IMF demands to launch market of agricultural land in Ukraine. Is it good idea?

Author : Oleksandr Okhrimenko

Source :

Ukraine has only one really attractive object for investment – an agricultural land, and it’s the real possible way to bring investment to Ukraine
22:32, 20 September 2016

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In Ukraine, the debate about agricultural land market has its long history. The law of the market of agricultural land was adopted in the days of Kuchma, and then was immediately adopted an amendment to the law that the land market will be launched in some time... And this "some time" has dragged on for more than a decade. Maybe now the formidable order of the IMF would affect our government, and it will finally launch this market. Especially because, according to the text of the IMF Memorandum, Ukrainian government until the end of September 2016 should adopt a law on the sale of agricultural land, or IMF would not give more money. Such an economic enforcement of the Ukrainian authorities to reform. And to start buying and selling on agrimarket all have been done long ago, and it is only the lack of political will. The problem is, in many ways, already overripe, and so the sooner the better.

As for the opponents of the market launch it is worth recalling that all these horror stories that the non-residents will come and buy all Ukrainian land, do not correspond to reality. According to the current Ukrainian legislation, and the IMF does not require to change it, buyers of agricultural land can only be the residents. So only Ukrainians can buy it.

Although it would be expedient to create a real land exchange to make the sales public and to assess the real value of the objects. This is really the big issue, because now there are no objective assessments of the agricultural land. There are expert valuations of Ukrainian land, but they are always controversial, and are used to take a land tax, but for purchase and sale it is not suitable.

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We need a real land market, and taking into account the specifics, it should be electronic and should be connected with the land registry to eliminate fraud and double resale of land. That is the problem Ukrainian authorities have to decide as quickly as possible – just to give an opportunity for everyone who has the desire, to see the prices of similar plots and understand whether or not to sell, and for how much. If there will be no exchange of land and public auction, some people would really buy the agricultural land at bargain prices. And very often they will pay for the land plots two or three times smaller than it really costs, and then re-sell it at exorbitant prices. There is a risk of the ordinary speculation with land shares. Some separate business representatives and our government maybe want this – in order to make billions on speculation of agricultural land.

The market of agricultural land - is not only the selling, but also the opportunity to get a long-term loan to the Ukrainian bank. This land market exactly could lead to what is lacking in our economy - the credit boom, when the most popular form of credit loans will be secured by the farmers with agricultural land. Through these loans, both farmers and large agricultural companies will be able to buy agricultural machinery, fertilizers and seeds, there will be no problems with the purchase of fuel for the sowing and harvesting. This in turn will stimulate demand for agricultural machinery in Ukraine, and consequently, a possible rise of agricultural engineering or at least repairing of imported equipment in the territory of Ukraine. And most importantly, such loans will enable to lay new orchards and vineyards, update the herd of cows and pigs, and build new farms and elevators. For banks would be easier and safer to give the farmer a loan with the pledge of land. This will encourage farmers to work, rather than try to deceive others because in this case bank will simply take the land and resell to another farmer. Everything would be in the same way as in the US or in the EU. We need to really work well, rather than trying to deceive everyone and think that there will be no revenge. The market of agricultural land must clear the agricultural business in Ukraine from all sorts of petty crooks and swindlers.

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And the most important factor. Ukraine has only one really attractive object for investment – an agricultural land, and it’s the real possible way to bring investment to Ukraine. Non-residents can not buy the agricultural land, but may act as co-investors of Ukrainian agricultural companies, and this process will allow to develop Ukrainian agricultural business, but for foreign money. How much money can be attracted to the market of agricultural land, is hard to say, but it is clear that more than a dozen billion dollars. So we should choose: to do as advised by the IMF, or to swear further because of Ukrainian land and doing nothing.

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