AGROINVEST

ANNUAL WORK PLAN - YEAR 1

JANUARY 25 – SEPTEMBER 30, 2011

February 2011

This publication was produced for review by the United States Agency for International
Development. It was prepared by Chemonics International.
 First Annual Work Plan
January 2011 - September 2011

AGROINVEST
ANNUAL WORK PLAN – YEAR 1
JANUARY 25 – SEPTEMBER 30, 2011

Contract No. AID-121-C-1100001

The author’s views expressed in this publication do not necessarily reflect the views of the
United States Agency for International Development or the United States Government.
 First Annual Work Plan
January 2011 - September 2011

CONTENTS

Acronyms ..................................................................................................................... iv

Section I – Introduction of Project .................................................................................5

A. Contract Background ............................................................................................................ 5
B. Project Scope of Work .......................................................................................................... 5
C. Project Results Framework ................................................................................................... 6

Section II – Annual Work Plan - Year 1 ........................................................................7

A. Project Context .................................................................................................................... 7
B. Work Plan ............................................................................................................................. 8
C. Technical Activities ............................................................................................................. 8
D. Cross-Cutting Factors ......................................................................................................... 17

Annexes

Annex A – Detailed Implementation Plan .............................................................................. 22

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 First Annual Work Plan
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ACRONYMS

AJLEP Access to Justice and Legal Empowerment Project

AMDI Agrarian Markets Development Institute
EBRD European Bank for Reconstruction and Development
FINREP Financial Sector Development Project
GDP Gross Domestic Product
GOU Government of Ukraine
IFC International Finance Corporation
LINC Local Investment and National Competitiveness Project
NBFI Non-bank financial institution
NPL Non-performing loan
PAR Portfolio at risk
PO Producer organization
PPD Public-private dialogue
PPP Public-private partnership
SMP Small and medium-sized producer
VAT Value-added tax

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SECTION I
Introduction to AgroInvest

A. Contract Background

AgroInvest is a five-year project (2011-2016) funded by USAID/Ukraine. The

purpose of the project is to provide technical assistance to accelerate and broaden
economic recovery in Ukraine through support to the agriculture sector and increase
the country‟s contribution to global food security efforts. The contract is a Level-of-
Effort award with a ceiling of $20,605,641.

B. Project Scope of Work

AgroInvest will accelerate broad-based economic recovery through a more inclusive

and competitive agricultural industry. AgroInvest is designed around three separate
but interrelated component objectives, each supported by specific expected results
under each component as illustrated below in the Results Framework.

Component 1 activities involve both a supply- and demand-side approach to

supporting a stable, market-oriented policy environment. From the supply side,
AgroInvest will promote the implementation of less volatile, more market-oriented
policies that stimulate increased investments in the agricultural sector. On the demand
side, Component 1 activities will strengthen the capacity of industry associations to
shape agricultural policies and provide public education on land rights among rural
landowners. Under Component 2, AgroInvest will stimulate access to finance by
strengthening partnerships between financial service providers and value chain actors,
including input suppliers and buyers, to facilitate sustainable access to financial
services for small and medium producers (SMPs). Finally, Component 3 activities
will create a more effective market infrastructure for SMPs and increase the
profitability of farming through better access to markets, the development of
wholesale and regional markets, and capacity building for producer organizations
(POs).

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C. Project Results Framework

Attainment of component objectives will allow us to realize the project‟s purpose of

accelerating economic recovery in Ukraine through support to the agricultural sector.
Ultimately, AgroInvest supports the U.S. Foreign Assistance Framework economic
growth objective and four program areas: trade and investment, agriculture, private
sector competitiveness, and economic opportunity. The project‟s monitoring and
evaluation (M&E) system, introduced in the Performance Monitoring Plan (PMP), is
designed to measure and report on progress against these objectives and expected
results using 28 indicators. These indicators and their associated annual and life-of-
project targets are listed in the table shown in the PMP.

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SECTION II
Annual Work Plan – Year 1

A. Project Context

The global economic and financial crisis hit Ukraine particularly hard given pre-
existing macroeconomic imbalances, structural weaknesses, and policy shortcomings.
Ukraine‟s GDP contracted by 15 percent in 2009 but has been steadily recovering
with growth estimated at 4 percent in 20101. The growth has primarily been buoyed
by exports of steel; however, the Ukrainian economy remains largely undiversified
with significant unrealized potential as an agricultural producer and exporter. The
agricultural sector in Ukraine contributes 10 percent to GDP and employs 16 percent
of the population2. Ukrainian agricultural capacity is currently operating at one-third
of its production capacity and providing only one-half of its potential contribution to
GDP3.

The agricultural sector in Ukraine faces significant challenges, including various

issues at the legal and regulatory level, weak linkages between financial institutions
and value chain providers of credit, and deficiencies in the production and marketing
capacity at the producer level. AgroInvest will address each of these issues to
facilitate the development of less volatile and more market-friendly agricultural
policies, sustainable access to finance for SMPs, and a more effective, efficient and
profitable infrastructure for SMPs. Taken in sum, achievements in these three areas
will hasten Ukraine‟s economic recovery and enhance its position to contribute to
global food security.

AgroInvest in the context of global food security efforts. The United States
Government (USG) and other global leaders have responded to the combined effect of
underinvestment in agriculture and food security, the steep rise in global food prices,
and the economic crisis by committing to "act with the scale and urgency needed to
achieve sustainable global food security." This commitment is reflected in the Feed
the Future Initiative, which aims to reduce global hunger and build sustained
agricultural-led growth. Reducing chronic hunger is essential to building a foundation
for investments in health, education, and economic growth and is critical to the
sustainable development of individuals, communities, and nations. According to the
United Nations Food and Agriculture Organization, GDP growth generated by
agriculture is up to four times more effective in reducing poverty than growth
generated by other sectors.

As an exporter of grains and oilseeds, Ukraine has the potential to significantly impact
the world food situation, while realizing significant gains in terms of export revenue,
economic growth, and rural development. Ukraine is one of the four countries in the
world (in addition to Russia, Kazakhstan, and Argentina) that has significant untapped
capacity to contribute to growing global food security needs. The president of the
Ukrainian Agricultural Confederation recently stated that Ukraine is probably the only
one of the four countries that could supply the estimated 50 million additional tons of
wheat needed to sufficiently fill the grain bins of the world if properly organized and

1
IMF Country Report No. 11/52, February 2011
2
CIA World Fact Book, January 2011
3
2008 United Nations Food and Agricultural Organization (FAO) Estimate

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motivated. In line with the Feed the Future Initiative and the USG commitment to
reduce hunger and increase global food security, AgroInvest will work with partners
and stakeholders to advance action that addresses the needs of small scale farmers and
agri-businesses, and harnesses the power of women to drive economic growth.

B. Work Plan

This annual work plan covers the 8-month period from January 25, 2011 to September
30, 2011 and outlines planned activities and expected results for each Project
component.

During the development of this work plan, AgroInvest staff met with stakeholders and
potential partners to discuss the numerous economic and political changes that have
taken place in Ukraine since the time when the original scope of work was developed.
These meetings served the purpose of validating and/or updating key assumptions for
all three project components and developed the foundation for a strong partnership
between the Project and stakeholders.

Year 1 will be a critical time period for AgroInvest since first-year activities will lay
the foundation for the entire project. During Year 1, we will comprehensively assess
the current AgroInvest regulatory environment and existing market challenges and
opportunities for value chain actors. Project surveys and assessments will provide a
solid, realistic basis for formulating strategic directions for each component in the
project. The Project team expects the political and economic environment to remain
dynamic and fluid in Ukraine, therefore AgroInvest will remain flexible so as to be
able to respond quickly to unexpected opportunities that may arise in line with Project
objectives. At the same time, we will be prepared to re-focus strategic priorities (in
close consultation with USAID) should external factors or political challenges prevent
implementation of planned Project activities.

C. Technical Activities

Component 1 – Support a Stable, Market-Oriented Policy Environment

The agricultural sector in Ukraine is significantly constrained by inconsistent and

unpredictable agricultural policies. These policies are too often driven by short-term
political interests or distorted as a result of the excessive influence of specific industry
groups/businesses through lobbying efforts. Recent examples of such policies include
the following: (i) The establishment of quotas on the export of grain products and
non-transparent procedures for the allocation of licenses for these quotas; (ii) GOU
policies aimed at introducing profit and trade margin controls on key staple food
products; (iii) Draft law No. 8053 which proposes to prohibit the export of key
agricultural commodities for all companies except for state-run monopolies
(government agents) or agricultural producers. AgroInvest will address the following
additional obstacles preventing the development of a stable, market-oriented policy
environment:

Government policies in the agriculture sector are not well prioritized. At

present there are various strategic documents and economic reform programs
underway; however, these initiatives are uncoordinated and often lack realistic

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implementation strategies and timeframes and are occasionally at odds with

other programs. Policies put in place often lack the necessary funding to
facilitate implementation.

Administrative reform. Recent amendments to the Constitution have

redistributed powers between the President, the Cabinet of Ministers, line
ministries, and the Verkhovna Rada (Parliament of Ukraine). Such
administrative reforms have affected the agriculture sector by strengthening
authority and scope of responsibilities of the Ministry of Agricultural Polices
and Foodstuff and eliminating the position of Deputy Prime Minister for
Agriculture. Most mechanisms for public-private policy dialogue which
existed earlier have been disbanded with the administrative reform. With few
exceptions, the GOU has refrained from engaging the private sector in
discussions over key agricultural policies, which has led to a wide disconnect
between the Government and agricultural business community.

Land reform. The government has implemented a land reform program in the
agriculture sector which allocated most of the agricultural land to farmers
through a national land titling program and most farmers have already
received their titles. However, with the moratorium on the sale of agricultural
land in place, farmers often lack options other than renting their land to larger
farming enterprises. The Government recently declared its intention to lift the
moratorium on the sale of agricultural land. If this happens, it is expected that
a large number of farmers will opt to sell their land.

Component 1, Task A Activities: Accelerate Market-Oriented Reforms

AgroInvest will promote agricultural policies that are more predictable, market-
oriented and WTO-compliant. Local capacity-building will be one of the key elements
in improving the policy environment. The Project will strengthen the potential of local
organizations, including AMDI and others, including industry associations.
AgroInvest will facilitate public-private dialogue through advisory council sessions
which the Project will facilitate. AgroInvest will also provide targeted technical
assistance on priority agriculture policy issues and be responsive to requests for
assistance from the Ministry of Agrarian Policy that align with project objectives and
goals.

General Approach to Task A Activities

AgroInvest will negotiate and sign a sub-award/grant with AMDI following the
development of a multi-year strategy and implementation plan. AMDI will be an
important AgroInvest partner in revitalizing public-private advisory councils,
providing limited analytical and secretarial-type assistance to these councils, and
delivering technical assistance on the agricultural policy reform agenda as needed.
Both the AgroInvest chief of party (COP) and deputy chief of party (DCOP) will meet
frequently with AMDI to provide organizational support, ensure consistency of
Project policy priorities and delivery of key policy messages, and promote active
participation of implementing partners and other members in meaningful dialogue to
facilitate market-oriented policy reforms.

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AMDI, with AgroInvest support and participation, will reach out to the government,
NGOs and other similar organizations (including industry associations and POs),
SMPs, financial institutions, donors, and other private sector stakeholders to conduct a
Strategic Policy Priority Assessment which will list and prioritize agricultural policy
reforms. The strategy will identify policy priorities; it will also serve as the basis for
the allocation of grants for Ukrainian organizations (including industry associations
under Component 1 - Task B) to lead on certain policy priorities and the analysis
needed to formulate policy recommendations. AgroInvest may involve short-term
expatriate expertise to augment the assessment and enhance policy analysis to ensure
a more comprehensive policy perspective.

Based on our preliminary assessment, AMDI and AgroInvest will likely focus on
issues related to lifting the moratorium on agricultural land sales; taxation as it affects
the agricultural sector and value chain stakeholders; regulatory barriers to agricultural
finance (including pre-harvest finance); cooperatives legislation; tariff and non-tariff
barriers; fine-tuning of warehouse receipts legislation; and wholesale markets
legislation.

In a recent meeting at the Ministry of Agrarian Policy, the Ministry acknowledged the
need to better understand policy actions, learn from international best practices, and
has requested Project assistance to provide analysis of the impacts of policy decisions.
The Ministry articulated the following priority policy reform items:

Land market reform

Regulations on pre-harvest finance mechanisms to reduce risk for traders and
credit suppliers in the food chain
Agricultural insurance and a GOU indemnity fund
Warehouse receipts market and harmonization of related but contradictory
legislation
Food stamps to subsidize the most vulnerable groups in the population and
reduce inefficient and distortive sector subsidies
Framework agricultural law similar to the US Farm Bill

AMDI will take the lead in re-establishing platforms for public-private policy
dialogue (PPD) through public-private advisory councils. AMDI and AgroInvest will
provide assistance to establish a Policy Secretariat. A key prerequisite for a proper
PPD forum is high-level support and buy-in from the GOU, and a GOU
chairperson(s) for the PPD council(s), with members representing Project partners and
diverse public and private sector views. AMDI will be well-placed to secure high-
level GOU buy-in to PPD forums facilitated by AgroInvest.

The Project will establish contacts and engage with relevant donors and their projects
actively working on agricultural policy issues. In particular, the project will work
with:

USAID‟s Local Investment and National Competitiveness (LINC); Financial

Sector Rehabilitation Program (FINREP); Access to Justice and Legal
Empowerment Project (AJLEP); and Public-Private Partnership (PPP) projects

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IMF/World Bank/IFC projects on the moratorium on land sales, lifting export

quotas/licenses for grain exports, agri-insurance/agri-finance development,
and mandatory certifications
The European Union‟s project for Implementation of Ukraine‟s Commitments
under WTO and ENP Frameworks in the Rural Sector
EBRD on warehouse receipts and pre-harvest financing

AgroInvest is well-positioned to play a facilitating function for donor coordination of

agricultural sector initiatives and will hold or facilitate regular meetings of donors and
donor-funded projects working in the sector.

Assumptions for Successful Implementation of Component 1, Task A Activities

AMDI is a viable co-implementer, but will not be able to engage in Project

activities until fully compliant with USAID rules and regulations. Full
compliance of AMDI is expected at the end of their bridge contract
cooperation with AED in May 2011
AMDI staff will be available to work under service agreements with
AgroInvest until AMDI is approved by USAID as co-implementer; this will
involve short-term technical work and local LOE
If AMDI is not ready in six months from the AgroInvest start date of January
25, 2011 then the Project will seek other alternative partners and options
Members of the GOU are willing and able to lead the public-private council

Component 1, Task B Activities: Strengthen Industry Associations

Many industry associations in the agriculture and related sectors are weak,
fragmented, and diverse. Capacity building and policy development measures are
needed so that these associations can exert greater influence in local and national-
level agricultural policies that impact these groups directly.

General Approach to Task B Activities

In Year 1 the Project will conduct a comprehensive needs assessment of the

agriculture industry associations to ascertain the largest gaps and design and launch
capacity building programs and trainings that will be practical for selected industry
association partners. Following the policy priorities assessment, a competitive grants
solicitation will be issued for industry associations to provide support for policy
analysis and policy advocacy. Although grants under this task will be primarily focus
on policy development, competitive grants may be provided to support associations‟
organizational development as well.

AgroInvest will also conduct a rapid assessment of the legal and institutional
framework under which industry associations operate. AgroInvest will provide
support to partner associations to help them become more effective in terms of
undertaking policy changes that will enhance their ability to organize, serve member
needs, and advocate for their own interests to accelerate market-oriented policy
reforms. Selected industry associations will participate in public-policy councils.
AgroInvest will explore opportunities for coordinating with USAID‟s civil society
development activities working with business associations.
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Component 1, Task C Activities: Provide Public Education for Land Rights

Most Ukrainian agricultural landowners do not fully understand the implications of

lifting the current moratorium on agricultural land sales. More important, there are
few outlets and support centers that landowners feel comfortable visiting to obtain
information on land issues. To address this, AgroInvest will implement a public
awareness campaign in partnership with local organizations to improve landowners‟
knowledge of their land rights. Secondly, the project will ensure that an accessible
network of legal support exists for small land holders by establishing sustainable face-
to-face consultation arrangements between affected land owners and legal service
providers.

Should the moratorium on the sale of agricultural land be lifted, the Project will shift
the emphasis of its public education program from current issues related to land rights
(for example: land lease agreements, rental payments, land disputes) to issues more
specific to a full-scale agricultural land market. The Rural Development Institute
(now known as Landesa), will also conduct an assessment covering a broad range of
land issues; including economic, legal and social issues. The Landesa assessment is
expected to highlight key land issues and related outreach and legal rights messages.

General Approach to Task C Activities

The Project will develop a communications, awareness, and outreach plan to reach
selected communities and individuals in rural areas to increase their understanding of
their land rights. In the development of the strategy, we will evaluate the utility of
various communications approaches and media platforms (e.g. television, radio, and
Internet where appropriate) to best reach selected geographic regions and target
communities. AgroInvest will establish criteria for selecting target communities (e.g.
the number of vulnerable rural landowners in a given region). After selecting the
targeted communities based on the selection criteria, AgroInvest will develop and
implement the approved communications strategy.

An important aspect of the development of the communications, awareness, and

outreach strategy will be to identify key partners that have existing outreach programs
and strong economic incentives to provide these services to potential clients. These
key partner groups include agricultural extension programs, agricultural finance
agents (lenders and insurers), and NGOs that currently provide advisory services to
farmers and landowners. AgroInvest will work with Landesa who will be contracted
under the LINC project (most likely in April), to assist them with implementation of a
strategy they are developing to increase rural people‟s capacity to protect their
economic and social rights in Ukraine.

The Project team will work closely with the USAID LINC project‟s land lawyers and
the new AJLEP project, thereby ensuring that the AgroInvest team has the most
current information on evolving land laws, land rights, and mechanisms for
supporting landowners.

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Assumptions

The land moratorium will be lifted

Landesa will demonstrate a credible outreach strategy

Component 2 – Stimulate Access to Finance

Following the global economic crisis, high levels of non-performing loans (NPLs) in
the Ukrainian commercial banking system represent a major challenge for banks to
increase lending, despite high liquidity in the banking system as a whole. Bank credit
to enterprises has shown some signs of revival; however, lending to the agricultural
system, in particular, is perceived as a high credit risk.

Because of the difficulty in finding suitable collateral, most banks and leasing
companies are reluctant to provide credit to SMPs. Should the moratorium on
agricultural land sales be lifted, this could provide increased opportunities for SMPs
to access finance through formal financial instiutions by using land as collateral.
However, few banks, if any, understand primary agricultual production and crop
cycles, funding requirements of SMPs, and how to accurately assess agricultural
sector risk. Recent discussions with Project stakeholders even suggest that some
banks that were previously active in rural lending have retrenched altogether and are
no longer providing rural finance (e.g. ProCredit).

Commercial banks are not the only sources of agricultural finance. Some larger
processors, traders, and input suppliers are providing pre-harvest finance for their
suppliers. For example, Chumak provides up to 25 percent pre-planting trade credits.
However, Chumak initially began working with more than 1,000 small growers and is
currently only working with 17 of the most efficient and reliable SMPs.

General Approach to Component 2

AgroInvest will conduct a comprehensive assessment of suppliers of SMP credit

(bank and non-bank) and financial instruments to identify existing market failures and
inefficiencies to providing SMP finance (including pre-harvest financing, banks and
credit unions, leasing, value chain financing, warehouse receipts, and agri-insurance)
and then develop market-oriented solutions. The assessment will also examine
opportunities and obstacles for increasing SMP finance from the angle of regulatory
barriers, which can be advocated and promoted by stakeholders as part of AgroInvest
Component 1. The assessment will form the basis of a well-informed strategy,
developed in the first part of Year 1 of the project, to lay a solid foundation for
implementation of the AgroInvest Component 2 strategy in Years 1 – 5. The initial
assessment will be continuously updated, on an as-needed basis, to identify new
opportunities for increasing access to agriculture sector finance.

Through stakeholder meetings and assessment findings, AgroInvest will identify the
most promising financial institutions and value chain actors for providing and
facilitating SMP credit. Subcontracts and technical assistance will be utilized for
training and capacity building on both the supply and demand sides of the equation to
increase SMP access to finance. Capacity building for banks, credit unions and other
NBFIs may include training on risk management of agricultural sector SMPs and

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enterprises, development of agriculture and agribusiness loan (and deposit)

instruments, agriculture-specific lending policies and procedures, and loan officer
training. AgroInvest grants will be targeted more toward SMPs and value chain actors
for market development of agricultural lending; with any grants to for-profit financial
institutions requiring COTR approval.

Capacity building for SMPs will improve their organizational effectiveness and ability
to access credit by assisting them to become more conversant in credit and
documentation requirements necessary for borrowing (including but not limited to
financial records), advantages and risks of borrowing, legal requirements and
obligations, and increased access to information for more informed decisions when
working with buyers.

AgroInvest will work with financial institutions, NBFIs and value chain actors to raise
awareness of the potential market opportunities of engagement with SMPs. With new,
innovative lending products and financing arrangements, AgroInvest supported credit
providers will generally move from short-term lending products to those with medium
to long-term tenor. The Project recognizes that it is much easier for an SMP to
initially qualify for a short-term line of credit (from financial institutions, buyer or
supplier credit), than it is to qualify for medium-term financing, for the simple reason
that the lender only has money at risk for less than a year. Short-term lending can be
used as a means for SMP‟s to develop a credit history and build relationships of trust,
which can then be used as the basis for extending medium and longer term credit.
Through value chain risk-sharing and off-take agreements, SMPs will find it easier to
access finance.

There are some non-bank financial institutions (NBFIs) such as the MEDA project‟s
Agricredit Capital Management (ACM) fund (with approximately $2 million in
capital, consisting of 600 loans with total portfolio value of $3 million operating in
the horticulture sector only, in Crimea and Zaporizha) that the Project will evaluate
for potential partnering arrangements. The Project also plans to work with IFC‟s
Agricultural Insurance Project to facilitate the introduction of reliable crop insurance
products in Ukraine as a means to increase access to finance for SMPs.

In addition to engaging SMPs and suppliers of credit to foster stronger relationships

within value chains and facilitate the introduction of new or innovative financing
products, AgroInvest will bring together stakeholders to advocate for policy reforms
needed to stimulate access to finance. AgroInvest will facilitate the inclusion of
partner financial institutions and others providers of credit in public-private sector
dialogues designed to facilitate the improvement of the legal and legislative climate
underpinning the lending market in Ukraine, including:

Draft law on land markets (provide input and promote transparent law)
Grain warehouse receipts (harmonize contradictory legislation)
Pre-harvest finance (introduce any necessary legislative or regulatory
requirements)
Law on Cooperatives (amend tax status)
Mandatory certification requirements (eliminate many)

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Assumptions

Banks and NBFIs are interested and willing to extend credit to the agricultural
sector
Banks and NBFIs will remain liquid and have resources to expand their
lending operations
SMPs will have the capacity to engage, both individually and collectively,
with banks, NBFIs and value chain providers of credit
The legal and regulatory environment will promote and facilitate increased
access to finance for the agricultural sector (e.g. moratorium lifted so
agricultural land can be used as collateral, legislation for pre-harvest financing
introduced, warehouse receipts legislation improved, law on cooperatives
revised to reduce tax bias)

Component 3: Facilitate Market Infrastructure for SMPs

SMPs need stronger organizations to increase their competitiveness and create greater
bargaining power in the marketplace. Achieving the full economic potential of
Ukrainian SMP agribusinesses requires improving their access to inputs and product
markets; and by formalizing and making their POs more commercially-oriented. This
will enable an expansion of SMP market presence to obtain quantity discounts when
buying inputs and gain additional marketing power when selling products. In addition,
many Ukrainian product markets are inefficient and exhibit varying degrees of non-
transparency. In addition, they may not be located in production areas that serve
SMPs or do not have the infrastructure required to meet the needs of SMP
agribusinesses. Overcoming these constraints is the focus of actions taken under
Component 3 of AgroInvest.

Task A: Producer Organization Development

Many SMP agribusinesses can compete with large conglomerate farms in terms of
field-level production capacity. However, SMPs face much higher input and assembly
costs associated with moving crops from the farm to the initial marketing centers,
which weakens their inherent labor-related production efficiencies. Although the
existing organizational infrastructure of SMPs is inadequate to reduce the need for
input supply and lower product marketing costs, there exists an informal working
foundation of more than 1,000 SMPs that form the basis for the emergence of more
formal Producer Organizations (POs). These POs, including business and service
cooperatives and associations, have great potential to provide quality services to
members and increase overall SMP competitiveness.

General Approach to Component 3, Task A

AgroInvest will focus on the value chain, capacity building of POs and linking them
with processors, other supply chain participants, and markets to improve SMPs and
POs competitiveness.

AgroInvest will first conduct in-depth desk and field analyses to gain a
comprehensive understanding of existing formal and informal POs to inform the
selection of partner POs that possess the highest potential. Evaluation criteria will be

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developed to ensure potential partner POs are evaluated objectively and transparently
and competitively selected for Project capacity building training and grant programs.
It is expected that selected POs will have both common as well as organization-
specific capacity building needs. Capacity building programs to improve POs‟
business management skills will likely include trainings on the following topics:
accounting and cash flow management, opportunity costs and risks, demand versus
supply based perspectives, value chain concepts, long and short-term business
planning, land issues and rights, member benefits, commercial relationships, legal and
contractual aspects of borrowing (from financial institutions and other value chain
providers of credit), and developing a business plan for accessing finance. In
conjunction with Component 2 activities, AgroInvest will also facilitate dialogue
between POs, SMPs, input suppliers, buyers, and processors to introduce innovative
products and new financing arrangements for SMPs. Additional sector and
commodity specific trainings will be provided on topics such as improved production
practices, pre- and post-harvest handling and storage, and quality issues.

The Project will also provide capacity building grants for partner POs of up to
$25,000 to support the introduction of innovative technologies for grading, packaging,
and cold storage facilities. As with the SMP and PO capacity building activities, the
Project will select grantees according to a competitive process on the basis of
objective evaluation criteria and a transparent evaluation and selection process. As a
general rule, grants whose purpose is to link producers and POs directly with credit
providers will require at least a 1:1 matching cost contribution by the grant recipient.

Task B: Develop Wholesale Markets and Other Market Infrastructure

Regional and wholesale markets provide more efficient market access for buyers and
sellers than informal markets and can also lead to less volatility in product pricing.
The GOU has recognized the need for enhancing regional wholesale market
infrastructure; however, financial, legal, and administrative obstacles have hindered
progress in this area. Since the solicitation release for competition, the GOU has
provided seed money to initiate the construction of up to four new wholesale markets,
two of which (Kyiv and Donetsk) have obtained private funding, and construction and
staff training are already underway. The Kyiv market is scheduled to open for fruit
and vegetable sales in July 2011 with buying and selling of dairy products, fish, meat,
and flour to commence in October 2011. The construction of the Donetsk wholesale
market is expected to follow a similar timeframe. This work plan has been developed
to take into account this new reality.

General Approach to Component 3, Task B

AgroInvest will partner with a Ukrainian market research company through a

subcontract to evaluate the current status of wholesale and regional/local markets to
inform decisions and identify opportunities on the locations for new wholesale and
regional markets as well as other market infrastructure needs, including cold storage.
The assessment will map out existing wholesale and regional markets, measure
progress toward the creation of new wholesale markets currently under construction,
and provide cost information on both preexisting and new markets. The assessment
will detail pertinent information about existing markets, including size of the market,
products handled, facilities available (e.g. retail, assembly, cold storage, logistics,

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January 2011 - September 2011

processing). Finally, the assessment will include recommendations for appropriate

capacity strengthening initiatives (e.g. feasibility studies, staff training, investor
mobilization) for existing wholesale and regional markets, those currently under
construction, or any other planned market sites or potentially viable sites.

The assessment will identify existing regional markets in all geographical areas and
describe major characteristics of each, including ownership, location, commodities
handled, required upgrading and/or further expansion capacity and associated cost
estimates, and provide recommendations on opportunities where AgroInvest could
potentially make the most significant developmental contributions.

Based on a careful analysis of the findings and recommendations from the market
infrastructure assessment, and depending on Project geographic target areas and
partner POs market infrastructure needs, the Project will select sites for wholesale
market facilities and regional market facilities. AgroInvest will coordinate with
USAID‟s PPP project to identify potential public and private sector partners for
selected wholesale and regional markets and begin detailed pre-feasibility
assessments.

Component 3 goes beyond wholesale and regional/local markets development and

also will identify opportunities for general market infrastructure development such as
cold storage and other market infrastructure facilities.

Assumptions

The market assessment will present two possible scenarios: (1) There will be
absorption capacity in Ukraine for wholesale markets in addition to the five
GOU-accredited markets (Lviv, Kyiv, Donetsk, Kharkiv and Zaporizha); or
(2) AgroInvest can play a significant role in the development of one or more
of the currently GOU accredited sites
Project opportunities may exist with the management and owners of Lviv‟s
Shuvar who are leading the development of and mobilizing private sector
investors for the two new wholesale markets in Kyiv and Donetsk
POs are not commodity specific
With other donor initiatives focusing on food safety, AgroInvest Year 1 work
plan does not include food safety activities and will not engage the
International Institute for Food Safety and Quality at this time (this may
change depending on Project partners‟ needs)

D. Cross-Cutting Factors

Anti-Corruption

According to Transparency International„s Corruption Perceptions Index for 2010,

Ukraine ranks 134 out of 178 countries (scoring 2.4 out of a possible 10 points),
indicating that corruption in Ukraine is perceived as pervasive. According to the
World Bank Group‟s 2008 Enterprise Survey, more than 50 percent of Ukrainian
firms cited corruption as a “major constraint” to doing business, compared to the
Eastern Europe and Central Asia regional average of 33.53%. Global Financial
Integrity estimates that the Ukrainian financial system loses $10.75 billion a year as a

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January 2011 - September 2011

result of deliberate under-pricing of exports, over-pricing of imports, and the purchase

of nonexistent services. The IMF's Resident Representative in Ukraine recently
reported on the non-transparent allocation of quotas on grain exports. During work
planning meetings with Project stakeholders, a leading agricultural expert estimated
that at least 40 percent of the total value of all farm subsidies is lost to corruption, and
another specialist reported that 80 percent of Ukrainian horticulture operates in the
shadow economy.

At the Project level, AgroInvest will contribute to the fight against corruption by
supporting the promotion of transparent and market-oriented policies that will provide
a level playing field for partners and stakeholders. AgroInvest will improve the
transparency of policy reform initiatives by facilitating public-private dialogue. The
Project will also increase demand for more transparent practices among the rural
population by empowering landowners to defend their land rights with improved
information, knowledge, and access to legal services. The Project will also improve
the business environment for SMPs through increased access to market information,
which will also stabilize the pricing of agricultural commodities. The AgroInvest team
will ensure the integrity of grants and procurement processes and utilize a robust
system of monitoring and evaluation to accurately capture and analyze results.

Food Security

In line with the Feed the Future Initiative and the USG commitment to reduce hunger
and increase global food security, AgroInvest will work with partners and
stakeholders to advance action that addresses the needs of small scale farmers and
agri-businesses, and harnesses the power of women to drive economic growth.

AgroInvest will conduct a food security assessment in April/May; the assessment will
start with a quick food security literature review, and follow with a field survey, or
more in-depth research with a local economics organization, such as AMDI, and be
led by a well-regarded US economist, to illustrate the crucial role Ukraine can play in
contributing to global food security.

Gender Integration

Gender equality and inclusiveness plays an important role in economic growth,

poverty reduction, and development effectiveness. While there is evidence of gender
discrimination at high levels of the Ukrainian government and in social spheres,
Ukraine performs fairly well compared to peer countries in the East Europe and
Central Asia region regarding female representation in the business sphere. According
to the World Bank Group Enterprise Survey 2008, a woman served as a senior
manager at 28 percent of Ukrainian firms compared with 19 percent for the region. In
addition, approximately 47 percent of full-time workers at Ukrainian firms are
women, compared to a regional average of 38 percent. Despite these promising
statistics, more work remains to be done to improve gender equality and inclusiveness
in Ukraine.

To the extent possible, AgroInvest project components and activities will include
gender considerations. For example, we will ensure strong participation of women in
the policy dialogue (particularly on land issues), craft gender-specific messages in

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January 2011 - September 2011

public outreach campaigns, and promote gender inclusiveness in capacity building

initiatives for partner organizations. The Project will disaggregate PMP data by
gender as appropriate to indicate the number of women reached through project
activities, advise USAID on any gender disparities, and highlight gender impact in
Project success stories.

USAID advised that they will conduct a gender analysis in late May or early June
2011, after which new Mission guidance on gender will become available. AgroInvest
gender equality and inclusiveness strategy and activities will be further defined by the
Mission‟s new guidance on gender and through Year 1 Project assessments and will
be included in the strategies for each Project component.

Geographic Focus

AgroInvest will be based in Kyiv but work in Crimea as well as in other regions. The
Project will engage SMPs and Crimean government entities to engage in policy
dialogue, improve competitiveness of agricultural production and markets, and
increase access to finance for SMPs.

National-level AgroInvest policy initiatives and activities under Component 1 will not
have a geographic focus. Expected results and impacts will benefit the entire
population, irrespective of geographic region.

Target regions for Components 2 and 3 will be selected according to four simple
criteria: strong market potential for important agricultural sectors: fertile soil and
appropriate crops, i.e. grains, oilseeds, and horticulture (fruit and vegetables);
available financial infrastructure; political will to support market development and
SMPs; and the presence of vulnerable rural communities or the potential to reach
AgroInvest targets.

Targeted geographic regions and types of assistance to be delivered in these regions

shall be determined following Project market assessments and based on an approved
strategy. The Project will review options for utilizing grants or sub-contracts for
additional geographical representation.

Indigenous Capacity Building and Utilization

AgroInvest is dedicated to developing local capacity and ownership of Project results.

Many Ukrainian technical professionals are well-educated and goal-oriented and
possess valuable market-economy experience. These skills will be utilized to the
fullest extent possible to deliverable sustainable services throughout the life of the
Project and beyond. AgroInvest will work with local partners, NGOs, and institutions
to the maximum extent possible. The Project partnership fund including grants and
subcontracts, which will enable local institutions (e.g. AMDI) to take the lead in
facilitating public-private policy dialogue and agricultural policy reforms, provide
capacity building and training for industry associations, producer organizations, and
financial institutions, and contribute to heightened public awareness of critical land
rights issues. The AgroInvest team composition reflects our commitment to a
Ukrainian-led approach, as the project COP is the only long-term expatriate field
employee.

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Knowledge Management

AgroInvest will disseminate and transfer knowledge gained during implementation

through a robust communications and M&E strategy. Our approach to
communications and performance measurement and sharing will not only achieve
specific results under Component 1 but also ensure strong communication and
knowledge sharing for all Project components so that lessons learned and the impact
of USAID funding is multiplied beyond the life of AgroInvest. National-level policy
and financial sector work will have country-wide impact through bank lending
networks, a national communications campaign, and important reforms. Local
capacity building initiatives will play an important role for replication and
sustainability of Project activities. AgroInvest will cooperate, share, and obtain
knowledge across other donor projects and development initiatives in Ukraine.

Public-Private Partnerships

AgroInvest will work with the USAID PPP project to identify potential opportunities
for forging private sector alliances between government entities and private investors.
Component 3 activities supporting the development of wholesale markets will require
partnerships between municipalities and investment groups, and AgroInvest is
prepared to serve as an honest broker in facilitating such arrangements.

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January 2011 - September 2011

ANNEX A
Detailed Implementation Plan

AGROINVEST ANNUAL WORK PLAN – YEAR 1 21

 First Annual Work Plan
January 2011 - September 2011

AgroInvest First Annual Work Plan

2011 Y2Q2 2011 Y2Q3 2011 Y2Q4

Work Plan Activities Milestone Responsible
Jan Feb Mar Apr May Jun Jul Aug Sep

COMPONENT 1. Support a stable, market-oriented policy environment

TASK A: ACCELERATE MARKET-ORIENTED REFORMS
LOP result 1: A clearer and more stable policy environment that has led to increased agricultural investment
LOP result 2: Formal sustainable and transparent public private dialogue mechanisms established and engaged in promoting investment and the advancement of agricultural
industry in line with WTO rules
LOP result 3: Private-public dialogue is more effective and regular
LOP result 4: Many of the laws, regulations and policies outlined in the agriculture policy strategy adopted and implemented

AMDI-AgroInvest
1. Conduct work planning/strategy discussion with
strategy discussed DCOP and COP
AMDI
and agreed
Grants/Subcontracts
2. Finalize AMDI co-implementer sub-award Sub-award made manager and
Component 1 leader
3. Review current GOU programs and Conduct Policy priorities Component 1 leader
Strategic Policy Priority Assessment assessed and AMDI
Policy priority needs
Component 1 leader
4. Complete Strategic Policy Priority Needs Paper and strategy
and AMDI
developed
5. Policy Priority Needs Paper/strategy approved Policy Priorities Plan
USAID COTR
by USAID COTR approved
6. Complete 3 Year AMDI Implementation Implementation of AMDI, DCOP and
Plan/begin implementation plan started COP
7. Assess needs of Secretariat for PPD/Policy
GOU support for
Councils and GOU ability/willingness to co- AMDI
Secretariat
fund/support
8. Policy Secretariat established (with lessons Secretariat
AMDI
learned from prior donor-supported PPDs) established
9. Secure high-level GOU buy-in to Chair and
GOU PPD buy-in AMDI, COP, DCOP
actively participate in PPDs

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2011 Y2Q2 2011 Y2Q3 2011 Y2Q4

Work Plan Activities Milestone Responsible
Jan Feb Mar Apr May Jun Jul Aug Sep

PPD councils/forums
10. Re-establish public-private advisory councils AMDI
established

AMDI compliance
11. Monitor AMDI implementation of policy Component 1 leader
with agreed policy
agenda and COP
agenda
Coordination and
mutual
12. Conduct regular meetings with AMDI understanding of
DCOP and COP
leadership policy directions and
sub-award
expectations
Secretariat
13. Provide continuous Secretariat leadership leadership AMDI
maintained
Engagement of
14. Facilitate coordination between policy councils
associations in policy Component 1 leader
and AgroInvest Associations
dialogue

15. Subcontract additional policy reform support

Policy reform work
(e.g. food security, land markets, pre-harvest Component 1 leader
conducted/developed
finance, agri-insurance; as needed)

TASK B: STRENGTHEN INDUSTRY ASSOCIATIONS

LOP result 1: A clearer and more stable policy environment that has led to increased agricultural investment
LOP result 2: Private-public dialogue is more effective and regular
LOP result 3: Partner industry organizations are well established and engaged in promoting investment, trade, and other priorities under the aforementioned agriculture policy
strategy
LOP result 4: Partner industry organizations demonstrating enhanced sustainability and effectiveness
LOP result 5: Capacities of industry associations are built, leading to sustainable improvements in policy

Industry associations
1. Identify and evaluate Ag Industry associations Component 1 leader
identified
Legal and
2. Conduct rapid assessment of legal and institutional
Component 1 leader
institutional framework for industry associations assessment
completed

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 First Annual Work Plan
January 2011 - September 2011

2011 Y2Q2 2011 Y2Q3 2011 Y2Q4

Work Plan Activities Milestone Responsible
Jan Feb Mar Apr May Jun Jul Aug Sep

3. Select Ag industry associations for capacity Associations

Component 1 leader
building programs selected
4. Design capacity building and policy
development programs for Ag industry Programs designed Component 1 leader
associations
Component 1 leader
5. Solicit and award capacity building and policy
Grants awarded and Grants
development grants
Manager
6. Implement capacity building and policy
Implementation of
development programs for Ag industry Component 1 leader
programs started
associations
7. Facilitate associations participation in at least 2 Policy dialogue AMDI and
policy dialogue discussions started Component 1 leader

TASK C: PROVIDE PUBLIC EDUCATION FOR LAND RIGHTS

LOP result 1: Greater understanding for individual land rights among rural land owners in targeted areas
LOP result 2: Property rights protection improved for rural land owners
LOP result 3: Rural population in targeted regions is more supportive of an open, and better functioning land market
LOP result 4: State land market administrators held more accountable for efficient issuance of state acts (deeds)
LOP result 5: Legal aid services are delivered sustainably for rural land owners

Component 1
1. Prepare land rights media/outreach/awareness
Plan developed leader, Comm. Pub
implementation plan on land rights
Ed Manager
2. Prepare land rights media/outreach
Comm. Pub Ed
plan/strategy on delivery of sustainable of legal Plan prepared
Manager
land services
3. Land rights media/outreach/awareness and
sustainable delivery of legal services plans Plans approved USAID COTR
approved by USAID COTR
4. Selected targeted communities for Component 1
Outreach strategy
implementation of outreach and legal rights leader, Comm. Pub
developed
strategies Ed Manager

5. Implement outreach/communication delivery of Implementation of Comm. Pub Ed

legal services strategy outreach strategy Manager

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2011 Y2Q2 2011 Y2Q3 2011 Y2Q4

Work Plan Activities Milestone Responsible
Jan Feb Mar Apr May Jun Jul Aug Sep

COMPONENT 2. Stimulate Access to Finance

LOP result 1: By year five, 10,000 new agricultural loans issued through USAID partner organizations
LOP result 2: Portfolio at risk for average agriculture lending is no more than 10% at 90 days for partner financial institutions
LOP result 3: A well functioning, warehouse receipts system that is more widely used
LOP result 4: New financial products operating in the market providing greater access to credit for SMPs

1. Conduct a comprehensive assessment of

Assessment tool to
regulatory and institutional barriers to, as well as
develop component Component 2 leader
opportunities for, increasing access to finance for
strategy completed
SMPs
2. Evaluate and identify partnerships with banks,
Initial field of credit
non-banks and value chain actors for increasing Component 2 leader
partners identified
access to finance for SMPs
Strategy to increase
3. Develop Action Plan for increased access to
SMP finance Component 2 leader
finance for SMPs
developed
4. Action Plan/Strategy approved by
Strategy approved USAID/COTR
USAID/COTR
5. Select partner financial institutions and
Partners selected Component 2 leader
providers of credit for assistance and cooperation

SMP credit providers

6. Sign MOUs with at least 4 providers of credit selected, MOUs Component 2 leader
signed
7. Develop and begin implementation of capacity
Capacity building
building programs for partner financial institutions Component 2 leader
programs developed
to provide finance for SMPs
8. Facilitate development of innovative products New financial
Component 2 leader
and strategies for agricultural lending products developed

9. Develop and facilitate capacity building Capacity building

Component 2 leader
programs for SMP borrowers programs developed

New dialogue
10. Facilitate engagement between lenders and
between value chain Component 2 leader
borrowers
actors

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 First Annual Work Plan
January 2011 - September 2011

2011 Y2Q2 2011 Y2Q3 2011 Y2Q4

Work Plan Activities Milestone Responsible
Jan Feb Mar Apr May Jun Jul Aug Sep

11. Develop at least two innovative products for 2 innovative financial

Component 2 leader
SMP lending products developed

12. Facilitate at least 3 financial policy reform 3 financial policy Component 2 leader
discussions/forums to support innovative lending reform discussions and Component 1
practices held leader

13. Develop baseline data for partner financial Baseline data M&E expert and
institutions and value chain lenders developed Component 2 leader

COMPONENT 3. Facilitate Market Infrastructure for SMPs

TASK A: PRODUCER ORGANIZATION DEVELOPMENT
LOP result 1: Local projects implemented that increase member services, market access, and productivity
LOP result 2: Investment facilitated through producer group projects
LOP result 3: Strengthened capacity of farmer organizations to provide better services to their members
LOP result 4: Increased productivity of farms in targeted producer organizations
LOP result 5: An average of a 100% increase in sales at targeted producer organizations
LOP result 6: Increased profitability of farming in targeted producer organizations

1.Develop selection criteria and conduct PO Assessment

Component 3 leader
assessment conducted
2. Select geographic region(s) with highest
Regions selected Component 3 leader
potential
3. Conduct Survey of POs and develop
Strategy developed Component 3 leader
Implementation Strategy
4. Survey of POs and Implementation Strategy
Strategy approved USAID COTR
approved by USAID COTR
5. Identify and evaluate high potential SMPs and Short-listed POs and
Component 3 leader
POs SMPs
6. Select 10-15 high potential Producer
Partner POs selected Component 3 leader
Organizations
Component 3 leader
7. Design capacity building programs for partner and Capacity
Programs developed
POs Building
subcontractor

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2011 Y2Q2 2011 Y2Q3 2011 Y2Q4

Work Plan Activities Milestone Responsible
Jan Feb Mar Apr May Jun Jul Aug Sep
Component 3 leader
Program
8. Implement capacity building programs for and Capacity
implementation
partner POs Building
started
subcontractor
Tender announced Grants Manager
9. Conduct competition for capital improvement
and proposals and Component 3
support for SMPs and POs
received leader

Baseline data
10. Collect baseline date for partner POs or SMPs M&E expert
developed

TASK B: DEVELOP WHOLESALE MARKETS

LOP result 1: At least two wholesale and five local/regional markets are established which provide greater access to markets for SMPs
LOP result 2: SMPs have better access to services such as cold storage, grading and storage, and other market infrastructure that enhances their ability to market their produce
LOP result 3: Private sector financing leveraged for the establishment of wholesale markets

Assessment
1. Conduct wholesale market infrastructure
completed, selection Component 3 leader
assessment and develop selection criteria
criteria developed
2. Develop wholesale market infrastructure
Strategy developed Component 3 leader
strategy/plan
3. Market strategy/plan approved by USAID
Strategy approved USAID
COTR
Markets sites under
4. Select market development site(s) Component 3 leader
consideration

5. Identify potential private and public sector Potential participants

Component 3 leader
participants short-listed
6. MOUs signed with up to 7 private sector and MOUs being
Component 3 leader
public sector investors negotiated
Feasibility studies Component 3 leader
7. Begin pre-feasibility studies on up to three
started on selected and feasibility study
potential market infrastructure sites
sites subcontractor

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