Pavlo KOVAL | For whom is the land reform?

New Year’s holidays are not over, but farmers are again on the streets of Kiev with pickets – “Against the sale of land”. It seems that consensus will be very difficult, and somebody will outweigh in the issue of launching the market or the circulation of agricultural land. Sociology on the subject is changing as well in turbo mode! 

The format of work chosen by the profile committee of the Verkhovna Rada for considering laws and amendments only increases the distrust to the authorities, because such issue as the purchase of land sale is rather sensitive. Part of the Ukrainians involved into the land reform process, who hesitated about the necessity to lift the moratorium on the sale of land half a year ago, today have firmly stood on against the launch of the land market. At the site of the Ukrainian Agrarian Confederation we also conduct short surveys and analyze changes in preferences regarding topical issues of agrarian development. The last of the polls continues today, and the structure of the answers through the proposed options is changing, but there are some interesting trends – a stable share of supporters of the maximum free market of land – about a quarter; the number of supporters of the extension of the moratorium is increasing –  more than 40%. We understand the lack of representativeness of respondents, but even from these answers we notice fear and fall of confidence to the objectivity and correctness of the reform proposed by the authorities. And this fact is worrying us, because we are convinced of the necessity of implementation of an efficient land market in Ukraine with a number of restrictions at different stages of its functioning.

The final version of law draft 2178/10, tabled by the committee for the second reading, contains a number of changes compared to the version adopted in the first reading, but as we can observe it does not reduce the tension surrounding its adoption. The most pressing issues are the concentration of land by one owner, as well as whether or not foreigners are allowed to enter the land market. The authorities are demonstrating certain actions by setting a limit of 10,000 hectares in one hand. But such an area causes indignation among farmers. We proposed to consider the option of limiting the concentration of land in ownership and using. There is worldwide practice in this regard, with the experience of recent decades in the countries of Eastern and Central Europe. So far, it is one of the main contradictions.

There is a number of questions to the procedure of consideration and adoption of the law draft by the Verkhovna Rada. There are not so many scenarios – a complete procedure, which has already initiated at committee level, and a simplified procedure. But can we adopt so complicated decision according to such approaches? Obviously, no! In addition, it is worth paying attention to the legal and economic consequences of the “rapid” adoption of land legislation.

Speaking about economic implications, we need to understand the possibility of implementing the future Law of Ukraine. The promised arguments for the economic growth of the agrarian complex and the national economy can “quickly” become a myth and, as a consequence, distort the essence of the functioning of the land market as such. It will increase the level of risk for investments in agricultural business, reduce the price of land, freeze started investment projects, may lead to chaos in land ownership and using, which will disrupt the crop rotation. Also it will impact on insufficient financing of operating systems of enterprises, reducing economic efficiency per one hectare of, loosing of positions in foreign markets.

According to this point of view, I would like to emphasize some of the positions of the Ukrainian Agrarian Confederation once again. It is worth mentioning the clear stages of the land market opening, and on the first stage it is advisable to speak only about Ukrainians with a one-handed limit of 200 hectares. The second stage should consider reasonable liberalization of land relations – review of subjects, concentration, change of target purpose, pre-emptive right…

An important aspect of the land reform is the accessibility and credibility of the subjects to the required resources. Thus, there is the question – “For whom is this reform?”  In our opinion, the key role belongs to two parties – the Ukrainian agrarian and the land owner. Together with local government they are Ukraine. We are often offered to rely on global financial institutions and individual investors who have significant financial resources. With such subjects we propose to talk about investments in the agricultural sector, not about banal land purchase. In order to attract investments for land reform, it is necessary to create a Land Mortgage Bank. Today we can still create such a financial structure, with a large pool of state-owned agricultural land, but it may be late tomorrow.