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Less Corruption, More Competition: Will Land Market Change Ukrainians' Lives?
16 November, 2019
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Village residents who lack the capital to purchase combines and other equipment for working the land will have to put their land up for rent. Volodymyr Hontar / UNIAN

The Ukrainian Parliament has supported the land reform bill in the first reading. The second reading is yet to come, but Hromadske has analyzed how the land market will change the lives of Ukrainians.

1.

Will I Be Able to Purchase Land?

If the law is adopted in the second reading, then every Ukrainian will receive the right to purchase agricultural land. Before this, the Land Codex had restrictions which only allowed the purchasing of land by people with agricultural education or experience working in agriculture. Now there will be no such restrictions.

2.

Who Else Will Be Able to Buy Land?

According to the terms agreed upon in the first reading, the right to buy agricultural land will belong to:

  • Ukrainian citizens

  • Ukrainian legal entities

  • Territorial communities

  • The state

3.

Will Foreigners Be Able to Purchase Land?

Despite the fact that foreigners are not a category that receives the right to purchase agricultural land, foreigners will be able to buy land if they found a Ukrainian company. However, the current bill does restrict foreign-owned Ukrainian companies from buying land for the next four years. President Volodymyr Zelenskyy has called for this point to be completely removed, and for an all-Ukrainian referendum to be held on this question before the second reading.

READ MORE: Parliament Shows Support for Land Reform Bill. What Would This Mean for Ukraine?

4.

Why Is the Government Pushing So Hard to Allow the Sale of Ukrainian Land?

Tymofiy Mylovanov, the Minister of the Economy, Trade, and Agricultural Development, considers the opening of the land market to be “the largest anti-corruption reform effort.” Right now, Ukrainians do not have full ownership of their land shares – that is, their portion of agricultural land. The current laws allow every citizen to receive a piece of land for free, but this process is long and complicated. About 7 million Ukrainians have received land since independence, but they don’t have any practical rights to exploit it. The government thinks that after receiving the right to sell land, Ukrainians will be able to assert full ownership. Data provided by the Ministry of Economy states that 1.5 million owners of land shares have already passed away, without seeing the right to sell.

5.

What Are the Risks?

Opponents of land reform insist that instead of gaining rights, Ukrainians will instead lose them. That’s because they believe that large companies and foreigners will treat the opening of the Ukrainian land market as a feeding frenzy. These opponents also think that once the moratorium on land sales is lifted, these large companies will be able to cheaply purchase large amounts of agricultural land, leaving Ukrainian villagers and farmers without the opportunity to engage in agriculture.

READ MORE: Ukrainians Have Been Tricked to Oppose Land Reform, Says Ukrainian President

6.

How Much Land Could You Buy?

The existing bill restricts the amount of land that a single company can purchase. This restriction is intended to hamper the ability of large companies to buy up all the agricultural land. That means that a single company (or a group of companies who have a single owner) can, in the confines of a territorial community, only purchase up to 35% of available land. In the confines of a single region, or the Autonomous Republic of Crimea, only 8% – and in all of Ukraine, they can purchase only 0.5% of available agricultural land.

7.

How Does Agribusiness Buy and Sell Land Now?

Seeing as the moratorium on land sale remains in place for the moment, agribusinesses “buy” land – that is, they sign a rental contract with the land’s owner for a very long period of time, such as 10 years. And rental prices for agricultural land in Ukraine are some of the lowest in Europe. Rental costs in Ukraine are 6 times lower than German prices, and 19 times lower than Danish prices. About 46,000 hectares in Ukraine are rented for a duration of 49 years. Additionally, a portion of agricultural land belongs to the Ukrainian state. The government believes that much of that land is involved in corrupt activities.

8. 

Will Incomes of Ukrainian Villages Change?

According to data gathered by the Ministry of Economy, the average price of renting a hectare of agricultural land in Ukraine is $70 per year. Once the land market opens up, this amount could increase to $164 per year by 2024. The government believes that competition will result in a 6% annual growth in agricultural land development. The government has also stated that the average price of a hectare of land, once the land market is open, will rise to about $2,200, though if land sales to foreigners are banned, this price may be lower.

READ MORE: Land Reform with Deputy Minister for Economy and Trade: The Takeaways

9. 

Why is the Land Market Good for People Who Engage in Agriculture?

When land sales are banned, the owner of a piece of land does not have the ability to fully exploit it. In particular, they do not have the right to use that land as collateral for a loan. That’s why village residents, who lack the capital to purchase combines and other farming equipment, are pushed towards renting out their land, because without collateral, banks will not lend them the capital needed to develop their business. Once the ban is lifted, landowners will be able to use their land as collateral, though that also means that failing to repay a loan will be grounds for the bank to confiscate their land. The government is also planning to give village residents preferential loans at low interest rates, so that each resident would have the ability to exploit their land or gain capital for growing their business.

10.

Will Russia or Other Countries Be Able to Purchase Ukrainian Territory?

This was a question posed to President Zelenskyy during his “press-marathon” in October. The current draft bill has no special restrictions for selling land to Russia or Russian companies, however, it does provide the ability to place corresponding sanctions. It’s not out of the question that the government will use this ability once the land market is launched. But even in the case that the land market is opened to foreigners and foreign companies, any purchased land will remain as part of Ukraine, just as non-agricultural land remains Ukrainian even if owned by a foreigner or foreign company.