Project Preparation Support Programme for Agribusiness Projects in Ukraine

With the on-going crisis in Ukraine commercial banks provide very limited support to the private sector, giving the EBRD a strong mandate to step in and support key agribusinesses. The EBRD’s projects include working with companies that have a high impact on the local economy – (1) by locally sourcing their products, strengthen backward linkages with suppliers along the value chain and promote market expansion (e.g. dairy sector); (2) provide employment opportunities (e.g. large agribusiness processors, farming and retailers) and (3) reduce the environmental footprint of their resource use (land, water, energy) and emissions. It has been estimated that the EBRD’s clients in the Ukraine's agribusiness sector account for around €12 billion of gross production, employ around 200,000 people, generate almost half of Ukraine’s agri-food exports, and are a source of hard currency in times when the country needs it most .

In 2014 the Bank invested €251 million through 13 new projects in the agribusiness sector alone (record year), which was more than 20% of the EBRD’s total investment in Ukraine. In addition, over the past 5 years EBRD financing attracted an additional €100 million from commercial lenders. In 2015, the Bank continued to invest strongly in all sub-sectors including food production, crop farming and commodity trading, and aims to achieve a business plan with a similar level of investment. Further TC support is required to assist on-going and future EBRD agribusiness operations, and help pave the way for new investments in the country.

The pre-investment due diligence costs for the EBRD’s projects are considered high by the local private sector, including environmental and legal due diligence. It can be a significant financial burden to companies, particularly to small- and medium-sized enterprises, who cannot afford this additional cost and therefore face a significant barrier in accessing EBRD finance. For larger companies, with more complicated corporate structures, the legal restructuring implies higher additional costs before they can approach the Bank for financing.

The EBRD is one of the few lenders currently providing liquidity on the local market and there is strong demand for its financing from the local private sector. Additional TC funds assisting the preparation of agribusiness operations in Ukraine, could play a crucial role in enabling the Bank to provide financing to companies that otherwise wouldn’t be able to access it.

The objective of the proposed programme is to support select EBRD investments in the agribusiness sector through a dedicated facility for the preparation of banking projects in Ukraine. The Programme will support agribusinesses within the context of the current challenging business environment. Ultimately, the Programme will help support the agri-food industry, critical for the Ukrainian economy in terms of export, jobs, and GDP contribution.

This Programme supports current priorities of the EBRD in its crisis response to the situation in Ukraine, and specifically those outlined in the EBRD Reform Anchoring and Crisis Response Package (16 January 2015, BDS14-360/F). Furthermore, the Programme contributes to the Bank’s Strategy for Ukraine  including the specific objectives of the strategy to address key transition challenges by supporting local and foreign enterprises diversify and improve their governance, transparency and energy efficiency.