Vicissitude at Ukraine's land market

Author : Olena Holubeva

Source : 112 Ukraine

Bill "On the circulation of agricultural land," which in September will be submitted to the parliament, stipulates that the Ukrainian lands will be allowed only to individuals up to 200 hectares per customer
17:57, 2 August 2017

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In an interview with, acting Minister of Agrarian Policy Maksym Martynyuk told that the bill "On the circulation of agricultural land," which is currently being developed by the Ministry and in September will be submitted to the parliament, stipulates that the Ukrainian chornozem will be allowed only to individuals up to 200 hectares per customer. Agroholdings (respectively legal entities, - Ed.) will be withdrawn from the circle of those who can do it. Acting Minister said this so confidently that it seemed that this issue had already been resolved. But literally five days later, in an interview with Interfax-Ukraine, Martynyuk said that he did not rule out the introduction of the law on granting to legal entities the right to purchase up to 1 thousand hectares of land.

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Press service of the Ministry of Agrarian Policy explains the differences of positions by the fact that "the key components that the government defends in the process of working out the model of land reform envisage access to the land market exclusively for Ukrainian citizens and the introduction of limits for such a purchase in the amount of 200 hectares." At the same time, the possibility of admission to the market of legal entities is "a proposal of agrarian associations - members of the working group". The press service said that after the discussion, the final version of the terms of sale will be reflected in the bill "On the circulation of agricultural land," which, after approval in the Cabinet will be presented in Parliament.

It should be noted that agricultural holdings are often considered as legal entities, among which there are many companies that are formally called holding companies, but more often they unite several dozen companies, each of which processes a certain amount of land.

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Exposed contradictions clearly demonstrate that the authorities are still hesitating and have no final position on the norm, which during the discussion of the terms of land reform in the Verkhovna Rada will be almost the most important subject of discussions. The fact is that any restrictions will have a direct impact on the price of the land. They assume admission to the market of various groups of persons with different financial possibilities. Of course, today financial resources are mainly owned by large companies (agroholdings) and foreigners. The latter, as they assured the government, will not be admitted to the land market for sure. At least in the first stage. "We are giving powerful messages that the government is committed to carrying out land reform in the interests of small and medium-sized producers.

At the same time, the norm on admission of legal entities to the land market can create the ground for shadow schemes, under which foreigners and agroholdings can enter the land market, according to the Ukrainian Agrarian Confederation (UAC). "We are against the legalization of legal entities to the market of the land, which will have negative consequences, especially at the first stages of the free market. We can let a number of countries with which it will be difficult to agree positions (Saudi Arabia, China, the United States, Great Britain and a number of other countries that have free funds to become owners of land in Ukraine)," said UAC director general Pavlo Koval.

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Schemes in which foreigners can bypass the ban on the purchase of land by foreigners, according to Koval, are very simple: "a Chinese marries a charming Ukrainian woman and buys land," and this marriage can be fictitious. "There is a whole range of instruments - inheritance, gift, collateralized property, and all this can happen if the land is allowed to be bought by legal entities," the UAC director general said.

According to him, another problem is the filling of the land cadaster: "There is no information on the existing borders, there is no information about the plots." Therefore, the boundaries of the sites belonging to the owners often do not coincide, not even mentioning about 10 million hectares, which belong to the state." It should be noted that Martynyuk also recognized the problems with the filling of the cadastre. According to him, the inventory in Ukraine was ineffective.

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The Association notes that the chaos in the accounting system of land can also become fertile ground for new raider seizures. And all this is against the backdrop of how the judiciary works in our country." For 15 years, none of the land owners has won any court against the tenant to protect his legitimate rights to property.

At the same time, Martynyuk said that he does not believe that "unfinished inventory is an obstacle to the start of the land market."

But the most important problem, according to the head of the Association of Farmers and Landowners Tomych, is the total poverty of the village. "There is total poverty in the village and there is no financial and credit policy. Poverty will motivate many owners of land shares to sell them in the first month. The buyers will be intermediaries, and the main players will be multinational companies. For a very short period, we may lose the possibility of developing the country through lost opportunities to influence the land resource," said Tomych.

It should be noted that in the discussion around the conditions for the sale of land there is also a camp, interested in a free market and absence of any restrictions. Their main argument is that the more restrictions are introduced, the narrower will be the circle of buyers and, correspondingly, the lower the purchase price of land.

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"All the restrictions that imposed on the market will lead to its underestimation, the land will be sold below the market value. Those who lobby them have one task: to reduce the cost of the land in order to make it cheaper. Then to gain control over large territories through certain persons. And then, after the decision is made to authorize the purchase of legal entities, a simple scheme works – the entity is sold for 1 hryvnia," said the People's Deputy, member of Bloc of Petro Poroshenko, Andriy Vadatursky.

According to him, if we talk about schemes, legal schemes to circumvent restrictions can be used in any case, both with individuals and with legal entities. Vadatursky said that he would oppose any restrictions on the land market. "We need people to have the right to sell the land at a fair, market price, even if it is speculative," the People's Deputy said.

He also added that those who say that they ought to protect Ukrainians from oligarchs, from foreigners who come and buy up the whole land, as a rule, are representatives of the interests of groups that benefit from maintaining the current status. They represent 400-500 thousand people who rent land at the lowest prices in the world and receive a huge profit from the sale of agricultural products: "On the other side of the scale are 7 million people (shareholders) who are hostage to this situation."

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However, it should be noted that the idea of a free market is not so simple. The authorities are unlikely to agree to it, and not because they are supporters of some schemes, but mainly because they perfectly understand that a free market and a fair market price for agricultural land will inevitably lead to an increase in rental rates, and this will affect the value of agricultural products, which will be tightened to world prices. It is logical that this can have the most adverse consequences for the rating of the government: how many Ukrainians are willing to buy bread at prices like in Europe?

As a result we get a Gordian knot, which is based on the same ill-fated Ukrainian poverty. It is impossible to overcome it without decisive reforms, but it is possible to accidentally miss several hundred thousand compatriots who simply will not be able to survive. Obviously, Verkhovna Rada will have to cut this knot in the autumn. And it is already clear that the fight will be hot.

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