The European Union’s policy of supporting poorer regions and member states with its subsidies has, once again, found itself embroiled in controversy over how Ukraine is spending its share of funds in the agricultural sector.
The issue was raised by MEPs Fulvio Martusciello and Alberto Cirio who led a roundtable discussion in the European Parliament on March 7. Their aim was to sound the alarm about the opacity of government subsidies distribution in Ukraine’s agricultural sector. Critics of Kiev point to the unfair and non-transparent practices in the procedures – all signs of inherent corruption.
According to Cirio, agriculture in Ukraine has always enjoyed the support of the state, which among other factors provides the foundation for the dynamic development of the agricultural sector. However, recent changes in the sphere of government subsidies have drawn attention and generated doubts regarding their fairness.
Ukraine’s lawmakers approved a €130 million budget for government subsidies for the country’s entire agricultural sector for 2017. This was criticised for being an insufficient amount to cover one of the most important industries of the Ukrainian economy.
More than a third (35 %) of the total allocated subsidies went to just one company, PJSC Myronivsky Hliboproduct, the largest industrial company in Ukraine. CEO and chief beneficiary of the company is oligarch- billionaire Yuri Kosyuk – one of Ukraine’s richest people, according to Forbes Ukraine. Myronivsky Hliboproduct is the most profitable company in the Ukrainian agribusiness.
At the same time, tens of thousands of small and medium-sized agricultural companies badly need state support, among them the enterprises in the grain sector that are not included in the list of those that are eligible for subsidies.
As for the remaining 65% of the subsidies, it was rationed off to help support tens of thousands of other agricultural companies across the rest of the country.
Representatives of the European Parliament are now voicing their concern about the situation. They argue that under the current conditions, an extremely restrained budget of government subsidies and state support should be provided to small businesses and households that produce more than 50% of all agricultural products in high-risk environments and that need financial assistance the most.
“Today, in particular, we are concerned about the distribution of government subsidies in Ukraine for the development of the agricultural sector, being one of the most important industries of Ukrainian economy, the leading export industry and having the significant development potential,” said Cirio.
The MEP’s concern is timely as on February 28 the European Commission prepared a new package of macro-financial assistance for Ukraine to the tune of €1 billion that will be distributed in two tranches. If the European Parliament and the Council of Europe approve the Commission’s proposal within the next couple of months, Ukraine will be able to receive the first tranche as early as July.
However, one of the biggest conditions for Kiev will be to implement anti-corruption reforms and legislative initiatives.
“The new EU requirements will also be related to the fight against corruption in Ukraine,” said Martusciello.
“The financial assistance allocated to Ukraine by the European Union – these are the budgetary funds, which are formed, among other sources, from contributions of the EU taxpayers, and we watch closely how Ukraine fulfils its obligations and the state policy in the country in general,” he added.
According to Cirio, the signs of endemic corruption at all levels are visible. “We call on the state authorities of Ukraine: the President, the Prime Minister, the profile committees of the Parliament, to focus on the schemes of the government subsidies in the agricultural sector as well as on the principles of their distribution in 2018.”