Part I.Soil salinity management in the Eurasian Region
Chapter 3.Assessing and forecasting the development of soil salinization and
4.3. Innovation and investment to support the management and use of salt-affected
A.V. Kucher and O.V. Anisimova (Ukraine)
Innovation and investment to support land amelioration is a range of measures that involves the use of means, mechanisms, methods, tools and techniques of innovation and investment management aimed at mobilizing and encouraging further investment and innovation in the areas of organization, technology, agrochemistry and nature conservation for increasing the efficient use and management of ameliorated lands.
Conceptually, the innovation policy should be combined with the investment policy to provide a simultaneous promotion of investments and innovations, as the former serves as a basis for the latter. At the same time, innovation incentives stimulate further demand for investments. The integration of innovation and investment activities and the attraction of additional finance to the development of innovative technologies should be considered as the most important aspect in the efficient and sustainable development of amelioration practices.
State control over innovation and investment policies in the area of soil amelioration in Ukraine involves the following priority measures [9]:
• the creation of an infrastructure of an innovations market and the development of technology transfer systems, in particular, by focusing on the development of innovations in the management of financial and material resources by different organizations such as science parks and scientific research institutes in cooperation with small and medium-sized enterprises under business incubation programmes and a coherent innovation policy based on the principles of planning and forecasting innovations;
• the implementation of an organizational-economical mechanism designed specifically for supporting new ecological ideas, providing a demand for innovations in the areas of amelioration and the greening of the ameliorated land use systems;
38 Soil salinity manаgement manual | Part I.Soil salinity management in the Eurasian Region
• the development of a system of economic incentives in soil conservation and innovation enterprises (tax deductions for entrepreneurs that bring patent licenses for ecological innovations in the area of amelioration and implemented soil protection technologies);
• the provision of tax deductions for enterprises under various forms of ownership and management, where they invest their own capital into scientific research and development of ecological innovations in the area of land amelioration;
• the creation of mechanisms of favourable loans to encourage practical applications of innovations in the area of land amelioration, e.g., by concessional loans to enterprises that implement innovative amelioration projects;
• the establishment of a credit insurance fund for innovative developments, the provision of the state insurance for risks in innovation development and the creation of special innovation-investment banks to concentrate capital in the area of amelioration;
• the improvement of an organizational-economic mechanism for the interaction between the recipients of direct foreign investments to encourage non-fiscal incentives such as economic liberalization in the agricultural sphere and strengthening the institutional support system, in particular, improving the performance of agents that attract foreign investments.
It is clear that actual possibilities for the practical realization of ameliorative measures on salt-affected lands depend mainly on the availability of investment resources. For example, according to estimated calculations for Ukraine, the annual application of gypsum to the Solonetz area of about 0.1 million hectares requires an investment of almost 5.6 million USD and the ameliorative deep ploughing of the Solonetz area of 0.04 million hectares requires about 2.7 million USD.
High ecological standards and economic efficiency can be achieved on ameliorated lands on the basis of a broad-scale use of innovations and a realization of the innovation-investment model in agricultural sector.
The main sources of finance for the priority aspects of innovative land amelioration development in Ukraine include the following: a) self-funding of agricultural enterprises and associated organizations, b) the state budget of Ukraine and local budgets at all levels, c) nature conservation funds at all levels, d) bank loans and finance lease, e) domestic and foreign investments and international technical support and f) other non-budget funds in accordance with current legislation.
Additional investments can come from sources such as global and regional funds, common investment institutions, international financial and credit institutions and government loans from developed countries.
Considering the limited availability of investment resources in the state, it is suggested that agricultural enterprises should be encouraged to seek their own funds for conducting amelioration of salt-affected soils in combination with their conservation and rational use, with a partial reimbursement of amelioration expenses. For example, both gypsum application and deep ploughing of salt-affected soils should require a 10% reimbursement of expenses from the government.
The efficiency of investment and innovation support for land amelioration can be improved by the active involvement of state funds into the public-private partnership, where the state uses mechanisms to attract private capital for innovative development.
In self-funding enterprises profits and depreciation remain chief sources of investments into
innovative amelioration development. At the same time, many agricultural enterprises have recently been unprofitable, while depreciation has reduced its potential to improve financial resources.
Therefore, mobilization of financial resources requires both internal and external investments that can only be achieved through creating more favourable business climate together with use of institutional media to attract domestic investors and foreign funds.
Bank lending plays an important part in financing investment-innovation projects in the area of land amelioration. In this respect, it is important to solve state-level problems of reducing the cost of bank loans, extending the periods of credit, increasing the credit supply and availability and diversity of international use of credit offsets. The best support of amelioration projects can be provided via long-term concessional lending with partial or complete repayments of interest rates from the state budget.
As long as agricultural enterprises have limited budgets and little potential for the self- financing of ameliorative projects, there will be a need for investigating untraditional sources on finance.
For instance, leasing can be a promising and effective solution to the problem. Financial leasing is more economical than bank credits and includes commodity lending that allows for the restoration and purchase of productive assets without great financial strain. Therefore, in a near future it is advisable to implement public leasing to support the refurbishment of existing enterprises with new ameliorative machinery.
The stimulation of processes for creating effective sources of investment can be achieved through the creation of new agricultural producer networks with relevant joint-stock companies, agricultural venture businesses and agrocomplexes that can be more efficient in attracting both domestic and foreign investments into land amelioration [4].
It could be helpful to make the following institutional arrangements: 1) to form holding companies on the basis of national water management enterprises as an effective way to increase the investment potential, 2) to apply consortium credits that imply minimizing lending risks and guarantees for repaying large loans and 3) to arrange cooperation between agricultural producers that have different legal statuses to enable joint investments and to minimize the risks.
Thus, a step-by-step implementation of the innovation-investment system into the development of land amelioration practices opens up new opportunities for a larger volume and higher efficiency of food production on ameliorated lands together with maintaining a high soil quality and further improvements in the food security of Ukraine.
40 Soil salinity manаgement manual | Part I.Soil salinity management in the Eurasian Region