Few issues have been as divisive as land. Almost since independence, Ukraine's authorities have worked on reorganizing the sector and building a market for the purchase and sale of land. Finally some progress is being made, but experts warn not every move is a step in the right direction.
Speaking at a recent Adam Smith agribusiness
conference in Kyiv, head of the State Agency of Land Resources Sergiy Tymchenko
put forward the government’s most recent to-do list, noting that liberalization
was now a done deal.
“We’re no longer asking the question: open the market or not? Of course
we open,” Tymchenko announced with pride.
The latest big step towards modernizing
Ukraine’s land market, he said, was the launch in January of an electronic
state land cadastre. A long time in the coming, the new platform has been
hailed by experts as a step forward – bringing some structure and transparency
into a chaotic system.
However, critics note that real owners are not
identified, an issue Tymchenko said would require a new law to override privacy
rules currently in effect.
To further develop the market, Tymchenko added,
a new law should be registered in July this year – to include the following
provisions:
ñ Minimum farming land lease fees, set
at 3 percent of the land’s nominal value, with an additional 1 percent tax
going to support local government budgets;
ñ Introduce miminum labor requirements
per hectare (“It’s unacceptable that only 10 people work on 10,000 hectares,”
Tymchenko said, but did not elaborate);
ñ Allow Ukrainian individuals and
state agencies to buy and sell land, without the state having a first purchase
right (as in an earlier version). Legal persons and foreigners will still be
limited to lease agreements;
ñ Extend the minimum lease terms to seven
years, through direct leases that can be used as collateral for loans
While most farmers and experts support the
extension of lease agreements, which will allow for more long term planning and
greater investment, the other proposals have people worried.
“Listening to the head of the land agency, I had shivers running down my
spine,” said Daniel Bilak, the managing partner of law firm CMS Cameron McKenna
in Kyiv. A veteran of the issue, with
two stints as a government adviser on these issues, Bilak argues that progress
has been hampered by excessive politicization, and in some cases ill will.
“We have so many concerns in Ukraine
about privacy of information – everyone in this room knows why … Its absolute
nonsense, because every land registry system in a normal functioning market
economy shows you exactly who the owners are,” Bilak said.
While
praising the creation of a unified state registry of property rights, a
complementary body to the state land cadastre, was in many ways a huge step
forward, Bilak added it was also an incomplete one.
For one, it
is inaccessible for ordinary citizens, only open to tax experts and notaries. A
second problem is that the registry, which aims to consolidate information from
4 earlier bodies, is largely empty, as leases in it can only be registered if
owners register titles, something they are unenthusiastic about.
Meanwhile,
new proposals on land regulations are also being met with varying enthusiasm.
According to John Shmorhun, CEO of Harmelia Holdings, the longer lease terms
are clearly positive, as longer time horizons will open up the door to
infrastructure or irrigation investments, for example.
But a tax
to local budgets, and mandatory employment minimums, are worrying, Shmorhun
added.
“I don’t
hear how the state with re-invest in the villages. On the one hand, they say
there should not be just 10 people wotking on 10,000 hectates, but on the other
hand if the government does not develop the villages, there will be no one to
operate the land anyway,” Shmorhun said.
“I’m
hearing a lot of contradictory remarks from government and this worries me.”
The idea of
a state land bank – a plan to set up a lender that would allocate cheap credit
– is being viewed in the same vein.
“Any time in this country that you
have the state involved in a sector in such a massive way, this breeds
corruption… Some state agencies already operate as racketeering
organizations,” Bilak warned.
At present, the land law foresees a moratorium
on sales until 2016, after the next presidential elections. However, according
to Dr. Yaroslav Tymkiv, an expert at Pact/Uniter, a civil society project, the
current version of the law leaves a loophole, so a subsequent law could move
the date.
According to Tymkiv, the biggest opposition to
lifting the moratorium on land sales comes from individual farmers who fear
being cheated by better prepared and more knowledgeable companies, as well as
mid-scale farmers who would struggle to buy out the land they currently lease.
Polls typically show negative sentiment toward a land markey ranging between 40
and 60 percent.
That doesn’t mean the current version is
perfect for the little guy. A recent report by USAID Agroinvest, a U.S. funded
advocacy project, points out asymmetrical relations work in small scale
landowners disfavor.
“They receive paltry sums in rent and are often cheated by their lessors.
Many would like to sell their land plots
to have money to pay for medical care of for education for their children, but
cannot do this due to the moratorium,” reads their report.
On the opposite side of the argument is a
conglomeration of corporate interests, from banks seeking to sell new products
like land mortgages to large agriholdings looking to legalize their assets
bought on the shadow market. Individuals who have some claim of ownership but
who have long moved to cities and cannot care for the land are also a
significant factor, Tymkiv added.
At the end of the day, though, its being able
to plan ahead that’s the most important, making some yearn for stability.
“Land is the key issue for agriholding companies … and the lack of
predictability of the land reform makes it very difficult to go out and look
for more money,” Shmorhun said.
Kyiv Post editor Jakub Parusinski can be
reached at [email protected]
