Kyiv, Ukraine, September 7, 2021—In a move to increase private sector participation for an inclusive and climate-resilient agricultural sector, IFC and the Ministry of Agrarian Policy and Food of Ukraine have signed a Memorandum of Understanding (MoU). Attracting private sector investment and expertise will help modernize and expand the country's irrigation and drainage sectors critical to unlocking the agriculture industry's potential in the global market and accelerating economic growth.
Due to years of underinvestment and degradation of the water supply system, Ukraine's irrigation infrastructure currently operates at just one-quarter of its potential capacity, significantly hampering agricultural production. Given the importance of appropriate irrigation and drainage for the sector, the need to invest in rehabilitating the system is clear. In addition, the recently launched land market will open up opportunities for landowners to invest in high-cost technologies such as irrigation.
According to the World Bank, irrigating 1 million hectares of land in southern Ukraine, the country's warmest and driest region, would require $2 billion of investment. Public funds are not enough to address the massive financing gap in this sector, making private sector solutions essential.
Under the MoU, IFC will work with the government on sector reforms, including identifying the proper institutional approach to improve the irrigation and drainage systems. IFC will also support the government in designing a viable public-private partnership (PPP) model to address the financing gap and attract private sector investments in the manufacturing of irrigation equipment. The efforts will be aligned with the Irrigation and Drainage Strategy of Ukraine until 2030.
"The memorandum defines the fundamental principles for structuring the national water operator according to the international standards of corporate governance. It also creates preconditions for attracting investment in the rehabilitation and modernization of Ukraine's irrigation infrastructure, from private investors, development banks, and international financial institutions," said Roman Leshchenko, Minister of Agrarian Policy and Food of Ukraine. "These investments will improve the performance of agricultural production, as well as contribute to the prosperity of agricultural regions of our country."
In addition, IFC will help the government develop a plan for launching a national operator for the main irrigation infrastructure. This will help provide timely repairs including proper maintenance of irrigation assets.
"Supporting institutional reform, developing PPP models, and creating a market for the manufacturing of irrigation equipment in Ukraine will be critical for unlocking the private sector investment needed to build the country's climate resilience and boost productivity," said Jason Pellmar, IFC Regional Manager for Ukraine, Belarus, and Moldova. "IFC is committed to supporting initiatives like this that can provide competitive, quality services across Ukraine's economy."
In 2020, IFC, in partnership with the Austrian Federal Ministry of Finance and the Hungarian Export-Import Bank, launched a project to help the country develop the irrigation sector. The aim is to promote legislative and policy reforms and create a viable business model to help Ukraine mobilize private finance, essential to rehabilitate and maintain the country's water supply infrastructure.
About IFC
IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2021, IFC committed a record $31.5 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of the COVID-19 pandemic. For more information, visit www.ifc.org.
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For more information about the Ministry of Agrarian Policy and Food of Ukraine, please visit
https://minagro.gov.ua/en
