The Day | 9.10.2012
Another step to …nowhere
MPs did not extend land sale moratorium, but experts say it is legally impossible to launch market on January 1, 2013
Parliament has taken one more step towards land market in Ukraine by refusing to extend the moratorium on agricultural land sale until 2014. Only 111 MPs favored giving the moratorium a new lease of life. So the document did not even need the first reading. At the same time, 234 deputies voted for the bill that allows foreign citizens and businesses with foreign capital to buy non-farming land in Ukraine. In other words, there was a majority in parliament at the time, which could have voted (if they had wished so) for extending the moratorium.
This approach of the MPs to one of the most important land-related documents leaves a lot of questions unanswered. For example, why did the deputies suddenly break a time-honored tradition and fail to extend this moratorium? For not all preconditions for lifting it have been fulfilled… It is still open to question if a free market of agricultural lands kick-starts on January 1, 2013, for Mykola Prysiazhniuk, Minister for Agrarian Policies and Food, clearly said last Wednesday: “There are no preconditions for the agricultural land market to start functioning on January 1, 2013.” The minister explained that, under the Land Code, agricultural lands can only be marketed after the passage of the law on Land Cadastre (it has already been approved by parliament) and the land market law which is now awaiting a second reading. And the main problem is, according to Prysiazhniuk, that the draft law on land market, now prepared for a second reading, cannot be approved in its current version. He said assuredly in conclusion that the agricultural land market would only begin to function when there are guarantees for the protection of the rights of agrarians to land. But when will this occur? No one knows. By all accounts, it is the new MPs who will have to deal with the land law, and it is not before 2013 that they will gather.
What awaits this country’s land market in 2013 in the light of the MPs’ latest legislative initiatives? The Day put this question to some experts.
Hennadii NOVYKOV, chairman, Agrarian Union of Ukraine:
“The MPs did not extend the moratorium. But it will be lifted on January 1, 2013, unless the deputies have extended it at a second attempt by that date. There still is some time left. On the other hand, this has created an interesting situation: the moratorium has been lifted, but the law ‘On Land Market’ is still to be passed. In my view, it would be a right decision to extend the moratorium for the time being – at least until this law has been approved and the inventory of lands has been completed. The main obstacle to the launching of this market is the unfinished inventory. All the other problems (for example, how much land should be sold to one owner) have already been discussed, and it is quite possible to take into account any opinion about them at any moment. It is possible, for instance, to instruct the State Land Agency to conduct the inventory of state-owned lands, and the latter can be the first to be put up for auction. Besides, a lot of acts have not yet been adopted. The situation is as follows: there is no law on land market (the rules of the game!), while the moratorium has not been extended. What then? Shall we auction off land without rules? This would be wrong beginning. I do not think the land market will open on January 1, 2013, under these conditions. Why did the MPs choose to take this step? They may be expecting the next-convocation parliament to pass all the land-related laws and thus bring the land market into play. Or, maybe, they do not want to assume responsibility for a frail and politically sensitive land resource.”
“THE OBSTACLE IS CORRUPTION AND FAILURE TO KNOW THE REAL VALUE”
Rostyslav KRAVETS, lawyer; senior partner, law firm Kravets, Novak and Partners:
“The bill the MPs voted down does not lift the moratorium – it just does not extend it. On the other hand, the passed law on the expansion of foreigners’ rights to non-farming land means that it is possible – from January 1, 2013, onwards – to introduce rights to a non-farming land plot into the authorized fund of economic entities. Therefore, it is still impossible to sell agricultural land because the Land Code’s final clauses say in no uncertain terms: it is only possible to buy, sell, or otherwise alienate agricultural land plots and shares after the land market law (still being debated upon in parliament) has taken effect, but not earlier than January 1, 2013. So if the law ‘On Land Market’ is not passed before the next year begins, there will be no free market of land and auctions.“I oppose the opening of a free land market. Why? The obstacle is corruption, on the one hand, and failure to know the real value of Ukrainian agricultural lands, on the other. What is now coming to the fore in the world, alongside IT technologies, is the agrarian because food security is exposed to danger. If Ukraine cleverly carries out the land reform, it will stand every chance to become the world’s leading agricultural country. But the squandering of land may rob us of this chance.”
“WE MUST SOLVE AT LEAST TWO MORE PROBLEMS”
Leonid KOZACHENKO, president, Ukrainian Agrarian Confederation:
“As there are no legalized regulations about buying and selling land, the parliamentary decision sounds very controversial and may seriously undermine a successful development of the agrarian-industrial complex. Why am I saying so? Let us analyze the draft law ‘On Land Market’ which the agrarian community calls mixed-colored. If, God forbid, it is passed in its present shape, then, with due account of the failure to extend the moratorium, there are bound to be serious cataclysms in agriculture and ample groundwork for corruption. In my view, the authors of this land bill must solve two problems. The first is to increase the minimal area of land purchasable by one entity from 100 to 1,500-2,000 ha. If it still remains 100 ha, none of the Ukrainian agro holdings will be able to work. Meanwhile, these very holdings mostly produce a large number of farming crops that are extremely important for the market, such as sugar beets. In simpler words, public companies will just grind to a hold in this case. I am not urging the state to work for agro holdings, but the point is that, before taking some actions on the market, one should think on how this will affect the country’s overall economic wellbeing. And who will stand to gain if, for example, the sugar-making sector is to be destroyed? Nobody but Ukraine’s rivals. The other problem is the up-to-10-percent lease holding limit at the district level. Our assessment shows that this figure should be raised – even up to 30 percent in some regions, such as Polissia.”
“TOO MANY ADMINISTRATIVE RESTRICTIONS”
Maksym FEDORCHENKO, chairman, information resource center Reformation of Land Relations in Ukraine:
“In my view, even if the law ‘On Land Market’ has been passed by January 1, 2013, and the ban on agricultural land sale is automatically discontinued, there will be no free market of land. There are so far too many administrative restrictions in this sector. I think all the current preparatory work (approval of this version of the draft law on land, establishment of a land bank in the proposed shape, etc.) will result in a situation when the potential investor will be chary of making essential investments in the Ukrainian agriculture. No use expecting brilliant changes. Leasing will remain the dominant form of land management in agriculture. And if the land bank begins to work, the market will see a super-powerful player that has unlimited access to budgetary financial resources and is free of any restrictions on this market. It is not clear at the moment how much land it will accumulate and dispose of. I think civilized players will not work very actively in these conditions. In other words, the companies that could bring the culture of civilized business to and invest considerable funds in the Ukrainian market will not just work for a land market like this. So the main goal is to drop excessive restrictions and give true freedom to agrarian market players.”
“THE NEW PARLIAMENT WILL STILL HAVE THREE DAYS TO EXTEND THE MORATORIUM”
Andrii MARTYN, department head, National University of Bio Resources and Nature Management of Ukraine:
“Only one of the three mandatory conditions for launching a free market of land has been fulfilled: a law on cadastre has been passed. In the absence of a law on land market, free circulation of land is very unlikely to begin next year. There is simply a tradition in parliament to extend this moratorium every year, but they broke it this year. It is not ruled out that after the elections the new parliament will still have three days and they will manage to extend the moratorium. In my view, the moratorium will be lifted after the elections in the first half of 2013, when the current version of the land market law will be replaced with a new law on the circulation of agricultural lands. I think the state should decide now on what kind of agriculture it wants to build and act accordingly. If we want a large-scale farming economy with many powerful agro holdings and high profits, we should be prepared for a minimum of jobs in and a gradual extinction of the countryside. In this case we should allow foreigners and legal entities onto the land market. But if we want the grassroots to benefit from this (to be able to develop small-scale agro business, earn, and have a lot of jobs), we should be prepared to having to subsidize farms and grant the right to buy land only to natural persons who are really engaged in agriculture.”
“WE MUST CAREFULLY DRAW UP RULES NOW”
Yevhen BERDNIKOV, deputy chairman, State Agency for Land Resources of Ukraine:
“If you look at the current version of the Land Code’s final clauses, you will see that lifting the moratorium is connected with the passage of two laws – ‘On Land Cadastre’ and ‘On Land Market’ – and cannot thus happen before January 1, 2013. The law ‘On State Land Cadastre’ was passed as long ago as July 7, 2011, while the one ‘On Land Market’ went through the first reading in November 2011 and got stuck at that stage. This means that only one of the two mandatory laws has been passed. So the opening of a free market of agricultural land and the possibility of converting land plots for commercial farming production in January 2013 is out of the question. A free market of agricultural lands can only emerge if the law ‘On Land Market’ is passed or if a linkage between the land moratorium and the Land Code’s final clauses is lifted.
“The agricultural land market cannot be opened unless the problems of a particular nature of these lands are settled. It is a specific category of lands. It is our national wealth. For this reason, ‘checks and balances’ in the law ‘On Land Market’ are of paramount importance. Passing the law ‘On Land Market’ is not a formal requirement for the moratorium to be lifted. This document sets out the rules of the game. As these rules do not exist so far, it would be wrong to speak about the pluses and minuses of an open market for market players and the state. We must carefully draw up these rules now.”