Taras Ku­toviy: “The state can be a proper owner only in ex­cep­tional cases”

«The state can be a proper owner only in ex­cep­tional cases»

The Ukrainian Week - - CONTENTS - In­ter­viewed by Lyubomyr Shava­lyuk

Min­is­ter of Agri­cul­tural Pol­icy and Food on prob­lems in the agri­cul­tural sec­tor, the lobby of land­hold­ers and the land market

The Ukrainian Week talked to Ukraine’s Min­is­ter of Agri­cul­tural Pol­icy and Food, Taras Ku­toviy, about cur­rent prob­lems fac­ing the AIC, the large land­holder lobby, and how to es­tab­lish a land market.

What are the Min­istry's plans for key re­forms in the farm sec­tor?

— We’ve called our new AIC de­vel­op­ment strat­egy “3+5” and, so far, it’s been dis­cussed quite widely. Both agribusi­ness and the in­ter­na­tional com­mu­nity have given us pos­i­tive feed­back. The strat­egy in­cludes three main ob­jec­tives and a few smaller ones. First is progress with land re­form. Sec­ond is trans­form­ing state sup­port for the sec­tor. Third is im­prov­ing ef­fi­ciency at state-owned en­ter­prises and putting them up for sale. Other pri­or­i­ties in­clude de­vel­op­ing or­ganic prod­ucts, mar­kets, ru­ral ar­eas and farming in­fra­struc­ture, and shoring up the in­sti­tu­tional ca­pac­ity of the State Con­sumer Prod­uct Ser­vice.

We’ve pre­pared leg­is­la­tion for each of the three pri­or­ity ar­eas, be­cause there are a num­ber of trans­for­ma­tions that need to take place. In or­der for them to suc­ceed, laws have to be changed.

We’ve also launched our Re­form Sup­port Of­fice. We hired young, am­bi­tious spe­cial­ists on a com­pet­i­tive ba­sis and their work is be­ing funded by donors—the EU, US and Canada—at market salaries. Right now, the Of­fice is go­ing through an in­ter­nal au­dit. When the re­sults be­come avail­able, we plan to un­der­take com­pre­hen­sive changes in the way the Min­istry is or­ga­nized.

How do you see land re­form tak­ing place?

— I’m ready to re­view a bill on the trans­fer of land des­ig­nated for agri­cul­tural pur­poses. To­gether with our team, we pro­pose in­tro­duc­ing the right to lease land and to use it as col­lat­eral against bank loans.

Why have we de­cided on this for­mula rather than a broader, more com­pre­hen­sive ap­proach to re­solve land is­sues? Be­cause I think that this is the pre­cise step that will gain sup­port in the Verkhovna Rada. I joined the Cab­i­net from the leg­is­la­ture, where I chaired the re­lated com­mit­tee, so I have a pretty ac­cu­rate sense of the mood among deputies: bet­ter that we take this small but sig­nif­i­cant step than to get caught up in some­thing more am­bi­tious and fail.

The trans­fer of land leas­ing rights will open up a num­ber of doors. Firstly, with this, the value of farm­land can be es­tab­lished. To­day, the main ar­gu­ment pop­ulists of­fer is that the minute land can be freely bought and sold, it will all be snapped up from Ukraini­ans for peanuts1. Once leas­ing rights can be traded and it be­comes clear that peo­ple are will­ing to pay 1,000, 2,000 or 5,000, no­body will be able to sharply drop the price, since buy­ing land could never cost less than leas­ing it. Se­condly, in­vestors will have the op­por­tu­nity to draw up long-term business plans. And even if they should sud­denly de­cide to get out of the farming business, they will be able to do so rel­a­tively eas­ily by sim­ply sell­ing off their land lease rights.

How will this af­fect the manda­tory time­frame for land use leases?

— Right now, land leases are for a min­i­mum of 7 years and a max­i­mum of 49. I don’t think that needs to be changed. Within this range of time, peo­ple de­cide for them­selves what suits them. Then the pic­ture looks some­thing like this: rights to a 10-year lease on land in X Oblast costs Y, a 15-year lease is a bit more, and a 20-year one more again. So peo­ple then de­ter­mine what term suits them best.

There is one im­por­tant so­cial is­sue, how­ever. Many peo­ple live off their land shares. When they sell the right to lease it, they aren’t sell­ing the land it­self. So who­ever owns the lot continues to get paid for leas­ing it. Who­ever owned the land and had the right to hand it down to heirs, continues to own it and has the right to hand it down. This can’t be em­pha­sized enough.

What changes do you an­tic­i­pate in state sup­port for the sec­tor?

— The key change here is that we want to sup­port agri­cul­tural SMEs with cash. We’re talk­ing about those farms that are work­ing no more than 500 hectares [about 1,250 acres]. To­day, 86% of farming en­ter­prises fall into this cat­e­gory in Ukraine. Yet only 2% of them are com­pa­nies that are us­ing cred­its. Why? Be­cause there is no col­lat­eral and the sit­u­a­tion with land re­mains un­clear.

There’s been an in­no­va­tion in state sup­port that I ini­tially only pre­sented as a philo­soph­i­cal no­tion, but now it’s close to be­ing re­al­ity since the PM an­nounced it pub­licly as the Govern­ment’s po­si­tion. We pro­pose that 1% of gross pro­duc­tion of agri­cul­tural prod­ucts go for state sup­port. Right now, this means UAH 5.5bn, the amount that will be di­rected at sup­port for the AIC next year—pro­vided that the Rada votes in fa­vor. By com­par­i­son, in 2016, this line item was al­lo­cated only UAH 300mn. In short, we’re look­ing at a rad­i­cally larger amount of state sup­port for agri­cul­tural pro­duc­ers, with an em­pha­sis on SMEs. Within this frame­work, we

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