CAP; EU Regulation 2021/2117 amending and supplementing the previous Regulations [5].

World experience convinces us that the creation and development of sustainable, economically balanced agricultural production in the country is made possible by the implementation of targeted state support (Table 1).

Table 1

World experience of state support for agribusiness in the most successful countries

Source: compiled based on [6,7,8,9]

As we might see from Table 1, historically, almost every state has actively intervened in the agricultural sector due to the need to ensure sufficient and affordable food for the population and an appropriate income level for agricultural producers (including farmers). Each country has its own characteristics regarding state support for farmers, which differ not only in the amount of funding but also in the specific goals that will be achieved with such support.

According to the OECD report Monitoring and Evaluation of Agricultural Policy 2022, the 54 countries monitored: all OECD and EU economies, as well as, 11 emerging economies, provided an average of 611 billion USD per year of positive support to individual agricultural producers during 2019-21. More than half, 317 billion USD per year was provided at the expense of higher market prices paid by consumers, and the remaining 293 billion USD per year was paid by taxpayers through budget transfers [10]. However, according to OECD Director for Trade and Agriculture Marion Jansen, although “state support for agriculture has reached a record level; the share of support aimed at stimulating sustainable productivity growth has decreased” [11]. A retrospective analysis of the dynamics of support for agricultural producers (PSE) in the section of individual countries is given in Table 2.

According to Table 2, Japan (37.5%) stands out among the countries with a significant share of state support (PSE) in 2021. EU countries (17.6%), China (16.2%), Turkiye (15.1%) and Israel (14.8%) also have a significant level of PSE. At the same time, the general dynamics of PSE over the past 20 years show a decrease in state support in the analysed countries (including Ukraine by 1.1%). The only exception is China, which is distinguished by an increase in the level of PSE from 3.5% in 2000 to 16.2% in 2021. It is worth noting that since 2005, India's PSE level has been negative (in 2021 it is -8.9%). This situation can be explained either by a significant amount of tax deductions or the difference between world and national prices is not in favour of the latter, which signals indirect or hidden additional taxation of producers in the country.

Table 2

The dynamics of agricultural support: producer support estimation (PSE) in 2000 - 2021

* % of gross farm receipts Source: compiled based on [3]

As for the positive dynamics of the volume of state support, the leading position was taken by China, whose state support for agribusiness increased from 9256 million USD to 289006 million USD. Significant growth is also observed in the EU ( - 18116 million USD), the USA ( - 5041 million USD), Canada ( - 3980 million USD), Australia ( - 1,060 million USD), Israel ( - 719 million USD) and Ukraine ( - 386 million USD). Significantly reduced state financial support in Japan and Turkiye (-16848 and -1294 million USD).

Therefore, agriculture is crucial for economic growth, and according to the World Bank, it accounts for 4% of the world's gross domestic product (GDP) [2]. The Ukrainian economy is no exception because the agricultural sector is its major component; its share in the national GDP during 2018-2021 was 10-13% [12]. Thus, in accordance with the goals of sustainable development of Ukraine for the period up to 2030 [13], set considering the 17 global goals of sustainable development [14] adopted at the UN Summit on Sustainable Development, financial support is provided to recipients in specific areas: partial compensation of the cost of seeds of agricultural plants of domestic production, purchased from natural persons - entrepreneurs and legal entities that carry out production and/or its sale; partial compensation of costs related to the provided agricultural advisory services; financial support of agricultural cooperatives; partial compensation of the cost of purchased agricultural machinery and equipment of domestic production; budget subsidy per unit of cultivated land (1 hectare) - to newly created farms; budget subsidy per unit of cultivated land (1 hectare) for farms (except for newly established ones); cheaper loans; a special budget subsidy for keeping dairy productivity cows to a farm that owns five or more cows, identified and registered following the legislation; additional payment for the benefit of insured persons - members/chairmen of the agriculture enterprise without acquiring the status of a legal entity of the agriculture enterprise.

As a result of russia's full-scale war against Ukraine, the Ukrainian economy shrank by more than 35%, which directly affected the amount of state support for the agricultural sector.