Verkhovna Rada will consider the bills on opening land market in the first reading on November 13. Eleven draft laws addressing this issue are on the first line of parliament’s agenda.
Earlier, President Zelensky instructed the Verkhovna Rada to lift the moratorium on land sale by December 2019 and adopt a bill allowing to open the land market.
The idea of Zelensky's team met with resistance among a number of political forces, which opposed the land sale.
Among other issues, one of the most debatable issues was the question on possible sale of the land to foreigners. Volodymyr Zelensky commented on this, saying that the decision to sell land to foreigners would be made by Ukrainian people on a referendum.
But how will it look like? First, see some backstory.
How did moratorium appear?
The moratorium appeared in 2001. On January 18, the Verkhovna Rada passed Law #2242-III, which provided that, owners of the land shares could not sell, donate or otherwise alienate their land temporarily until the Land Code was adopted.
However, they would be able to inherit them and sell them to state and for public needs.
The Land Code was adopted by the parliament on October 25 that year.
The document established that until January 1, 2005, agricultural land and land shares cannot be sold or alienated (however, the exchange, inheritance and exaction for public use were allowed).
This has since been called a moratorium on sale of agricultural land. This temporary ban was extended 10 times (in 2004, 2006, 2008, 2010, 2011, 2012, 2015, 2016, 2017 and 2018).
Now, let us talk about the current situation.
Land market. How will it happen?
According to the Minister of Economic Development Tymofiy Mylovanov, his ministry prepared 35 scenarios of launch of the land market.
“There are 35 scenarios prepared by all possible experts. However, I think we need to focus on two criteria. The first is economic growth. The second is the distribution of it between people.”
Mylovanov noted that a reform has to “maximize economic growth and divide its results among Ukrainians, including landowners.”
On October 18, the Committee on Agrarian and Land Policy recommended that Parliament support bill No. 2178-10 on opening the market of agricultural land as a basis. This bill was developed the same committee.
One of the authors of the draft law, MP from Servant of the People Mykola Solsky revealed the difference between the bill of profile committee and governmental committee.
“The first moment, as you know, according to the bill of the Cabinet of Ministers, the physical persons – citizens of Ukraine, may be the buyers of the agricultural land as well as the legal persons – the residents of Ukraine, in other words, registered in accordance with Ukrainian legislation. According to the alternative bill, the restriction is imposed for partakers-legal person who can be the founders of such legal persons who might be the owners of the land. Until 2024, the foreign physical persons and persons without citizenship of foreign state cannot be the founders,” he said.
Solsky underlined that in such a way only citizens of Ukraine will be able to buy the agricultural land until 2024.
“The second moment, during the elaboration of this alternative bill, one important moment was considered. When we talk about Ukrainian enterprises, which exist in Ukraine, there are over 1,300 enterprises which work in Ukraine for years, contribute to Ukrainian land, Ukrainian infrastructure, create working places and owned by the foreigners among others. For this category of legal persons, only those who work in agricultural business at least three years and in the volume of the lands they process at the moment the law comes into force and who signed the agreements, registered in them – they also use the same rights as other legal persons from October 1, 2020,” Solsky explained.
He added that the bill #2178-10 provides the additional restrictions on the concentration of land in one hands – “at the level of the region, the percent of concentration is reduced from 15 up to 8%, the additional restriction is imposed on the concentration at the level of the joint territorial communities – 35%”.
What Cabinet of Ministers plans to do before the launch
Giving the word to Prime Minister Oleksiy Honcharuk:
“We need to provide the possibility to small farmer to obtain credit at significantly lower credit rate for purchase of the land plot to make him being at the same level with foreign subjects or even wining over them. We plan to create a tool, which will allow us to compensate this interest rate.
He added that the Cabinet of Ministers along with the National Bank will make the crediting cheaper in hryvnia before the start of the land reform; it will be able to get credit at 14-15%.
The World Bank believes that $500 million needed for the partial guaranteed costs for farmers for land purchase.
According to Director of the World Bank in Ukraine, Belarus and Moldova Satu Kahkonen, the demand for land purchase from 2,200 small farmers is predicted in the first few years after the opening of the market.
Kahkonen also noted that it is necessary to create the special neutral agency of guaranteed costs for farmers for financing.
So what, whether the land is not sold now?
It is sold. Bypassing the moratorium. There are variants and thee are a lot of them.
One of the most spread ways is the so-called emphyteusis – it is the right to use the land plot for agricultural needs.
Such variant does not have clearly established form and terms of payment and the right of ownership might be sold to third persons according to emphyteusis.
In fact, the owner is paid the whole sum at once for the whole term of use of the land. But, the buyer does not become the owner but lease the land and there is a possibility of early termination of the contract.