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1 Report on activities carried out during the reporting period 10

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Annex 2 Project Fiche – English and Ukrainian
1. Rationale 1.1. Strategic framework
Sector Wide Approach or SWAP
1.2. Lessons learnt
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Annex 2 Project Fiche – English and Ukrainian


Title

Implementation of Ukraine’s commitments under WTO and ENP frameworks in the rural sector (Sector Wide Approach for agriculture, food safety and rural development)

Total cost
M€ 9 million

Aid Method
Project approach – centralised management + budgetary support

DAC-code
31110
Sector





Summary


The project is designed to support Ukraine in the application of a Sector Wide Approach or SWAP for agriculture and rural development, within the context of WTO accession and greater EU integration.


It is programmed within the framework of a €27 million project the support to ENP Action Plan Implementation and the main issues to be addressed by the proposed project are: (i) food safety and quality standards; (ii) market infrastructure and competitiveness; and (iii) rural development. On the basis of a EC supported comprehensive Agricultural Sector Assessment, these are considered priority issues that hamper Ukraine’s efforts for improved global market access, higher production and food standards and greater international competitiveness, and improved rural livelihoods.


The project will aim at implementing an agreed sector-wide programme (based on SWAP) in the development of an agricultural and rural development policy and strategy, thereby allowing the Ukrainian government to federate its own and donors’ efforts in a coherent policy framework largely based on EU agricultural and rural policies.


Keeping in mind Ukraine’s WTO aspirations, the overall objective of the project is to implement Ukraine’s commitments under WTO and the ENP Action Plan.


The specific objective of the project is to develop a common framework approach and understanding of the priorities and issues in the agricultural and food sector, and in the rural areas of Ukraine.


Overall project results are expected to be the following: (i) greater EU integration and harmonisation (with reference to CAP and EU’s Rural Development Policy 2007-2013); and (ii) closer compliance with WTO requirements and harmonization of the legal framework with the EU. Emphasis on ‘green box’ issues, and reduced ‘yellow box’ measures.


1. Rationale

1.1. Strategic framework


Related Programming Documents:
  • NIP: Section 1.1 Legal and administrative reform; Section 2“Support to the private sector and assistance for economic development”, Section 3 “Support to the development of social assistance policy and services targeting vulnerable groups”;
  • ENP Section 2.2. Economic and social reform and development; Section 2.3 Trade, market and regulatory reform;
  • PCA Article 60 agriculture and the agro-industrial sector, 63 environment, 70 regional development.

Policies and programmes such as the NIP 2004-2006, which includes the aim of improving product safety and consumer protection, and in line with the contemplated accession of Ukraine to the WTO, leads to EU supporting the international alignment of Ukraine’s agricultural reforms especially to ensure full implementation of sanitary and phyto-sanitary, and environmental standards. The EU-Ukraine ENP Action Plan of 21 February 2005, confirms and underlines specifically the need for aligning Ukraine with the EU and with international regulatory and administrative practices, and to prepare Ukraine for its participation in the EU internal market, including more co-ordination between the different concerned stakeholders in the areas of sector wide reforms.


On 18/10/2006 EU Commissioner for Agriculture and Rural Development, Mariann Fischer Boel, and Ukraine's Minister of Agricultural Policy, Yuriy Melnyk, signed a Memorandum of understanding on a dialogue of agricultural issues between the Ministry of Agrarian Policy of Ukraine and the Directorate General for Agriculture and Rural development of the European Commission to set the framework for future cooperation.


This particular project is designed to support Ukraine in the application of a Sector Wide Approach or SWAP for agriculture and rural development, within the context of WTO accession and greater EU integration.


The project is built on the assumption that by its commencement, Ukraine will join the WTO and therefore will have to cope with the WTO requirements. Similarly, WTO membership will encourage greater international integration, particularly with regard to the long-term potential for EU membership; facilitated by increased EU integration and harmonisation measures. Increased international integration and harmonisation, through WTO and EU integration, will help to focus on the efforts in Ukraine for improved global market access, higher standards and greater competitiveness over time, and improved rural livelihoods.


1.2. Lessons learnt


Agricultural and rural investment strategy (ARIS) from July 2005 is a joint work between the Ukrainian ministry of agrarian policy and the un food and agriculture organization (fao), supported by the World Bank, which proposes and makes suggestions for mechanisms to create off-farm employment and businesses and support the development of a viable family-based agricultural sector.


Within the framework of the FAO project participatory formulation of an agricultural strategy consistent with WTO accession and EU integration, four strategic policy papers have been prepared that were presented at a seminar in Kyiv in June 2006. These were Trade in Agricultural Products, Accession to WTO and Integration with EU, Reformation of Land Relations and Change of Agricultural Manufacturers’ Structure, support and regulation of agriculture and marketing and Rural development.


Also commissioned by the FAO was a paper The Challenge of Conforming to Sanitary and Phytosanitary Measures for WTO Accession and EU Exports: The Case of Ukraine 3as well as “Ukraine after 2000: A Fundamental Change in Land and Farm Policy?4. The FAO is also currently working on an overall strategy for agricultural policy to further WTO accession and the achievement of a free trade agreement with the EU. 


There is therefore a substantial reference basis upon which the Ukrainian Government might build its own strategy for the development of the sector.


Other valuable lessons are/to be learned from past and ongoing Tacis projects such as the project “Establishment of an Agricultural Standards Certification and Control Mechanism in Line with WTO-SPS Requirements” (October 2003-October 2005). The project is aimed at supporting the economic development of the agricultural sector via the implementation of international standards in food safety, animal and plant health. Main lessons from the project are:
  • In terms of food safety and quality standards, the private sector is significantly ahead of the state, in terms of thinking and activity, driven out of necessity and commercial reality.
  • It is difficult to work with state agencies in this area, as there is no uniform approach on thinking and the various ‘players’ are vying for control of food safety issues.
  • There are too many vested interests willing to undermine the establishment of a single Food Safety Agency, which is required for a cohesive ‘Farm-to-Fork’ policy and practice approach.
  • Raw material production e.g. dairy, is too fragmented and disjointed to ever satisfy market requirements in hygiene and food safety, as the farms are too small and unable to bear the investment levels required. There is a need for consolidation and concentration of dairy production in clusters, with an emphasis on stable quality milk supply to processors.


The project “Improvement of Logistics Services and Marketing Channels for SMEs in Agriculture” (March 2005-December 2006) delivers the following key messages:
  • Farmer Procurement and Marketing Groups - farmers must recognize that they can strengthen their position by learning to cooperate. It is essential to adopt a collective approach to get efficient results.
  • Supply Chain Development - the need to consider and organise supply chains to enable farmers to reach the end user is a necessary aspect of planning. Efficiency of storage and distribution through efficient logistics will allow better marketing and enable better prices to be realised. Improvements in marketing channels will improve margins and importantly ensure that Ukrainian agriculture remains internationally competitive. Export markets are important to improve the profitability of farmers.
  • Management Support - an efficient supply chain can only be developed by an integrated approach involving all partners in the chain and using logistics that allow accurate and timely information to be available when required. Good management and management systems are required to ensure the correct development of quality and productivity of this project.
  • Legislation and Administrative Regulations - international standards and norms are essential in order to enter external markets. The policy and regulatory framework is critical in allowing the development of the rural and agricultural economies.
  • Credit Provision and Grant - Agriculture is the engine of rural development but credit is the fuel required to power it!


IBPP key institutions project “Reform on Agricultural Management” recommended as follows:
  • Separation of the political and administrative apparatuses;
  • Unification of the staff entities and creation of a transparent staff structure;
  • Consolidation of functions, competence and responsibility at the respective work levels;
  • Functions and personnel capacity should be structured not vertically but horizontally;
  • Consolidation of all inner-ministerial service areas.


Within the framework of the project “Co-operation of Public Bodies with Civil Organizations in the Process of Agrarian Policy”5 draft legislation facilitating the creation of operating framework for civil organizations in agricultural sector to assume an active role with public bodies was prepared but unfortunately was not passed by the Verhovna Rada.


The project “Improvement of Risk Management Capacity of Farmers and SMEs in Agriculture” (May 2005-May 2007) which is ongoing and is currently developing a strategy for the development of an agricultural insurance system recommending institutional budgetary and regulatory changes to stimulate the demand for agricultural insurance and for its increased use in access to finance which will be followed up by a planned IFC project.


An important lesson learned is the over-emphasis on agricultural and rural legislation for reforms, and less attention to enforcing the law due to the lack of institutional guidance backed by operational plans, which in turn should be supported by a mid-term expenditure framework (MTEF).