Fronteza

Thoughts about the Agriculture Sector of Ukraine

Recently I chatted with the entrepreneur, who’s about to start his enterprise in the Ukraine with the group of like-minded entrepreneurs. They have the bold goal. We talked about the relevant opportunities and touched the subject, which has direct influence on their goal. The subject is the development of the agriculture sector in the Ukraine as a whole.

It is the hot topic and I decided to share my vision and thoughts on this subject with you, my honored readers. Here’s what I have got (let alone legal puzzles – I’m not good in that legal stuff):

1. The complex requires defragmentation and restructuring. In my opinion, we cannot refer to the today’s agriculture complex in the Ukraine as to the agribusiness. It is the agrichaos or the disordered bazaar. If entrepreneurs and business owners want to compete with foreign businesses, successfully penetrate into and protect themselves on the foreign markets, do business like true businessmen, then they must rid themselves from the model of business-chaos with thousands of disorganized small farms and enterprises. The strength is in the unity and order. The complex requires defragmentation in order to unite fragmented small enterprises and farms and form big production enterprises which will be able to create brands and position them well, both locally and global. Small enterprises and private farms can satisfy the demand of some bounded geographic territory. At the present time, the Ukrainian agribazaar is very fragmented with thousands of small farms and enterprises which are barely known. All of the problems stems from the fragmentation: quality control, risk and contract management, etc. That’s why the fragmented agrichaos of the Ukraine is treated by developed and organized businesses like the agriappendage, not like the strong business competitor. Thus the task number one is the defragmentation and restructuring of the agriculture sector (I hope Ukrainian readers will comprehend the wording “defragmentation and restructuring” properly, because I truly know what does it mean in the Ukrainian practice);
2. The complex requires the organized market. The complex requires organized trade exchange with a set of standardized contracts, with the comprehensive quality control, risk mitigation and counterparty protection system. Even if there are so-called exchanges in the Ukraine they are so insignificant in the economic aspect and their business models are so primitive and obsolete, that I won’t dare compare them with foreign trade exchanges. What we have to comprehend, the absence of the organized trade exchange in the economy of the country, where the agriculture sector plays the vital role, is a rank ignorance. The agribusiness in such country is nothing but a disordered bazaar with thousands of street-stalls and hawkers. It is good to satisfy your immediate needs but it is not good to do the true business. How can a buyer find a well-deserved supplier? How can we ensure against risks in the chaos? How we can assure ourselves of the product quality? There must be a central counterparty. The market must be organized, of course if the Ukraine wants to protect its businesses, comply with world standards of doing business and compete successfully with foreign businesses;
3. The complex requires the modernization of enterprises and farms. It concerns both the production base and the business models and thinking. The Ukraine must gradually move forward and evolve from obsolete, legacy business models, if any. The Ukrainian business must learn and gradually adapt foreign business models and develop true entrepreneurial thinking. If Ukraine’s businesses want to compete and fight with foreign businesses as an equal, they must, first of all, become more organized and use accumulated world experience. They must adopt modern approaches and models of doing business to enhance the Ukrainian agribusiness and raise it to a new level of the modern competition. I want to emphasize that here we are talking about the modernization of both the production base and the entrepreneurial thinking. The result will be insignificant, till each thinks only about own benefits – “I produce, they buy, I get paid – that’s enough”, till there are no unity of thinking between the entrepreneurs and business owners, till there is no comprehension that only together they represent the true business power, not just another agriappendage, till they apply some efforts to modernize their thinking and business models. The relevant business models can be elaborated and implemented, which will allow for the relative independence of individual enterprises and farms, but all of them will be subdued to the general business rules and principles. The strength is in the unity. We have to understand that the task of creating the business-order out of the business-chaos, the agrichaos in this case, is hard to accomplish, unless entrepreneurs and business owners first change themselves and their way of thinking.