Opening of Ukrainian land market: Prospects for country and president Zelensky's rating

Author : Natalia Lebed

Source : 112 Ukraine

In Ukraine, 71% of the territory (42.7 million hectares) belongs to agricultural land, a quarter of which belongs to the state
11:53, 24 October 2019


Land reform is becoming one of the most discussed topics of recent times. The issue is complex and controversial, society mainly reduces it to a simple statement: we will not let sell our land. So it doesn’t matter anymore whether a moratorium on the sale of land is a good or bad idea. The only important thing is how the new initiative will affect the rating of Zelensky’s cabinet. And how soon the situation will heat up to the need for new elections - parliamentary, and possibly presidential.

Related: Ukrainian MPs propose selling land to foreigners?

What do Ukrainian lawmakers offer?

As political scientist Boрdan Petrenko rightly says, "the land market has existed and exists to this day, and that the lands are bought up by interested people, who follow some other schemes." Indeed: domestic masters, if they wish, will find 1001 ways to circumvent the law. However, the profile (agrarian) committee of the Verkhovna Rada approved last week bill No. 2178-10 "On amendments to some legislative acts of Ukraine regarding the circulation of agricultural land."

In other words, the first step was taken to open the land market. The next word is for the parliament, it might support or not support this initiative.

According to the bill, from October 1, 2020, the ban on the sale of agricultural land is canceled. The Ukrainian individuals and legal entities, territorial communities, and the state would an opportunity to buy the land. As for the participation of the foreigners in the acquisition of agricultural land, a transitional period is set (until 2024).

The bill also provides for the tenant's preemptive right to purchase a land plot. The concentration of land ownership is determined at the level of 15% of the region and 0.5% of the country.

Related: Agrarian Committee of parliament recommends to adopt land market bill

Foreigners in da house

And now let's move on to the analysis of the bill and touch on its main short story - selling land to the foreigners. Those who believe that it is absolutely not worth doing this will certainly give an example of Argentina and Brazil. But what is wrong with these countries?

Argentina has been resisting Chinese expansion for a long time, but in the end, it lost ground under circumstances. The world's largest agricultural holding Beidahuang Group is located in China (the land bank is more than 5.4 million hectares), it suffers from the lack of arable land. Back in 2011, the company began the search for land for soybean production in other countries of the world. In order to lease 234,000 hectares of land for soybean cultivation in Argentina, the Chinese had to invest $ 1,5 billion.

In 2018, the Beidahuang Group managed to agree on the purchase of another 320,000 hectares in Argentina, to which the country went because of default and for the sake of package investments from China. Before this, China’s investment in Argentina’s agriculture was undesirable, primarily because of the mood of the local population and business. The local discontent, in particular, was fueled by a rise in the price of arable land due to the increased demand for it. For example, in Santa Fe, rents increased from $ 150 per hectare in 2001 to $ 650 in 2017. When such a price became unbearable for the "natives," the Chinese entered the Argentine land market. And, of course, they are not alone.

Related: Most of Ukrainians oppose opening land market, - survey

A similar situation takes place in Brazil. Financial analyst Oleksiy Kushch notes that the famous Brazilian favelas "arose just because they were inhabited by landless peasants." We should not follow the Argentine-Brazilian path, Kushch emphasizes not to lose "both the large social group of our peasants and the socio-cultural phenomenon of the Ukrainian village."

Kusch draws attention to how cunningly, in his opinion; the draft law spells the entry of foreign capital into the land industry. Until January 1, 2024, land ownership is not allowed if the ultimate beneficial owner of such a company is a foreign participant. In other words, a foreign legal entity can create such a "land pool" of Ukrainian legal entities that have been registered on the agricultural market for three years and use them to collect land in a heap - share for share, hectare for hectare. And there would be no investments in the development of the agricultural sector.

The roll call of farmers

According to the State Statistics Service, about a third of Ukrainians live in rural areas, but over the past 18 years, peasants have decreased by almost a quarter (from 16.9 million to 13 million), while the number of citizens during this period fell by just 16% (from 34, 8 million to 29.3 million).

From 1990 to 2018, 426 rural settlements disappeared from the map in Ukraine. However, the actual number of “extinct” villages is much larger: from 2014, 369 uninhabited villages were simply not taken off the state register (the Institute for Demography and Social Research of the National Academy of Sciences of Ukraine confirmed this in 2017). 4684 villages are on the verge of extinction, where as of 2015 (no more recent data) – up to 50 people lived in each of them. Needless to say, the extinction of villages is facilitated by both the predominance of the number of deaths over those born and the labor migration.

Related: Servant of the People MPs offers to allow foreigners to buy Ukrainian land

Of course, there are large villages where people continue to live, create local communities, develop agricultural business, but the pastoral picture is far from there. Theoretically, instead of an inefficient collective farm system, farmers should be the backbone of local economies. But as of 2014, there were 52.5 thousand farming entities in Ukraine’s agriculture (an average of 1.7 "units" per village), 71.3% of which were farms. However, they did not revive the labor market: according to the statistics of 2014, out of the population employed in agriculture, a little more than 3% worked on farms.

In the absence of powerful incentives to stay in the village and engage in farming (and the first such incentive should be adequate taxation of peasants), Ukrainian farmers will imitate the Argentine way. The opening of the land market can only reinforce this trend.

Oleksiy Kushch does not agree with the fact that villages are dying out and agricultural production is inefficient.  But Bogdan Petrenko, in turn, believes that the land market will not have a relationship to a further reduction in the rural population. He recalls a record crop in 2016. But in terms of extremely low purchase prices, farmers prefer to leave the crop in the fields, which will subsequently be plowed, or in extreme cases feed part of the vegetables and fruits collected to livestock.

Related: Why Ukrainian labor migrants leave for Poland

Reaction of the West

Since we are used to considering the correctness of the decisions made through the prism of the reaction of the West, in the case of the opening of the land market, it is also advisable to foresee the response of our foreign partners.

Recently, the European Court of Human Rights has recognized that Ukraine’s moratorium on the sale of agricultural land violates human rights. The problem was actualized by two pensioners: 71-year-old Sofia Zelenchuk from Ivano-Frankivsk and 79-year-old Viktor Tsytsyura from Ternopil. Both plaintiffs are the owners of land shares, which they leased, and then wanted to sell. In 2015, Zelenchuk and Tsytsyura appealed to the ECHR with a request to explain whether the existing moratorium violates their civil rights. And it turned out that it does. The ECHR noted the "inconsistency of the Ukrainian authorities," which has long declared its intention to create a land market, but each time it only prolonged the moratorium. “From 60 to 80% of Ukrainians do not support the liberal land market, and attempts to impose it led to the beginning of a period of disappointment in Zelensky,” the expert notes.

In a word, the situation would be hot soon. After all, autumn is a high point not only for the Ukrainian peasants but also for the Ukrainian revolutionaries. Although we will not rush to conclusions and forecasts - for a start we will wait for a "land" vote in parliament.

Ukraine is not the only country where certain restrictions on the sale of land apply. For example, in Denmark agricultural land is sold exclusively on the basis of maintaining the status quo. The buyer must prove that he plans to engage in farming and nothing else - in particular, he must live in the countryside for the last eight years before buying. The purchase of shares and bringing the land to sizes over 150 hectares is prohibited by law, when the acquired property reaches 30 hectares, the owner must confirm his professional qualifications and demonstrate the results of his work on this land. Legal entities in Denmark do not sell agricultural land at all - only private owners have the right to purchase. 

In Ukraine, 71% of the territory (42.7 million hectares) belongs to agricultural land (of which a quarter belongs to the state), and yet, however, we still have unregulated land legislation. More than a quarter century ago, the Verkhovna Rada adopted the decree "On Land Reform," which included a number of gaps. Thanks to them, the agricultural land market has not yet been formed, a significant part of the rental market is in the shade, and several categories of land do not have a clearly defined legal status.

Since the actual reform did not work, 11 years after its definition, that is, in 2002, a moratorium on the sale of agricultural land was introduced. It was assumed that the moratorium will be valid until 2005 and will end with the adoption of laws on the land market and on the state land cadastre. The first law does not exist today. The second one was nevertheless adopted in 2011 with a delay until January 1, 2013. But it did not enter into force due to the extension of the moratorium until January 1, 2016, and subsequently - until 2019.

Burrowing rating in the ground

If the moratorium on the sale of agricultural land is lifted, this will mean great changes for farmers and for the government.

We asked Bogdan Petrenko how the opening of the land market will affect the ratings of the ruling team. “It depends on what ratings we are talking about,” the expert replied. “If they are about external, then they will definitely grow, if about internal, then it’s worth looking at the consequences. Because even if only 12% of respondents support the opening of the land market, it’s doesn’t mean that the rest will certainly be disappointed in Zelensky if such discovery occurs."

Political expert Ruslan Bortnyk advises paying attention to which of the politicians is growing support and what this trend is associated with for a better definition of electoral trends. According to him, everything rests on the same land reform. “

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