Farmers vs agriholdings:
What kind of land market Ukraine needs
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