Alisher Tyazhyn, Kusto Agro’s first deputy CEO, speaks about the land market and Kusto Agro’s social responsibility at the 11th international conference on “Doing Agribusiness in Ukraine.”
Kusto Agro is a Kazakhstani company. It has been working in Ukraine since 2012. We understand it is necessary to take a structured approach to the land market opening issues in the first place.
On the other hand, our company has its own internal philosophy — the land cannot belong to anyone in principle. It existed millions of years before us, and it will remain behind after us.
The government should insure investors against risks
We believe that the state, namely Ukraine, represented by the government, has to implement the right mechanism allowing market participants to build the system correctly. We are not against the land market opening. However, the government’s attitude is the most important thing in this case. In this process, the government should be the platform that will hedge or insure all investors and market participants against risks.
We see this matter from within: what was 5 years ago and what is happening with the land market now. If we compare Ukraine and Kazakhstan, Ukraine is ahead of it in agriculture by 15 to 20 years. Ukraine has done a lot, and even now, in Kazakhstan, we use all the best Ukrainian practices while developing agricultural projects.
Let us simulate 2 scenarios: foreign investors’ access or no access to the land market. Could you comment on these two scenarios, taking your company as an example?
If there is no access, nothing will globally change for us. We will go on being socially oriented. What I mean is that we will anyway fulfill all the obligations taken by us with respect to our field companies and in the villages where our shareholders live. We will support local communities as well, but first of all, we will support our shareholders.
In this regard, we are facing the future and believe that shareholders will become more insured in such a scenario because we rent their land for 10 to 15 years. Moreover, we are interested in supporting and improving the village infrastructure as best we can. The fact is that the government neglects rural areas. If you look at the current situation in rural areas… Just go beyond Kyiv and see that the picture is not always rosy. So, that is the situation where it is the business that actually helps. Even if we have no access to the land market, we are ready to accept it, and our attitude will not change.
We are ready for the second scenario as well. We see opportunities, but we need an understanding of what a Ukrainian company is. Kusto Agro is considered to be a Ukrainian company. We have been working here for more than 7 years. We pay taxes here, and we are a tax resident. It is just that the government must organize the purchase and sale system correctly. It can possibly determine some kind of balance or share within the village, region, etc. We see no problems here too.
Kusto Agro is a socially-oriented company
If the government implements the latter scenario, how will it change your business model? Will you develop any new directions?
We are a socially-oriented company, although it is clear that business is business. Everyone loves the final profit and loss statement containing positive numbers. But why are we striving for social orientation? Because we clearly understand that our core asset is people. They are our employees, our customers, and our shareholders.
Consequently, we take this policy very responsibly and launch social projects in rural areas. Not all companies with Ukrainian capital do so. Some companies conduct their business illegally and don’t pay taxes — these Ukrainian companies cultivate land illegally.
In this regard, we are absolutely transparent — we are definitely contributing to the market, and our strategy won’t change, it’ll be the same.
“Gray farmers” don’t bear such costs, as they work in a “gray-black” zone. They are not really competitors to us, but you have to understand their influence on shareholders.
“Gray farms” pull shareholders’ heartstrings. They come and give them more than transparent companies like ours. But the shareholders don’t understand that these “mates” came just for a year, just to earn money quickly, and tomorrow, others like them will come to replace them. However, they don’t bear any responsibility to shareholders.
Our social responsibility to our shareholders is much longer in time. We not only support shareholders but also improve the infrastructure in rural areas. Kusto Agro builds churches and helps to construct kindergartens. We build roads and playgrounds. The government doesn’t always do it. People come to us with such requests, and we help them. We comprehend well enough that if we just come to harvest and leave, it won’t be right. With such an approach, people’s attitude towards our company will be completely different in the future.
You have to understand that we are not doing this to buy people’s affection. It’s just our internal corporate policy. We inherently work like this in all our business areas, not just here.
The active land market will not cause massive shareholders’ outflow
If the land market doesn’t open, we’ll return to our basic scenario, according to which we have been working for more than 7 years. If the government makes any other decision on foreign companies, we will still work following the basic scenario.
I don’t believe the land market will cause massive shareholders’ outflow. Shareholders are not silly. They aren’t the people they used to be 10 years ago. Having the Internet and access to information, they understand the value of their land as well, and not everyone is eager to sell it. They are comfortable working in the same good old way.