Agromars, a Ukrainian poultry company, is going out of business. OK, so what? Why take note of this? Because there’s an interesting story behind this that tells us a lot about how “development banks” work.
Some 20 years ago, Agromars was one out of a range of poultry producers in Ukraine. Then, in 2003, the International Finance Corporation (IFC), part of the World Bank, began to pour money into one of its competitors, the MHP Group, led by oligarch Yuri Kosyuk. Until 2017, MHP received more than USD 500 million in investment capital from the IFC, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB).
This was not without consequences: In 2008, MHP had reached a 36 percent market share of chicken production in Ukraine. Still in 2010, MHP’s share in the poultry market was no more than twice that of Agromars, the 2nd largest poultry producer. In 2013, MHP had already gained a market share of 52%, with Agromars’ share falling to 15%. MHP’s share continued to rise to 61% in 2015, 64% in 2017 (Agromars 11%), and finally over 70% in 2020.
Agromars was a large industrial poultry producer, too: 35,000 hectares of land, 12 breeding farms with 1.1 million parent chickens, a hatchery for 92 million day-old chicks per year, and more than 17 million broiler chickens on 43 farms.
However, the tremendous support by international development banks enabled MHP to build the largest poultry facility in Europe, with a total annual capacity of 220 million broilers, among other expansion projects. In fact, MHP gained „monopoly power” and “overwhelming control” in Ukraine’s poultry market.
Now, who are these international financial institutions (IFIs) interfering in such a way as to help one single company gain monopoly power over a large market? First, it’s worth noting that these IFIs operate with public (taxpayer’s) monies of their shareholder states. Originally, they were founded to help development and transition countries, such as former USSR states, establish market economies. But they seem to have lost track long ago, questioning the legitimacy of their continued existence.
Unfortunately, the banks are unwilling to confront themselves with their wrongdoings. Shifting Values filed a complaint with the EBRD’s official project complaint mechanism, but the Bank chose to reject it with a flimsy excuse.
To make matters worse, MHP is a company which became infamous for massively evading taxes, bypassing EU import quotas with a “bone trick”, sparking protests among the local population at their site of operation, etc.
In the end, International Finance Institutions used public monies to influence the market to create a monopolistic situation. Last but not least, it brought forth the suffering of hundreds of millions of chickens every year. And we all support this with our taxes. One might wonder when decision-makers will finally stand up to review the practises of these banks!