Investments in agriculture encounter serious barriers

3 june 2015

"The situation with investments in agriculture is difficult," said Elena Razumova, the Deputy Head of the Department for Expert Analytics of the Analytical Center. A number of fundamental factors continue to operate, together with macroeconomic, related to the current crisis in the economy".

"Investment rates fell significantly after 2008, the situation was worsened by the local industry crises associated with the drought in 2010 and 2012," said the expert. With regard to the current crisis, after the introduction of the food embargo, the investor's interest in agriculture has decreased further: investments in fixed assets in January-December 2014 decreased by 6.8% to the previous year (in 2013 the figure was -3.8% and in 2008 it was -4.3%). That is, in 2014 the depth of the recession was significantly greater than in pre-crisis 2008".

According to Ms. Razumova, factors discouraging potential investors are obvious: the fall in real incomes and associated risks of the market, expensive loans, the overall rise in production processes due to exchange rate differences, as well as the dependence on imported technologies. The embargo has intensified the problem in the dairy market - the shortage of raw materials and lack of competition from European producers provoke the emergence of low-quality products and dumping.

"Fundamental factors have not disappeared - barriers to the granting and disposal of land, the ineffective supervisory law," said the expert. "To the date, only large agricultural holdings, which have agricultural products (grain crops) in their composition of exports, or investors, who receive subsidies from the state investment projects, continue to invest."