Announcement of The World Bank's Ukrainian Agriculture Project on May 24, 1995

SIA A The World Bank 1818 H Street, N.W., Washington, D.C., 20433, USA News Release No. B95/83ECA Contact: Jan Pakulski Phone: (202) 473-1797 Fax: (202) 676-0585 E-mail: JPakulski@Worldbank.org WORLD BANK SUPPORT FOR UKRAINIAN AGRICULTURE WASHINGTON, May 24, 1995 - The World Bank yesterday approved a loan of $32 million to help finance a seed development project in Ukraine. Ukraine has experienced dramatic economic decline since the collapse of the Soviet Union. The first economic program aiming at comprehensive stabilization and structural reforms was announced by Ukrainian President Kuchma in 1994. These measures, which focus on reducing inflation and enhancing the private sector, are expected to create a favorable environment for restructuring the agricultural sector which has traditionally played a significant role in the economy. Ukraine is the second largest country in Europe with a population of 52 million and a land area of 600,000 sq. km. Approximately 20 percent of the labor force is employed in the agricultural sector and 400,000 sq. km of the total land area is occupied by agricultural land. Agriculture presently contributes about 30 percent of total merchandise trade and has enormous future potential. However, the collapse of the domestic Soviet market and the lack of liberalized trade has severely affected this sector. Necessary agricultural reforms include privatization of the agricultural and food sector, modernizing production technologies, improving the food-processing system and introducing new management and marketing methods. The project's objective is to improve the nation's capacity to produce high-quality seed efficiently, thus raising agricultural productivity and boosting agricultural exports. In the short term, the project aims to support private production of high quality commercial seed from domestic and imported germplasm in order to reverse the decline in domestic availability and export of quality seeds. Financial and technical assistance will be provided for: (a) the development of three private enterprises specializing in the multiplication of domestic and imported hybrid seed for maize, sunflower, sugarbeet, and Jcrld BankI7raine Seed Development I of2 ArchiveslRecords Center, H B1-001 ( 1) their processing and marketing; (b) germplasm maintenance and development for three leading domestic suppliers of hybrid maize, sunflower and sugarbeet germplasm. In the medium term, the project aims to develop a competitive seed system by enhancing efficiency and effectiveness through privatization, improving the regulatory framework, contributing to the introduction of a new germplasm maintenance and plant breeding system. Price and trade liberalization are expected to raise seed prices and help establish financially viable seed production and processing. Growing export opportunities are expected to make the seed enterprises more competitive. These goals will be met by providing technical and financial assistance to improve th- regulatory framework for the seed system and develop an agricultural research and strategy plan. A Project Management Unit and a Project Steering Committee will be responsible for the successful implementation of the project. Loans will be channeled through the Ministry of Finance which would transfer these funds in the following way: * investment funds allocated to the three private seed production companies would be administered by UkrExlmBank; * investment funds allocated to the regulatory agencies of the Ministry of Agriculture and Food, the Ukrainian Academy of Agricultural Sciences and the Project Management Unit would be channeled through a special Account to be established in a major foreign commercial bank. The project will be implemented'over a five-year period with an estimated closing date of September 30, 2000. The total cost of the project is estimated at $63.3 million. The Bank will contribute 51 percent of the total cost, while the seed enterprises will contribute the remaining $31.3 million. About $23.9 million will be passed on by the Government to the financial agents of the project which would forward these funds as subloans to the private seed enterprises. The Bank loan is for 17 years, including five years of grace, at the institution's standard variable interest rate, currently 7.09 percent. Ukraine joined the World Bank in September 1992. This is the fourth World Bank loan approved for the country, bringing the total amount of loans for Ukraine to $673 million. World Bank/Ukraine Seed Development 2 of 2