Экспертное мнение - Kreston

Экспертное мнение


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Only the laziest has not yet spoken on the blockchain value in agriculture. In most cases, these are general forecasts and assumptions based on overall assessments of the technology potential.

However, there were very few specifics on what problems do agrarians have and how blockchain becomes a solution to those. It is strange considering the agricultural blockchain projects already exist worldwide. They are few now, which is something nevertheless. People should know more about it since it is where the future of agriculture lies.

Say no to paperwork

Farmers have two perennial problems: growing crops and selling crops. And if growing crops depends directly on the farmer, selling them is an activity beyond their control. It is so hard to control because the sale of the product, especially in foreign markets is a complex procedure that requires many documents to be collected and approved by various specialists. Blockchain technology will allow you skipping through the paperwork.

A case in point is Easy Trading Connect (ETC), a blockchain platform that serves as the basic technology for smart contracts. It can autonomously verify legal documents (even the complex ones such as the sales and purchase agreements or letters of credit). To that note, the speed of examination exceeds the conventional fivefold, and this fact has already been proven in practice.

I am sure many of you heard last year that Louis Dreyfus sold a lot of soybeans to Shandong Bohi Industry. This deal has become the first in agriculture to have been arranged via blockchain. This, however, is not as important as the effect of the transaction, which is quite impressive. As a rule, a transaction like this takes 11 days instead of 4 as in the case with blockchain. And time-savings equal cost-efficiency since virtually no spendings should be made for legal services. It is particularly important for the agriculture because such procedures always cost more compared to other industries due to the low margin and high volumes traded.

Needless to say that the risk of fraud, redundant tasks, and simple errors decreases since blockchain tolerates none. Among the other advantages are a feature allowing to track the progress of transactions. All the information will be immediately available to the parties to transaction, which, again, minimizes the risk of falsification.

With the development of blockchain, it is plausible that soon the history of counterparties can be verified, provided the counterparties provide any. In addition, it can analyze their compliance with the terms and conditions of a contract and the performance thereof. This is a potential development opportunity. Many experts now say that the massive selling of agricultural products via blockchain is imminent.

Transparency set on maximum

The buyer always wants to spend only on a quality product. Especially if we are talking about food since their health and well-being literally depends on it. Which is just the way to their loyalty. The blockchain may come in handy even here.

Let us take a look at a startup Ripe.io. Its development encompasses a mix of Blockchain and Internet of Things and allows you to learn everything about the product — where it was grown, what chemicals it contains (it is a great way to learn if the manufacturer overuses pesticides), who and how manages the supplies, etc. In short, the technology tracks the entire path of food from farms right to the plate. It is a handy thing that can potentially help you rid of the problems of food fraud, false markings, and unnecessary intermediaries. But most importantly, it will help you secure the relationship of trust with the buyers and sellers.

The fact that the startup was among the first to join Food + Ag Tech — one of the TERRA accelerators that unites innovative agrarian projects — means that Ripe.io is in high demand. Forbes has ranked Ripe.io in 25 innovative developments, while IBM, Walmart, and Tsinghua University announced a cooperation in the blockchain technology to secure safe food for the Chinese citizen. This suggests that anyone will be able to learn all about the products they buy.

In protection of the crops

AgriLedger offers a similar solution. However, its goal is entirely different: ensure the harvest accounting. Initially, the project focused on farms in developing countries that lose some of the manufactured products due to a poor communication with suppliers: paper contracts are often concluded with errors and sometimes get deliberately falsified. As a result, up to 50% of the crops do not reach the points of sale according to the AgriLedger’s statistics based on the UN studies.

The technology created by the startup encompasses a multifunctional platform. It can be used to enter contracts, negotiate, and even track the location of crops sent to the buyer. It is impossible to make changes into the blockchain, which makes AgriLedger truly transparent and corruption-free.

As we said earlier, AgriLedger was initially designed for small farms, but it can become an interest for the larger business. As this technology develops further, it can be used to control the performance of own logistics and assess the effectiveness of distributors and partners. In fact, the system allows eliminating the human factor and associated risks.

In general, the examples above show that among the main benefits of blockchain is a simplified handling of documents and procedure transparency. At first glance, it does not seem anything special but becomes very important in practice.

It is also worth noting that blockchain is not only able to identify errors and defects. This way, Easy Trading Connect automatically charges fines and penalties on a virtual account when one of the parties to transaction fails to meet own obligations. It is convenient since the breaches of contract happen all the time, and a counterparty may not be paying fines willingly. Funds have to be exacted through legal proceedings, which is costly and time-intensive. 

Will blockchain technologies appear on the Ukrainian market and when?

Implementation of blockchain is a complicated process that above all requires changes in the ordinary course of business in agricultural companies. Ideally, such changes should affect all and at the same time. After all, if they use e-documents and the latter will do business old-fashioned way, no real benefits will come out of the technology.

Secondly, there must be regulation at the state level. Like it or not, blockchain is tightly connected to the cryptocurrency market, which is why the rules and its usage should be clearly spelled out. But there is more than that. Blockchain, as we remember, ensures the transparency, which is unwelcome in places where corruption thrives. In Ukraine, unfortunately, there are many shadow schemes to distribute agricultural products. Obviously, their organizers will resist innovation to the last breath.

Source: AgroPortal

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Over the last few years, the Ukrainian coal industry has been in deep crisis. It cannot satisfy the Ukrainian need for coal and operates at a loss.

Sadness in figures

Until 2014, Ukraine extracted about 60-65 million metric tons of coal every year. The figures plummeted to 40 million metric tons in 2016 and 34.9 million in 2017.

With the decrease in extraction increased the profitability of coal mines. According to the Ministry of Energy and Coal Mining, the average cost among mines was ₴3,124.9 in February 2018, which is 1.5 times higher than the selling price (₴2,033.5 per metric ton).

Can it be all about war?

The downfall of the coal industry does indeed owe to the conflict in Eastern Ukraine among a great many of other reasons. Nearly 70% of coal mines (both private and state-owned) are situated in the uncontrolled territories.

It is hardly just the matter of quantity but the quality as these regions are where the anthracite coal (rank A and T) is located. More than half of Ukrainian heat power stations use this type of coal.

The escalation of the Donbas conflict seized almost the entire supply of coal, and Ukrainian heat power stations now became exposed to a severe shortage of fuel.

Notorious Rotterdam+

In 2016, the attempts to solve the anthracite deficit resulted in the formula Roterdam+ introduced by the National Commission for State Regulation of Energy and Public Utilities. The projected cost of coal for Ukrainian heat power stations was calculated as follows: averaged 12-month quotations on Rotterdam stock exchange plus shipment to Ukraine.

Unfortunately, power suppliers do not use the tariff instrument particularly well to diversify the supplies. Instead, they continue the transportation of coal from uncontrolled territories, while including the Rotterdam+ formula in the tariff.

To that note, no rise in the cost of Ukrainian coal accompanied the price increase.

In 2016, for instance, the procurement of coal from state-owned coal mines was ₴1,380 per metric ton, and with the Rotterdam+ formula it hit over ₴3 thousand.

That said, the increased power expenditure of Ukrainian coal mines forced power suppliers to increase their tariffs due to the Rotterdam+.

The result was a conundrum: with the increased import, the rest of the Ukrainian coal industry has degraded completely.

Coal of a different sort

The problem can be solved by increasing the output at coal mines in those territories controlled by Ukrainian government (Western part of Donetsk Oblast, Dnipropetrovska Oblast, Lviv Oblast, and Volyn Oblast).

These coal mines have enough steam coal but of a worse quality, i.e. gas coal and long-flame coal (rank G and D).

To meet the demand for such coal, most thermal power units should abandon the use of coal A and T for the coal G and D.

However, it is not the best time for investments that convert boilers to use the gas coal since thermal power plants have been reducing their energy output for several years now. The declining Ukrainian GDP only adds to the issue being in direct proportion to the power consumption.

Secondly, the import of anthracite from the Russian Federation has become a much easier solution for Ukrainian energy specialists. After the trade was banned with the occupied territories of Donetsk and Luhansk regions, Russia became the largest coal supplier in Ukraine (almost 74% of imports in 2017 and 78% growth in June 2018).

According to the State Fiscal Service of Ukraine, the imports of coal from the Russian Federation for three months alone accounted for US$470 million in 2018.

That said, it is uncertain how much anthracite actually continues to flow in Ukraine from the occupied territories through Russia (formally as the Russian or overseas coal).

What can be done?

The solution should be comprehensive and cover both the issues of production and demand.

First and foremost, Kyiv has all the tools except for political will to encourage energy experts to abandon the use of imported anthracite for the Ukrainian coal.

It should be mentioned that efforts in this regard are being made. In September 2017, the wholesale power market passed a draft that changed the market rules and suggested prioritizing those thermal power generation units operating on the coal ranks G and D over those using anthracite.

However, this draft was blocked by the Anti-monopoly Committee of Ukraine.

And the struggle between the lobbyists of Ukrainian coal and importers seems to continue.

Secondly, the long-awaited anti-corruption effect. The Prime Minister Volodymyr Groysmann has openly spoken on the fact that state-owned coal mines have local capos.

Thirdly, the enhancement of the corporate governance in state-owned coal mines. Some efforts were made in the form of State-owned Enterprise National Coal Company — a DTEK-like mega holding that unites around 30 coal mines remaining in the state’s possession.

The process implies a ‘cleansing’ of state-owned mines from surplus assets (primarily welfare facilities to be transferred to local governments).

Moreover, the merging of mines entails a liquidation of numerous coal mining associations to which they now belong. In theory, this will speed up the preparation of coal mines before privatization.

Another important component to ignite the coal industry is modernization and external financing.

More specifically, the Polish manufacturer of mining equipment FASING plans to enter the Ukrainian market. Negotiations have already started.

For the results to become material, there should be more players. However, the economic situation in Ukraine and the lack of substantial reforms does not contribute to that.

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With the growth in sales comes the growth in business — a law proven by long-standing practice. The question stands, however, what should be done to secure this growth?

By unleashing the reserves hidden in the sales department, you can increase the revenues by 5-15%.

Where are these reserves?

To find them, one has to delve deeper into the processes. For instance, some companies see no difference between a sales department and customer service. Such an illusion is particularly inherent to those large companies that have a solid list of loyal clients. Because loyal clients are the core focus of sales managers. That is, sales managers may handle accounts, close documents but leave cold calls for another time.

It goes without saying such a model is deplorable, providing for no increase in the client database or higher gains.

There are other important points to consider.

Structure of sales department

Many executives and sales managers do not fully understand how their sales department works, its areas of responsibility and the overall structure of the department. Such a confusion leads to chaos in the entire department dragging the sales performance with it. That is why every executive must outline a clear structure and ensure every manager understands his/her functional responsibilities and duties. Here are some ways to structure your sales department:

  • the duties of trade representative are performed by an executive, who often acts as the head of sales, or there is a trade representative officer at the company. The head of sales has multiple trade representatives accountable to them. As a rule, trade representatives are divided by territory or commodity group. For this structure, the best industries are retail (corporate sales), net marketing, services some b2b businesses.
  • classic model. For the purposes of this model, a sales manager means a store clerk, manager that answers calls and a salesman that meets with clients. In other words, a person somehow involved in sales takes the role of a sales manager. Industries: retail (answering incoming calls), services, b2b, internet shops (incoming calls);
  • 3-layer model. In this scenario, the head of sales has officers on three areas: lead generation (generation of leads by means of cold calls and active sales), lead conversion (transformation of leads into sales after sales managers meet and negotiate with clients), account management (client support and administration). Industries: services, b2b (when selling expensive products or products with a long sales cycle);
  • 4-layer model. This model is structured similarly to the previous one except one more expert adds to the picture — a lead development specialist. Lead development specialists come into action only after the deal is closed. They remind clients about the company over time, reinforce their loyalty and earn their trust so they make an order. Industries: car dealership, specific retail in most cases.

KPI system

Every entrepreneur or executive measures a salesman’s performance by KPIs. Having a multi-layer and complex system with vague KPIs instead of having a simple one such as ‘money on accounts’ can generate 30% losses for the business. Simplicity is the key. Select one key KPI and 3-5 secondary KPIs that would support the key one.

Incentives and reward

A manager without motivation will be a weak link in your sales department. And if the reward system does not satisfy the department — a wind up is just around the corner. The incentives and reward system should be updated every half a year. Try motivating employees with salaries and percentage bonuses, or maybe even stop paying salaries and give a juicy percentage bonus instead.

Use secondary KPIs to motivate but do not forget about penalties. Always give your employees an opportunity to recoup from penalties if they cover a specific period. The sales department generates your revenues, which is why the incentives and reward system should be designed with care.

Process automation

The processing speed, a well-configured phone line and document management system, website integration and the landing page — these components can enhance the conversion of applications into sales and provide for their optimization. Which brings us to the Customer Relationship Management — a software to manage a company’s interaction with current and potential clients.

Sooner or later, an entrepreneur finds themself in a situation when there is no space for their business to grow further without a properly configured CRM system. At first stages, aim for the simplest system that has many integration features. Ensure your sales department has a high-quality communication. Integrate your phone marketing with CRM.


Without scripts, no sales department will actually get any sales. Creating scripts is an art. With no experience, sense of the market and client image, you will never create proper scripts. Keep your scripts always updated as your managers try finding their individual style of sales and presales through trial and error.


Source: delo.ua

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During the earnings call for Q2 2018, Apple CEO Tim Cook announced the company is planning to expand its Apple Pay digital payments service to Ukraine.

He did not provide any specifics, only that the launch was scheduled on the next few months.

On 17 May, Apple Pay became available in the mobile application “PrivatBank 24”. A remarkable speed of action. Which, in itself, speaks volumes.

Haste makes waste, or does it?

No doubts that Apple was in a rush to launch the service. Our connection to the service came even faster than Norway and Poland mentioned in Tim Cook’s message. And these countries are more successful as far as the economy and technologies are concerned.

It goes without saying that Apple Pay planned to expand to Ukraine for a long time as rumored by Maksim Patrin, Head of E-business at Alfa-Bank Ukraine. A year ago he said that Apple Pay would debut in Ukraine by late June 2018 citing his insider sources. And he was correct for the most part.

What does all this tell us? It means that the Ukrainian market has potential and is compelling for Apple, and the number of contactless payments in Ukraine is skyrocketing.

According to the National Bank of Ukraine, last year marked a 37.8% growth in contactless cards (2.7 billion). To compare, the figure was 1.45 million as at 1 January 2016. While contactless cards accounted for 8% of all payments in 2011, in 2016, their number hit over 35%.

This, however, is not even the most important. Unlike Europe and the USA, Apple Pay faces much less competition in Ukraine. Of course, local banks such as Ukreximbank, Ukrsibbank and others have already rolled out similar digital services but their audience is limited and includes only the clients serviced by such a bank. Secondly, all these services have significant flaws. To name a few, EXIMpay works only with Visa cards, whereas Kredopay works only with Mastercard.

Apple Pay, however, is a “universal soldier”. It supports a variety of cards issued by different banks provided they have the technologies needed.

Apple Pay has only one strong competitor on the Ukrainian market – Google Pay. But that’s a whole different topic for another time. Given the increasing popularity of Apple devices among Ukrainian consumers, Apple has bright prospects ahead.

What about the gloomy side?

The rapid advent of Apple Pay can catch many Ukrainian companies and banks off-guard. It remains to be seen whether they can implement the technology rails for the service and how much time will it take.

Even Privatbank has not introduced all the functions yet, although being the first to integrate the Apple Pay. That way, Apple Pay users have no access to the bonuses that the Privatbank’s loyalty program Bonus+ offers.

Without the banks and state authorities being proactive, Apple Pay in Ukraine may not bring any meaningful results especially for those living outside the major cities. Some towns and small settlements even do not accept credit cards let alone the contactless cards.

Moreover, the case with Google Pay only adds more pessimism to the issue. Many waited for it, and many hoped for it. However, if we look at the Privatbank’s statistics, the low transactional activity in this service is self-explanatory.

There are tens of thousands of users, whereas the total of credit card holders serviced by Privatbank almost reaches 20 million.

The reason behind this is a poor distribution of NFC technologies that the entire system of contactless payments is based on. And the problem is not just the terminals alone, but the infrastructure too. Even an NFC smartphone will cost on a pretty penny, which an average consumer is unlikely to afford.

What can Apple Pay change in Ukraine?

All things considered, one can hardly expect an en masse transition to the Apple’s contactless service in the nearest future. The Ukrainian infrastructure lags behind. It is quite possible the situation can change in a year since technologies are known to grow exponentially.

Another peculiar point is that the very news about a big company such as Apple rolling out its product on the market tosses challenges at certain companies.

For all intents and purposes, it is another signal for the business that the country does not drive off the development track. Furthermore, it is an excellent newsbreak for Ukraine.

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The sales and purchase of securities generate a sustainable cash flow making them work for both the economy and the people, for whom securities are the only real alternative to deposited savings. 

This can only happen once there is an effective stock market in place. Without it, things turn out the same way they do in Ukraine.

The situation with junk securities is a very illustrative example.

Junk securities and their designated purpose

By junk securities, developed countries understand high-yield noninvestment-grade securities.

As a rule (but not always), the issuers are non-liquid businesses, companies on verge of default and so forth.

By selling their stocks and bonds, they try to recover their financial position. That said, emitters have to offer increased premiums to investors to offset the high exposure to risks.

As a result, the yield of junk securities can exceed the key interest rate of the Central bank by few percentage points or even be several times larger.

With a clever approach, which implies choosing an emitter wisely, such an investment can bring solid revenues.

The purchase of junk securities often intensifies when other better-quality investment instruments on the stock market show extremely low yields.

For example, such a tendency was observed on the exchange market in August last year. Back then, the ten-year US Treasury yield was at 2% a year, while the average yields of US junk bonds were struggled at 5.8% according to Bloomberg.

According to the analytical platform Informa Global Markets, that difference gave a strong surge of transactions in junk bonds.

The emissions of junk bonds accounted for US$17.65 billion in August last year, which is almost 900 billion higher than in 2016.

And what about Ukraine?

We have no stock market or a solid mechanism to protect investments, and the legal framework for investment activities is extremely deplorable. Therefore, junk securities are traded in Ukraine in an unusual way. With a local touch, so to speak.

Here, in Ukraine, by ‘junk’ we generally understand fictitious securities issued by fictitious companies and backed with no real assets.

They are created for trivial reasons – tax evasion and money laundering.

By purchasing fake stock, companies artificially overstate their expenditure side and decrease earnings subject to a 25% income tax.

Another common scheme is shifting the profits abroad. To that end, a company sells cheap fictitious securities to a non-resident only to repurchase them at a maximum price, thus, allowing to shift the profits abroad.

The bottom line is that the funds stay abroad, and the worthless securities return and settle in Ukrainian banks. Which are neither large or credible in the vast majority of cases.

This proves the recent statement of the Fund Deposit Guarantee reading that liquidated banks show a high concentration of junk bonds – nearly 13 billion. To add insult to the injury, their securities portfolio totals 15 billion.

All these figures are indicative of the extent of the shadow economy in Ukraine and what happens in the absence of an efficient stock market.

With no legal framework to govern this area, tax officials cannot even prevent fraudulent schemes effectively.

The Law of Ukraine “On Securities and Stock Markets” even has no definition of ‘junk’ or fictitious securities, let alone the counteraction measures.

For that reason, the National Securities and Stock Market Commission of Ukraine cannot ban the emission of such stocks or bonds directly. They will have to find a formal reason for that. Which are very often to be appealed before the courts.

What to do?

An obvious solution would be to reform the stock market.

One has to produce a new development program for the entire segment, create a database of security issuers available for all investors, implement mechanisms for investment protection, control of the issuers and so forth.

An important criterion for the stock market efficiency is its accessibility to the general public. Not only it is a stimulus to the economy, but a sign of transparency over the entire segment. The USA is the perfect example. Nearly a half of the US families are stockholders. There are special institutions to protect specifically the interests of small investors.

In Ukraine, however, the stock market is rather a restricted area only for the few to enter guided by its own rules. It is no surprise such conditions warrant the growth of junk securities in the state.

To that note, the tax law must be changed.

Ukraine by any reckoning imposes a significant tax burden on the business and offers no measures for its support. Having such expenses on their ledgers, many are compelled to find off-the-books solutions. And, unfortunately, that is what the junk securities provide for.

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The impact that the newly built Crimean Bridge is going to have on Russia can hardly be exaggerated. No wonder its grand opening was such a queer: Vladimir Putin crossed the bridge driving a Kamaz.

Yet, in addition to the vehicles, the repercussions it carries for Ukraine can hardly be overemphasized.

Economic losses

Until we have information on the calculation methods used by the Ministry of Infrastructure of Ukraine, their ₴500 million of annual projected losses seems to be a very rough estimate. As you may recall the bottom of all problems is the height of the Kerch Bridge, which allows to pass ships not higher than 33 meters. The Mariupol Sea Port, the largest on the Azov Sea, could accommodate vessels with the sail height of up to 44 meters. It is difficult to estimate the share of such high vessels in the cargo turnover and whether we actually have need in those. According to the data of the Mariupol Sea Port, the Kerch-Yenikale canal cannot accommodate 144 vessels that the port used to work with.

On the other hand, the biggest losses the Mariupol Sea Port is going to incur will not stem out of the military conflict in the Eastern Ukraine and the resultant confinement of transport connection with uncontrolled territories. For the port, steel products always remained the main commodity. In 2007, it accommodated over 8.5 million metric tons of cast iron and steel products alone. The port had shipments from all metallurgical plants of the region (Illich Steel and Iron Works, Azovstal, Yenakiyeve Iron and Steel Works, Makiivka Metallurgical Plant, Alchevsk Metallurgical Plant, Donetskstal Iron and Steel Works). Today, the Mariupol Sea Port focuses on products from the Illich Steel and Iron Works and Azovstal. These shipments make only half of the older volumes being around 4.5 million metric tons a year. Other shipments such as coal, coke, and clay have generated losses as well. Many coal mines are located in the uncontrolled parts of Luhansk and Donetsk regions, and there is no direct rail communication with the Northern part of Donbas (where the clay is extracted and Europe’s largest Avdiivka Coke Plant is located) that would by-pass Donetsk. In total, the turnover of steel and other types of cargo shipped to the Mariupol Sea Port declined from 15 to 7 million metric tons (according to the port).

What can be done?

After the Crimean Bridge, the South-East Asia direction, where the cargo ships with a high above-water portion used to set sails, became of a crucial importance (according to the Mariupol Sea Port). Nearly 1.5 million metric tons of iron and steel came this way, that is, about 20% of the current cargo turnover.

Before the bridge, however, transcontinental vessels were loaded in Mariupol hardly to the fullest. They then docked at Black Sear ports (Yuzhnyi Sea Port, Port of Chernomorsk, Port of Odesa), where they loaded the remaining space with products from the Dnieper Metallurgical Combine and ArcelorMittal.

For that reason, the most obvious way to offset losses from the Crimean bridge is the further development of railway communications between Mariupol and the mainland (namely, increasing the handling capacity of the railway junction at Kamysh-Zoria that accommodates railway trains coming from the Mariupol railway hub). Such actions can solve two problems at once. On one hand, it will allow Mariupol steelworks to ship some of the steel products to Black Sea ports. On the other hand, it will allow the Mariupol port to offset turnover losses by increasing the shipments of agricultural and other types of products from all over Ukraine, which would not require large-capacity vessels.

Not to mention the economic and military benefits such a railroad communication can bring.

As to the cons, they are mainly geopolitical

Unfortunately, the main losses Ukraine incurs have a geopolitical rather than economic nature.

  1. Russia has once again confirmed the seriousness of intentions about Crimea showing that it is in dead earnest and for a long time, and that international courts or hopes for the issue to somehow resolve by itself cannot scare Moscow off.
  2. The Sea of Azov now becomes a lake, and even before the bridge was built, Russia had had resources to close the Kerch Strait for Azov ports in Ukraine.
  3. Ukraine has almost completely lost any levers to influence Crimea since Russia does not need a land corridor to the annexed enclave anymore, nor has any interest in its stability. As, for example, in autumn-winter, when the ferry connection becomes unstable.
  4. The important part is that Russia has fewer deterrents against a more aggressive policy towards Ukraine. And after the gas pipelines around Ukraine to Europe hit their designed capacity (especially, Nord Stream 2), Russia’s interest in the existence of Ukraine will diminish even further.

For that reason, new challenges require Ukrainian elites to have better diligence and concentrate resources in the right direction – particularly, on infrastructure projects. Alas, time is not on our side.

Source: Novoe Vremya.Business

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Many developed countries require declaring your income. The procedure remains essentially the same: within a specific period, citizens are required to submit the statements of their income, expenses and other tax information to a relevant state agency.

Each procedure, however, differs from country to country. The persons declaring their income, size of information specified, avoidance penalties – any information is highly situational.

Tax returns in the United States

For example, in the United States, any entity/person classified as a tax resident shall submit a tax return. First of all, it applies to those employed in the US.

In addition, tax residents are holders of a working visa and, in most cases, those incapable of working but entitled to non-labor revenue (such as persons with disabilities): alimony, dividends, rent, royalties.

The Internal Revenue Service is responsible for processing the revenues of most taxpayers. The General Accounting Office is authorized to process the revenues of public servants. It also keeps records of the revenues of those companies whose representatives are lobbying their interests in public authorities.

At the same time, not all residents are bound to submit tax returns. These may be companies with zero annual income and citizens, whose annual income is lower than the IRS minimum.

A tax return must contain all revenues and their source. The first thing tax officers examine is the origin of taxpayer’s funds and if the taxes were paid on those. Tax officers care not about the number of apartments, cars, yachts, watches and other items of value. Only the income-generating assets.

In addition to the cash and borrowed funds, politicians bear a responsibility to specify their shares in business entities, if any,  and liabilities before lending organizations.

If within a year they have conducted transactions of sales and purchase of shares, and if the total value of such shares exceeds US$1,000, – such information should be specified as well. The main focus is on information about private collections (paintings, automobiles, etc.). To that note, the closest relatives (spouses, children) should also make such information available.

There is one more interesting fact about income declaration in the USA. For citizens, this procedure is an opportunity to assess their financial position and tax history in general.

Americans, same as Ukrainians, pay taxes during the year. An annual declaration allows seeing the entire picture, calculating if all payments have been made or if there was an excess paid and understanding if all tax deduction opportunities have been used (for example, for expenses incurred on training, treatment, education, etc.).

In the event of excess payments, the state undertakes to return the excess paid. That said, the revenue service is usually not so over-particular when it comes to inspection. An extra comma or wrong date is not always treated as a taxpayer’s attempt to understate the tax result. Unlike in Ukraine.

And what about us? How are things going in our country?

Those who are relatively knowledgeable about the declaration of income in Ukraine may notice that the procedure in our country is quite different from the United States.

First, only specific categories of citizens submit tax returns in Ukraine. These are public figures, public servants, and anti-corruption officers.

Such an obligation rests with those receiving a certain type of income such as one received from abroad (including transfers from relatives working abroad), revenues from alienated shares, and securities. Moreover, it is incumbent on those involved in a sole professional activity (attorneys, doctors, lawyers, etc.).

Other factors may also create a necessity to submit an annual tax return. Such as an unexpected inheritance from distant relatives.

A tax return has the same format for all categories of taxpayers, unlike the ones for politicians and public servants. Their control is the responsibility of the National Agency on Corruption Prevention.

Such documents are filled out and sent in an electronic form only (as per amendments to the legislation).

The electronic tax return includes 16 sections. It is mandatory to specify accurate information about the revenues and expenses, immovable property, including ongoing construction (if any), automobiles and other vehicles available, securities, monetary assets and bank accounts, credits and loans, luxury items, private collections, rare valuables.

“Civic” tax returns in Ukraine are subject to meticulous examination down to every comma and full-stop. Even a small error can become an excuse for tax claims. Unfortunately, the submission procedure is often delayed and creates many problems for those Ukrainians with poor awareness when it comes to preparing tax returns.

What is also important is that tax returns of public figures and public servants in Ukraine are in public domain, unlike the United States. On one hand, such a measure achieves maximum transparency. On the other hand, this data is used to manipulate public opinion.

Both in Ukraine and the USA, a failure to submit a document results in a penalty for late submission. In Ukraine, some cases entail a criminal responsibility.

A penalty also applies if the examination reveals errors. Which makes the Ukrainian case rather ambiguous. Our tax service cares not if the errors were intentional or accidental. A taxpayer will have to pay the penalty anyway.

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According to the State Statistics Service of Ukraine, the number of agricultural cooperatives increased by 3% in Ukraine in 2017. Considering that this indicator was declining steadily – not bad. Let us not forget that the government has launched a support program to top it off.

₴1 billion is expected to support the farming households and cooperatives. The benign lending systems and compensation for some expenses will also be there to aid their development. So, we read the news and can hardly believe our eyes. Alas, it is not so simple as it may seem.

Goods things first

Betting on cooperatives is a wise move in itself. It is a huge trend in the world. Take a look at our EU neighbors. The cooperative business is becoming more popular there.

According to the European Commission (EC), there are around 250 thousand cooperatives in the EU. In total, they employ 163 million people – one-third of the local population.

Most cooperative associations act only in the agricultural sector. According to the EC, the cooperatives account for 89% of the agricultural market in the Netherlands, 79% – in Finland, 55% – in Italy, 50% – in France. Next in turn are the woodworking cooperatives, banking conglomerates, cooperative retail associations, etc.

Europe is not the only one with cooperatives. Other regions are not far behind and some even got ahead. ZEN-NOH – one of the largest agricultural cooperatives – was created in Japan, and its annual turnover accounts for $50 billion with 4.78 million of participants. There is also CHS (USA) – one of the world-leading agricultural cooperatives. Its annual turnover is $35 billion.

I think we all can agree this figure is huge. So huge that many governments now consider the further development of cooperative business models. Experts even discuss the perspectives to create a social and solidarity economy many times. The kind of economy that would have cooperatives in focus.

These talks alone are already something. The social and solidarity economy has long been viewed as something outdated, a communism relic, a dead end. Now, however, experts have a different perspective.

Of course, it would be a crime for Ukraine not to support this ‘flashmob’, especially in view of our country being the largest exporter of agricultural products. And the reason for that is both the positive experience of our neighbors and simple logic.

Modern cooperative members own a shared capital, commit their harvest to the cooperative, assign the development, marketing and sales functions to it. At the same time, each member retains the right to independent decisions that factor in the specifics of their personal land plot and agriculture, which an agricultural holding cannot do to a full extent. That said, farmers participating in a cooperative can export without intermediaries and raise external investment or use large loans.

In other words, cooperatives allow small entrepreneurs to have same opportunities as agricultural holdings, which they would not have on their own. That is what makes agricultural associations successful. Ukraine’s intention to follow this path is quite reasonable and correct. For now, however, this path is fraught with difficulties.

About difficulties

The fact that the number of cooperatives in Ukraine is growing is surely a positive sign. Unfortunately, that is not the case when the quantity equals quality. Nearly one-third of associations created do not operate de facto. Not only do they lease land to agricultural holdings, they are never engaged in other activities. The effectiveness of other cooperatives also raises some flags. And there are several reasons for this.

First reason is the lack of awareness among farmers. Some do not even know what a cooperative actually is. Others immediately recall the ‘kolkhoz’ (communal farms), ‘prodrazvyorstka’ (food surplus requisitioning) and, perhaps, even collectivization. With these ideas in mind, one can hardly believe that cooperatives can result in real benefits.

First Deputy Minister of Agrarian Policy and Food Maxym Martyniuk has noted in one of his publications that most farmers in Ukraine merge into cooperatives unwillingly on the initiative of local authorities and donor project representatives. He concluded that this is a bad sign. On one hand, it is possible. On the other hand, we have a successful example of Japan, where the government initiated the creation of agricultural cooperatives. Japanese agencies still control many of the local farm associations.

Local farm associations cover 91% of the agricultural market. The largest and world’s most successful agricultural cooperative is already in Japan. That is, the kick in the pants is not an obstacle in this case.

What is more important is reforms and profound support at the government level, as well as professionals with the experience in cooperative governance. So far, Ukraine has made little progress in this regard.

Secondly, the legislation has some problems too. The Ukrainian law qualifies cooperatives as non-profit organizations, and for that reason – tax-exempt.

At the same time, the Tax Code binds cooperatives to pay an income tax, which is indicative of inconsistencies between the law and the code.

In addition, those who service cooperatives have to pay the income tax when selling or buying via the cooperative. Naturally, it affects the cooperatives’ profit and their competitiveness.

Bottom line

If one rids of all the problems above, implements an efficient support program, promotes business awareness among farmers – the bright future will be forthcoming.

The examples of other countries can attest to that and we are yet to see if the government can rise to the challenges.

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Every company develops through a number of stages: from the start-up stage, when businesses are being formed and have little earnings, to the break-even point.

Then, there follows the profit stage, but only if the company is not in the valley of death, where most businesses lie buried after they failed to reach the breakeven point.

These stages make a company’s lifecycle.


Financial planning plays an important role in the company’s lifecycle. At first stages, financial planning is the company’s backbone, which then becomes its vascular system that allows to digitalize and balance the inflows/outflows/cash flow via the business budgeting system by business areas.

Financial goals should be prioritized in view of specific factors. These factors:

  1. Company lifecycle.
  2. Strategic goals (local/global)
  3. Market size and market positioning.
  4. Competitive environment, etc.

That said, the financial objectives must also meet certain criteria, such as the reality.

  • reality. In this case, we assume the attainability of tasks in a certain period. At least one successful entrepreneur knows that business objectives should lie beyond the life and remain unattainable as a perfect ideal. This notion applies well at the early stage of development;
  • measurability and predictability. Objectives should be susceptible to mathematical calculations and financial analysis;
  • non-stop progressivity. The objectives you set should be of permanent nature and progress exponentially, that is be growing together with the company;
  • intensity and extensity. The intensity implies the internal efficiency of a company – the ability to work its way through costs. Extensity – the ability to increase external sales.

Supervision tools are behind every success and should be used at any stage to ensure the development. One of them is a system of key performance indicators (KPI) used to spell out objectives and their timelines.

It also tracks their implementation speed, progress, and other important factors.

Essentially, KPI is a tool that can visualize the movement towards your goals. The benchmark to measure the efficiency of your business and to answer important strategic questions, such as: “what’s the score?”, “does the efficiency increasing?”, “has our EBITDA increased (or Revenue, Market penetration)?”, “does the unit economics work?”, etc.

The Deming cycle aligned with OODA concept (Observe–Orient–Decide–Act) is just as important.

They are designed to solve any problems through a comprehensive analysis of all the factors affecting them.

We can see how it works in world-class companies that are keen users of these methods in their processes.

For example, if there is a manufacturing defect detected at Toyota factories, the entire conveyor line shutdowns instantly. Then the entire technical staff is gathered. Through joint efforts, they identify the problem and create a solution.

That is, they observe, orient, decide and act as the OODA concept guides.

Once the problem is dealt with, the conveyor resumes operation and no problem alike reveals itself after the conveyor is fine-tuned. The staff is this informed of previous shutdowns and will prevent the recurrence. By the way, that is the answer why Japanese vehicles have almost no breakdowns.

With these principles implemented at each stage your business starts up and develops, you will definitely succeed.

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