Farm­ers vs agri­hold­ings:

What kind of land mar­ket Ukraine needs

The Ukrainian Week - - CONTENTS - Oles Kra­mar

What kind of land mar­ket Ukraine needs

The op­por­tu­nity to buy and sell farm­land has turned into a key fac­tor of po­lit­i­cal strug­gle in Ukraine. Few politi­cians do not lament the threat of modern lat­i­fundists “buy­ing up land for peanuts” in case the sale ban is lifted. This rhetoric has been serv­ing the in­ter­ests if big and gi­ant agribusi­nesses for two decades now, al­low­ing their own­ers to ap­pro­pri­ate a lion’s share of land-gen­er­ated rev­enues and con­cen­trate more and more of the land in their hands.

Today, the own­ers of farm­land in Ukraine are forced to lease it to agri­cul­tural hold­ings for at the term of least 7 years and a monthly fee of UAH 1 or 0.03 cents per are (100 m2). The own­ers have no op­por­tu­nity to take a loan col­lat­er­al­ized by their land and work on it ef­fec­tively. Yet the law pro­hibits them to sell the land. They are thus left with no choice but to lease their land on dis­crim­i­na­tory terms to the agri­cul­tural hold­ings that are of­ten mo­nop­o­lies on the lo­cal mar­ket. If the land stands un­used for too long, the owner can be ac­cused of not us­ing his or her patch for farm­ing pur­poses and de­prived of the right to own it based on the Land Code.

This sit­u­a­tion ben­e­fits big agribusi­nesses so much that they have ac­tively re­sisted the land mar­ket for 15 years now. For now, noth­ing stops them from ex­pand­ing their lat­i­fun­dia by thou­sands and, pos­si­bly, mil­lions of hectares through cheap rent. They can eas­ily im­pose their con­di­tions on the poorly in­formed own­ers who hold patches of sev­eral hectares each and are not united in any as­so­ci­a­tions. An­other scary stereo­type is that for­eign­ers will come and buy up land if the ban is lifted. How­ever, they have long been con­trol­ling ex­ten­sive patches of farm­land in Ukraine through long-term lease and lo­cal in­ter­me­di­aries. Fi­nally, all big agri­cul­tural hold­ings in Ukraine work as le­gal en­ti­ties through off­shore schemes.

LAND MAR­KET AS A TOOL

The coun­try is pay­ing a very high price for the sta­tus quo. This is il­lus­trated by the de­grad­ing coun­try­side and its in­fra­struc­ture even as agri­cul­tural out­put, ex­ports and prof­its grow. The own­ers of large agribusi­nesses of­ten live in Kyiv or abroad, so they have lit­tle in­ter­est in tak­ing care of the land or ru­ral in­fra­struc­ture.

Un­like big agri­cul­tural hold­ings, small and medium farm­ing busi­nesses have no pocket banks or ac­cess to in­ter­na­tional fi­nan­cial mar­kets. They strug­gle to get loans. The fund­ing they man­age to ob­tain, col­lat­er­al­ized with fu­ture crops or equip- ment, is ex­tremely costly and cum­ber­some given the high risks. Lend­ing prob­lems hit the de­vel­op­ment of live­stock breed­ing or stor­age in­fra­struc­ture the hard­est. SMEs in agri­cul­ture lack the fund­ing badly; im­prove­ments would ex­pand the prospects for SMEs. The big busi­nesses, by con­trast, have the fund­ing and are de­vel­op­ing these sec­tors.

So, the pri­or­ity ques­tion is how to break this trend if the land sale ban is lifted and to tran­sit to a strong com­pet­i­tive na­tional farm­ing busi­ness. Among other things, it can pro­tect Ukraine from the prospect of for­eign dom­i­na­tion in the coun­try’s farm­land. Ukraine’s in­ter­est lies in con­vert­ing the suc­cess of the agri­cul­tural sec­tor into the ap­pear­ance of re­silient and nu­mer­ous small and mid-sized busi­nesses in agri­cul­ture. These will make help make the na­tion’s so­cial fabric and con­trib­ute to the de­vel­op­ment of the ru­ral ter­ri­tory around their lo­ca­tion.

The farm­land mar­ket should be launched de­spite the fact that a lot has yet to be done for it to func­tion prop­erly. The elec­tronic plat­form of the State Land Regis­ter launched in 2013 has flaws. In 2015, the Public Cadaster Map be­came freely ac­ces­si­ble. In 2016, the State Land Com­mit­tee de­vel­oped soft­ware to au­to­mat­i­cally ex­change data on land plot own­ers with the Min­istry of Jus­tice. The aim was to di­min­ish cor­rup­tion risks in the process. Today, the map shows

100% of land ad­min­is­tra­tion cer­tifi­cates. How­ever, more is to be done for the land cadaster to per­form all of its func­tions. There is no full in­for­ma­tion on all land plots in it yet. The uni­form sys­tem of spa­tial co­or­di­nates or plot iden­ti­fi­ca­tion is not used uni­ver­sally. A uni­form sys­tem of the land cadaster data and its ac­cu­racy has not been in­tro­duced

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