To sell and buy land freely is a dream that is still way too far for Ukraine. A moratorium on the sale of land, or, rather, its abolition, is the cornerstone of all discussions on the creation of a full-fledged market. Opinion has found out whether it is still necessary to abolish the moratorium, who and why are afraid of this decision, what losses and consequences of the restriction will Ukraine bare and what alternative market control mechanisms should be introduced in the future.

Moratorium on land: should it be abolished?

The head of the Committee of Economists of Ukraine Andrii Novak spoke about the expediency of abolishing the moratorium on land sales. According to him, this is a necessary step, but it is necessary to establish three main restrictive measures that can prevent all fears.

“Of course, it is necessary to open the market. But how, this is another question. If the market will work the way privatization was carried out earlier, then such a market is not needed. If we want a civilized open market, then we really need certain legislative limitations that will remove those bumps that we have.

First, it had to be established, that an agricultural land can be bought only by a Ukrainian citizen. Then there will be no fears, that foreigners will come and buy the Ukrainian land,” Novak is thinking.

According to the expert, the second restriction should be the maximum area, that one Ukrainian citizen can buy. This is necessary in order to remove the fears of a possible purchase by “one oligarch of the whole land.”

“The third restriction is the total area of agricultural land, which in general can be used. That is, there must be three main limiters, and then all fears will be gone. Under such conditions, of course, an open land market is needed, because the moratorium rolls back the huge investment potential, that can be realized in case of the introduction of a civilized land market,” the economist said in a commentary to the Slovo i Dilo media.

The member of the board of the international union “Institute of National Policy” Maryna Bahrova also supports the abolishing of the moratorium. According to her, the current moratorium is a shame for Ukraine, because it makes our country one of the six rogue states and removes us from the developed world. Moreover, abolishing the moratorium should increase the number of financial investments, jobs and attract international investors.

“A moratorium on land sales is an oligarchic rudiment. Some ignorant patriots in the field of economy, who are suffering from phantom pains for the Ukrainian lands, believe that after abolishing the moratorium the land in Ukraine will not belong to the people.

I would like to tell them, that now, in fact, the industrial and agricultural lands that we are talking about, in Ukraine are mainly owned by oligarchs-monopolists, and not by the people. And the people suffer from this economically. The entire Ukrainian economy suffers. Therefore, the abolition of the moratorium will lead to the destruction of the oligarchic monopoly in many spheres of the economy.

In all developed civilized countries of the world, there is no moratorium on the sale of land. The abolition of a moratorium on the sale of land in Ukraine will resolve a number of the most important unresolved up to date issues: it will cause a new inflow of financial investment into the country; attract foreign investors; increase the number of jobs, reduce unemployment, corruption, and crime; reduce the outflow of population abroad; will lead to an increase in the standard of living and well-being of citizens,” is said in her comments to Opinion.

Inna Bohoslovska, a state, and public figure, an MP from the “Party of Regions”, who left the party faction and the party in November 2013, made a stand against the abolishing of the moratorium. In her opinion, the right to personal property in Ukraine is not protected by law, and the population will not be able to take advantage of the opportunity to purchase land due to a difficult economic situation.

“Today, the cancellation of the moratorium on land sales in Ukraine is emphatically impossible for a number of reasons. First and foremost, it happens due to the lack of a reliable land cadastre. The actual distribution of land in Ukraine is significantly different from what is recorded in the documents. There are millions of acres of Ukrainian land, which, according to documents, are considered as roads, pastures, forests or belong to dead shareholders. At the same time, they are actually cultivated and yield or held for construction works.

The right to personal possession in Ukraine is not protected by law, so illegal seizures of land have become common practice. As a result of lawlessness, which is currently taking place in the market, people are forced to take weapons and independently react against raiders, who seize their land and burn houses.

The population of the country has grown poor, financial resources are concentrated in the hands of no more than 10-15 corrupt financial-industrial groups. Therefore, 40 million Ukrainians will not be able to take advantage of their right to purchase land, and it will be redistributed through corruption schemes among interested people,” Bohoslovska told Opinion.

Valerii Klochok, an economics, and political expert, explained that after the launch of the land market, we face the threat of reducing small and medium agribusiness and a number of risks, but despite the split Ukrainian position, international organizations and institutions such as the IMF and the World Bank clearly emphasize: it is necessary to abolish the moratorium and launch a full-fledged market.

“In the case of the launch of the land market, we are facing the threat of further reduction of small and medium agribusiness, massive migration of rural population to multi-million-person cities, land impoverishment for the production of export-oriented products with a relatively low added value and the withdrawal of capital offshore and, of course, we are in for further decline of social infrastructure in the countryside and the extinction of these villages themselves. Of course, the owners of agricultural holdings also have no desire to talk about abolishing the moratorium. For them, the situation is quite satisfactory.

If the position in Ukraine with regard to land reform is different, then the position of international financial institutions, with which Ukraine is cooperating, is quite decisive. For example, one of the conditions for obtaining another tranche of the IMF is the launch of a full-fledged land market. Just last year, the relevant requirement was raised by the government of Groysman. But then they managed to “fudge” the issue.”

The World Bank also stated its position regarding the launch of the land market in Ukraine. The head of the World Bank representation in Belarus, Moldova and Ukraine Satu Kahkonen noticed that they are satisfied with any scenario for the launch of the land market. Including the sale of land in a limited amount (up to 300 hectares) in one hand only to individuals – citizens of Ukraine, which was previously offered by the Ministry of Agrarian Policy,” the expert told to Opinion.

What is the cost of the moratorium for modern Ukraine?

The MP and member of the Verkhovna Rada of Ukraine Committee on Agrarian Policy and Land Relations Oleksii Mushak in his recent column cited the list of losses, that moratorium on land is costing Ukraine. In particular, according to the People’s Deputy, the decline is in horticulture, livestock and other spheres that require long-term investment: investors do not see the opportunity to invest in leased land.

“ – 7 million landowners (every 6  Ukrainian) cannot dispose of their assets and should use shady deals. On the underestimated lease, they lose about 400 USD a share lease (3.6 hectares on average) per year.

– Land leaseholders exhaust it in search of profit, so the quality of Ukrainian black earth is getting worse every decade.

– Land can’t be the collateral subject in a bank – financial instruments for the development of the agricultural sector have not been created. Companies do not have enough money; therefore, they cannot create processing enterprises, storage capacities, etc. There is no infrastructure in agriculture that could have arisen.

– Horticulture, breeding, and other areas, that require long-term investment are falling, because investors do not see the opportunity to invest in leased land,” the People’s Deputy stresses.

Kyrylo Levterov, a lawyer and the head of the legal department of the corporate security service of the All-Ukrainian Agrarian Council, shared the list of the consequences of the operation of the moratorium in Ukraine with Opinion, noting that the restriction of the land market stimulates a number of losses and worsens the state of the land itself.

“ – Degradation and soil erosion: Agrarians do not pay sufficient attention to the conservation of soils. After all, none of them is sure, that after 5-10 years they or their descendants will work on these hectares. The rent can go to another householder.

– The huge costs of signing, upgrading and protecting rental rights.

– The cost of lease per hectare sometimes exceeds similar figures in the EU.

– The lack of implementation of irrigation systems (except maintaining systems in the south): huge capital expenditures on irrigated land are not possible under lease conditions.

As a result, low yields, low quality, and high production costs. Together with a high cost of financing, we have a non-competitive agricultural sector,”  stated the specialist.

How to control the land market after abolishing the moratorium?

Kostiantyn Denysov, a Ph.D. in economic sciences and an activist of the Zaporizhia regional organization Svoboda, believes that if the moratorium on land is abolished, an alternative mechanism should be set up and according to it, land sales will be taken through a state specialized bank. More precisely, it is a long-term lease, and for large areas, the tenant must pass the qualifying exams.

“An efficient alternative to the moratorium should include the following:

– A Ukrainian can sell a land exclusively to the State Specialized Bank.

– This bank will lease land on the long-term basis with the right of a family heritage (long-term lease is an effective mechanism, for example, Hong Kong was leased over 99 years by Britain).

– A farmer, who wants to lease more than 30 hectares of land must pass a qualifying examination for the activity on this land.

– The state will introduce criminal responsibility for soil erosion as a result of human activity and the prohibition on changing the special purpose of agricultural land,” the expert believes.

However, the lawyer Stanislav Tsys stressed that after abolishing the moratorium it is necessary to stimulate the owners of land resources to unite in land cooperatives.

“Together with the abolishing of the moratorium, it is necessary to foresee mechanisms for stimulating owners to combine their units into land cooperatives. Then they will be able to claim the distribution of all profits gained from the harvest. That will give a new impulse to the overcoming of poverty and the revival of the village,” Tsys believes.

By Dmytro Zhuravel

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