Timothy Ash, an economist and senior sovereign strategist of emerging markets at BlueBay Asset Management, believes that creating a land market would, if done rightly, change Ukraine. In an interview with Hromadske, he praised the current Ukrainian government for trying to push through land reform which was supported by the parliament in the first reading earlier in November and is expected to be voted December or in early 2020.
You had written on the land reform, you were following what’s happening here. Let us know what your take is on the current voting for the land reform and what are your concerns.
Firstly, congratulations for the current administration for trying to push through land reform. This is revolutionary, it could be a wonderful positive to the country. This could really transform Ukraine if it’s done in the right way. I mean, firstly, it’s making sure that there is an efficient allocation of land to those who are best able to use it, it’s a consolidation of land plots. But also in terms of land sales. Poor rural inhabitants would be able, in theory – if you have the maximum number of purchase of land, you make the market of land as open as possible. The potential for poor rural inhabitants to sell land and generate quite significant returns from the sells, but also the state. The state is obviously a very big owner of the land, and if you sell it and get a decent price for land the state is gonna have huge revenues stream going, going forward.
I know that there was a mention of $40 billion earlier. It could be even beyond that. This could be transformational for agriculture in Ukraine, for rural societies, and also for public finances. I imagine, if you get tens of billions of dollars through the sale of state-owned land, that will help reduce the budget deficit. You can imagine some kind of sovereign agricultural well fund could be used to invest those resources from the land sale into rural development going forward over, you know, decades.
It’s a fantastic idea, but I just hope it’s done in the right way.
What I hear, the slight disappointment so far has been restrictions on who can buy land. Obviously, there should be requirements on national security to restrict certain ownership. In many other countries that is also the case. But I think you should make it as open as possible to bid up the price of land, to make the price that poor rural inhabitants get for land the highest, also state gets the highest possible price for land as well.
So, I’m a little bit worried that, what I hear about the legislation that has been passed at the moment, there are many vested interests trying to restrict who is able to buy land. And I think a lot of leaseholders that are currently doing incredibly well by being able to lease land very cheaply, I think they have a massive vested interest in trying to restrict the purchase of land and keep the price as low as possible. That’s pretty worrying, actually.
What would be your suggestion on how to improve the public opinion about the land reform which was created within decades? And how do you think Ukrainian society can be ensured that it won’t be dangerous?
It’s remarkable, we are where we are, where I think now a quite significant part of the population actually does want land reform. For the last 30 years, politicians have told everyone that the population doesn’t want land sales. I think it’s about marketing. This is a fantastic idea for Ukraine, and it’s simply the matter of the government getting out there and explain to people what it actually means. It’s clear that oligarchic television channels’ owners have big stakes in terms of land lease and have no interest in a proper-functioning land market.
So, the government should go out and tell people what it actually means.
It’s important that the revenues from land sales stay in rural areas. I’ve mentioned it already, but some sovereign land fund, that all the revenues of land sales from state-owned land goes to development fund that can be plowed back into rural areas, so people can see exactly what the benefit from selling land, particularly by the state, is, and it just doesn’t disappear in general budget financing.
Many countries have sovereign wealth funds. The biggest resource in the Middle East is oil and gas, so they create an oil and gas sovereign wealth fund, and that’s used for future generations. The biggest resource in Ukraine is agriculture, the land. So create a long-term development fund from land sales. It could have tens of billions of dollars of finance in it, use, for example, to build schools and roads in rural areas, send poor rural people to university, or overseas study. There is lots of things you can think to do with such a fund. But is shows the population in rural areas that they are going to be the big beneficiaries from this reform.
It’s about selling the story. And even in the referendum, I think it’s marketed in the right way – the politicians get out there and explain the concept. I think a majority of people would support it.
/Interview by Nataliya Gumenyuk
/Text by Vladyslav Kudryk
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