The land sale moratorium has been prolonged for another year. However, the law, in which this decision was approved, states that the moratorium is valid until the first of March of this year. The Cabinet of Ministers should submit a bill to Parliament on the market turnover of agricultural land which will give a real start to land reform. However, experts doubt that it will be done on time. Therefore, DUMKA decided to find out what constrains the adoption of this law most of all and where is that “golden mean” which will give the chance both to start the reform, and not to sell the Ukrainian black soil to foreigners – the thing that its opponents fear most of all.
The problem is long overdue
The Ministry of Economic Development and Trade of Ukraine says that according to the World Bank, the introduction of the land market would create opportunities for GDP growth in Ukraine annually by additional 0.6-1.6 percentage points. It would allow attracting almost 1.5 billion-dollars-worth investments per year, and in turn, push the development of agriculture. The prospect is tempting but for a few things. Therefore, the moratorium on the alienation of agricultural land (and this measure was needed to ensure normative regulation and the creation of infrastructure for the land market), which was first introduced in 2001, and was repeatedly prolonged later, may not be limited to the year 2020.
Experts note that if the government bill on the turnover of agricultural land is not introduced to the Parliament in time, this may cause another delay in the launch of the land market. On the one hand, the desire to protect Ukrainian black soil from a sale to foreigners (so, as supporters of the moratorium say, we can lose Ukraine without any war) is quite logical and justified. On the other hand, if the shareholders really want it, they should be able not only to lease their land for pennies (now they are paid 3 thousand hryvnias per hectare at best for a year) or inherit it, as it happens now, when shares are mainly leased to large agricultural holdings for 49 years, but also to sell it at a market price.
In addition, whether we like it or not, the issue of land sales in Ukraine entered the international level after the European Court of Human Rights considered the case of Zelenchuk and Tsytsiura v. Ukraine. The moratorium was recognized as such that violates human rights by the ECHR last year in May. It is quite possible that since the summer of this year – a year after the decision of the ECHR came into force – those Ukrainians who desperately need to sell their land will also start applying to the European court if the Verkhovna Rada does not adopt the law on the turnover of agricultural land by that time.
Protecting the shareholder and the interests of the country
“Prolonging the moratorium till 2020 is a forced step for today,” the member of the Verkhovna Rada Committee on agrarian policy and land relations, the people’s deputy Serhiy Labazyuk explains to DUMKA, “because the situation is very complicated. On the one hand, the law on the land market, which should clearly state all the mechanisms of its functioning, has not yet been adopted. It is neither legally nor physically possible to sell and buy land. But given that people in our country do not always adhere to the legislation, we understand that if there is no such a formality as the prolongation of the moratorium, there may be lawyers, notaries, and registrars who will carry out appropriate actions to alienate the land. And although it is illegal, such gray or black schemes will mislead the owners of land shares. Therefore, we should not allow it to happen.”
According to the people’s deputy, we should not forget that usually before the elections – whichever, presidential or parliamentary – politicians like to manipulate the topics that are important for people. So, the opponents of the land reform are easily imposing certain moods on society. “Nowadays, the opinion on whether it is necessary to give people the opportunity to sell the land or not is clearly divided in society,” Serhiy Labazyuk says. “So, the older generation is mostly against such a sale, although hardly anyone can reasonably explain why exactly they are against. The explanation is very simple: during so many years of the moratorium’s existence, it was imposed on people that the land should not be sold, so they treat it as an axiom. But the younger generation mainly believes that it is necessary to be able to sell and buy land. Why? Because they, even if they own shares, usually do not cultivate the land themselves but lease it. And if they live in the city, riding there every year for their rent is not very interesting. And if they had the opportunity to sell this land at a normal market price, they could invest in their education, mortgage, or solving other important issues. Therefore, it is necessary to give people the opportunity to exercise their right, but within the framework of the current legislation, which we must regulate.”
According to the specialized parliamentary committee, it is important to protect the owners of land shares, who should be able to sell their land at a market price and prevent the situation in which they will be deceived by fraudsters after the opening of the market. And the issue of food and state security, in general, is just as important. We are talking about the fact that the land should not only be properly cultivated but also that the land market should not be chaotic, because it will entail a lot of negative aspects. “First of all, in this case, the production shaft and the number of workers will decrease, and the final consequences are even difficult to imagine,” Serhiy Labazyuk says. “Regardless of whether we want to determine it or not, the Ukrainian land is a key resource of the state, so the state should be able to influence the policy on the land market to some extent. If we lose control over this resource today, we risk losing a lot without war.”
The relevant ministry keeps silence
Since there is very little time left until March, and the government bill, which is entrusted to the specialists of the Ministry of Agrarian Policy and Food of Ukraine together with their colleagues from the Ministry of Economic Development, the Ministry of Finance and The State Service for Geodesy, Cartography and Cadastre, was not yet presented to the Agricultural Committee of the Parliament, we are asking the specialized ministry about this issue. And as it turned out, the officials of the Ministry of Agrarian Policy do not have time now for the development of the bill. In any case, as their press service explained to DUMKA, because of the changes that have occurred in the Ministry (Maksym Martyniuk, who was an acting Minister of agrarian policy, resigned and the Deputy Minister for the European Integration Olha Trofimtseva was temporarily appointed to his position – auth.), the request is being reviewed by the management,” so we cannot get an answer yet, although, of course, they are working on it.
Meanwhile, society is primarily interested in the readiness of the bill and whether they will manage to submit it to the Parliament before March 1, as the government plans, which was said at one of the last meetings of the Cabinet of Ministers, because the creation of such a serious document requires a lot of time. And, according to the norms of the government bill, who will have the preferential right to purchase land and in what amounts it will be possible to buy it? How and who will assess the land? Did the officials support the idea of online land auctions? Which option do the officials offer as a solution to the problem of selling Ukrainian land to foreigners, because this aspect is generally the main deterrent for the launch of the land market, and the like? And it is unclear how long this request will be under “consideration of the leadership” of the Ministry, therefore our questions have so far remained unanswered.
Saving the businesses that are already operating efficiently
The Ukrainian Agrarian Confederation advocated the abolition of the moratorium on the sale of agricultural land for a long time, supporting the introduction of the land market. “The moratorium should be abolished, but it cannot be done at any cost, that is, not when the law on the turnover of land exists only at the conceptual level, but there is no prepared text proposed to the Parliament,” the General Director of the Ukrainian Agrarian Confederation Pavlo Koval said in a comment for DUMKA. “Although in fact, there are several bills registered in the Verkhovna Rada, but they are difficult to perceive and are not considered by the Committee.
In addition, to this date, the draft law is being developed by a working group of the Verkhovna Rada Committee on Agrarian Policy and Land Relations, on which expert centers, which include foreign experts, and the relevant ministry are working. These documents might be introduced as different bills. I am a member of the working group of the committee. The work is carried out there, certain materials are already developed. But the work is complicated because it is not only about the bill on the turnover of land, but also about the package of changes primarily in the Land Code. Therefore, it would be advisable if a joint bill would be introduced to the Parliament, which would later be finalized in the Committee.”
What should be considered in the first place? Pavlo Koval says that the Ukrainian Agrarian Confederation will support reasonable measured decisions as to canceling the moratorium and introducing the land market. We are talking here about a number of serious restrictions, without which we should not launch the land market if we do not want to be left completely and utterly empty-handed. “An important question is how much land should be owned and used by a single economic entity,” the expert explains. “I am convinced that this issue should be regulated at the community level, although specific figures will still be debated. There are suggestions that should be determined on the districts level. We believe that a single subject should be able to use no more than 25% of the land within one district.” According to Pavlo Koval, now there are areas where only one economic entity operates, so we need to think how to regulate all this so that there is competition, without which it is impossible to expect positive market changes.
The next restriction, which the Ukrainian Agrarian Confederation will insist on, is at the level of the region, and the fourth level of concentration restrictions is within the whole country. The General Director of the UAC explains: “the concentration should not exceed 1-1.5% within the country, but this is also a debatable issue, because if you take 42 million hectares of land, which we have today, then 1% is some 400-420 thousand hectares per subject. Now there are companies that concentrate such areas. And if these enterprises operate effectively, they have worked out crop rotations, technological machine stations with reference to land clusters, there is no need to destroy their production structure with this law.”
Foreign factor in the Ukrainian land market formula
The UAC is concerned about the strategic issue, which, in fact, is the cornerstone of the land reform. We are talking about the biggest risk, that is, who will have the right to buy land. Although sociologists note that the opening of the land market is supported by more and more Ukrainian citizens, they say that many Ukrainians are still against the sale of land (almost 45%, although previously it was 70%), because they believe that if you turn the land into a commodity, it will be bought by foreigners – and nothing will remain of Ukraine. “To prevent this from happening, we insist that in the nearest 10 years after the introduction of the land market there should be no possibility of the admission of foreign entities to it,” the expert said. “And then it will be necessary to reconsider this issue. By the way, all Central and Eastern European countries have gone this way. Some countries, such as Hungary, prolonged the rule of non-admission of foreign residents to buy land. And they insist on this position even though they have court cases that are considered by the ECHR.”
Pavlo Koval predicts that we shouldn’t expect the mass sale in any case, but even our richest farmers will not be able to compete with the American, Chinese or Arab investors if they are admitted to the market, because foreigners will come with large sums of money and win the competition at any cost. Therefore, the restrictions of foreigners for at least 10 years is a necessary condition. Later, the Ukrainian Agrarian Confederation explains, we will analyze the restrictions, trends, how the demand will be formed, what proportion of the total number of private and public lands will be put up for sale, how the price will be formed, who has the money, how the macroeconomic situation around this land will change and what consequences this will entail, and only then it will be possible to return to the issue of admission of foreign citizens or companies to the land market in Ukraine.
“There will be no quick investments, and simply buying land for speculative purposes is unacceptable,” the General Director of UAC thinks. “Moreover, we consider that first of all Ukrainians have to become owners and users of our land. And if in 10 years it becomes clear that we need additional investment resources, that we have already worked out the procedures of sale, exchange, and lease, that in this area there are no corruption risks, that we have learned to deal with raiding, then we will return to the discussion about the admission of foreigners to this market.”
As you can see, the Cabinet, the Verkhovna Rada, and the specialized associations are convinced that the launch of the land market should not be postponed anymore. However, before taking such a step, the mechanisms of protecting the rights of landowners should be developed to prevent the land from being bought by one single person or several people and to protect the interests of the country as a whole. But in my opinion, the question of whether the government will manage to prepare properly and submit such a serious bill before March is rhetorical.
By Larysa Vyshynska
