Ivan Tomych: "Over 10 mil­lion hectares of farm­land are in the shadow econ­omy"

Head of the Ukrainian As­so­ci­a­tion of Farm­ers and Pri­vate Landown­ers on back­ground, cur­rent stage and threats of land re­form

The Ukrainian Week - - CONTENTS - In­ter­viewed by Lubomyr Shava­lyuk

Re­cently, the de­bate on lift­ing the mora­to­rium on the sale of agri­cul­tural land has died down some­what. This was largely due to the fact that the IMF re­moved this is­sue from its list of con­di­tions for pro­vid­ing the next tranche of fund­ing. How­ever, the re­form of re­la­tions in the land sphere and in­tro­duc­tion of a land mar­ket as its re­sult are still rel­e­vant top­ics. Ukraine must fi­nally re­alise the po­ten­tial of its most pow­er­ful re­source. The Ukrainian Week spoke to Ivan Tomych, head of the Ukrainian As­so­ci­a­tion of Farm­ers and Pri­vate Landown­ers, about the con­di­tions un­der which the mora­to­rium was adopted and the stages of land re­form.

Un­der what con­di­tions was the mora­to­rium on the sale of agri­cul­tural land im­posed and what came af­ter this?

When the Land Code was drafted, it did not ini­tially con­tain a mora­to­rium. It en­vis­aged the adop­tion of a num­ber of laws nec­es­sary for land re­form. A list of these is recorded in the Fi­nal Pro­vi­sions of the Code. The land mar­ket could not have been launched un­til they were passed and im­ple­mented. This was re­flected in the Tran­si­tional Pro­vi­sions on the Pro­hi­bi­tion of the Pur­chase and Sale of Agri­cul­tural Land. This ap­proach was de­ci­sive in ob­tain­ing the votes in Par­lia­ment for the Land Code in au­tumn 2001.

A leg­isla­tive base for land re­form be­gan to be es­tab­lished in 2002, when the 4th con­vo­ca­tion of the Verkhovna Rada was elected. I headed the Agrar­ian Com­mit­tee in that par­lia­ment. De­spite the fact that var­i­ous fac­tions were rep­re­sented in it, we im­me­di­ately iden­ti­fied a com­mon po­si­tion on land re­form and the nec­es­sary leg­isla­tive sup­port.

The first is­sue we raised be­fore Par­lia­ment con­cerned the al­lo­ca­tion of land plots to cit­i­zens. Then there was a list of laws on the sys­tem of land use and pro­tec­tion, state sup­port for agri­cul­ture (this was not men­tioned in the Land Code, but was part of the pack­age of laws re­quired for land re­form) and so on. As a re­sult, the 4th con­vo­ca­tion of the Verkhovna Rada adopted 11 fun­da­men­tal laws listed in the Fi­nal Pro­vi­sions of the Land Code. Three more laws were not passed, although we had done a great deal of prepara­tory work by hold­ing sev­eral par­lia­men­tary hear­ings and gov­ern­ment days on the is­sues. The par­lia­men­tary com­mit­tee mon­i­tored all de­vel­op­ments.

We iden­ti­fied a num­ber of is­sues and de­ter­mined which laws needed to be de­vel­oped in or­der to elim­i­nate them. Frankly speak­ing, an­other year of the 4th con­vo­ca­tion Verkhovna Rada was needed to com­plete the land re­form.

What hap­pened af­ter the 4th con­vo­ca­tion of the Verkhovna Rada fin­ished its term?

2006 (the 5th con­vo­ca­tion was elected in March 2006 – Ed.) was al­ready an un­pro­duc­tive year – the de­ci­sions made were less ef­fec­tive. Par­lia­men­tary elec­tions took place. How many fun­da­men­tal laws did the new par­lia­ment and all sub­se­quent con­vo­ca­tions adopt? One, for all par­lia­ments since the 5th con­vo­ca­tion. Af­ter 2006, it was as if all the par­lia­men­tary hear­ings and leg­isla­tive ba­sis that we left be­hind had dis­ap­peared – like they had never ex­isted. The MPs be­gan to solve the land is­sue from an­other per­spec­tive, aim­ing to quickly sell off the land. The process of land re­form did not reach a log­i­cal con­clu­sion and was in­ter­rupted. In or­der to pre­vent may­hem in the land sphere, Par­lia­ment re­sorted to an­nual ex­ten­sions of the mora­to­rium on the sale of agri­cul­tural land.

What are the prob­lems in the land sphere to­day?

Ev­ery­thing in the field of land re­la­tions to­day is a catas­tro­phe. If we con­tin­ued the land re­form af­ter 2006, that would not be the case. Now, more than 10 mil­lion hectares of agri­cul­tural land are in the shadow econ­omy. This refers to plots that were not in­her­ited by any­one when their own­ers died; the land for which rental con­tracts were never re­newed; re­serve and state-owned land, in par­tic­u­lar be­long­ing to the Min­istry of De­fence, not to men­tion the Academy of Agrar­ian Sciences, which is al­ready spo­ken about a lot in other con­texts. These re­sources serve thieves in­stead of cit­i­zens and the bud­get.

But that's not all. Now it has come to a point that no­body could even imag­ine pre­vi­ously: seizures of prop­erty and land, as well as mur­ders re­sult­ing from land con­flicts. All this is tak­ing place in the peace­ful part of Ukraine and poses a se­ri­ous threat to sta­bil­ity. Ac­cord­ing to my data, there were 6,800 at­tempts and suc­cess­ful cases of land grab­bing in 2016. The crim­i­nals of­ten used weapons and mur­ders took place. That is to say that own­er­ship rights are not guar­an­teed; more­over, they can also be a threat to life, which could sub­se­quently threaten so­cial se­cu­rity in the coun­try.

These are just the main prob­lems with land re­la­tions. In ad­di­tion, there are a num­ber of prob­lem­atic is­sues that can be an­a­lysed for hours: the cadas­tre has not been filled with the nec­es­sary data, there is no sep­a­ra­tion be­tween state-owned and com­mu­nal prop­erty, and many, many more. But the key prob­lems I men­tioned threaten a civil war, and I have re­peat­edly em­pha­sised this. If we had launched the land mar­ket on July 1, 2017, as orig­i­nally planned, I be­lieve that a tragedy would have been in­evitable. I was crit­i­cised for this po­si­tion a lot, but my task was to pre­vent such a de­vel­op­ment. I per­son­ally spoke to the cur­rent prime min­is­ter sev­eral times on this topic and I think he is, to some ex­tent, aware of the pro­cesses that are tak­ing place. It seems that the pres­i­dent is re­luc­tant to put any more pres­sure on him, which he said to par­lia­ment while de­liv­er­ing his pres­i­den­tial ad­dress.

So at the mo­ment there is no ques­tion of in­tro­duc­ing a land mar­ket as soon as pos­si­ble. Cur­rently, the main is­sue is how to for­mu­late ap­proaches to re­solv­ing land is­sues and turn them into op­por­tu­ni­ties as a pub­lic agree­ment be­tween the oli­garchs that have real in­flu­ence and the pop­u­la­tion of Ukraine, which is mostly poor.

Would it be enough to pass laws to re­solve the prob­lem­atic is­sues in or­der to launch the mar­ket for land?

Not at all. We have a clear po­si­tion. We do sup­port land mar­ket. But be­fore it is in­tro­duced, it is nec­es­sary to re­solve all the prob­lem­atic is­sues that we are talk­ing about. It is also about bring­ing land out of the grey econ­omy, hav­ing a com­plete land reg­is­ter and full de­mar­ca­tion. This is the foun­da­tion. But the rest is more im­por­tant. A civilised mar­ket im­plies the pres­ence of sell­ers and buy­ers. There are many sell­ers of land in Ukraine: due to its cir­cum­stances, sev­eral mil­lion own­ers of land plots are ready to sell them within one to two months once the ban is lifted. But there are no buy­ers in the coun­try­side. There are only oli­garchs and multi­na­tional com­pa­nies that will work through Ukrainian in­ter­me­di­aries. They will buy up the land. We can­not imag­ine the depth of the prob­lem that may arise from this.

Large agri­cul­tural hold­ings op­er­ate on global fi­nan­cial mar­kets. There is the ex­am­ple of the com­pany Mriya, whose founder Ivan Huta I know well. He started with 50 hectares. I am not go­ing to crit­i­cise him, but facts are facts. What hap­pened to this com­pany (Mriya went bank­rupt scan­dalously in 2016 – Ed.)? Will we be able to talk about any sort of sta­bil­ity con­trolled by Ukraini­ans if such firms cul­ti­vate and sub­se­quently own the best land in the coun­try? Def­i­nitely not. The na­tional in­ter­est is lost here. In Ukraine, a few com­pa­nies de facto cul­ti­vate a third of the coun­try's land re­sources. The land hold­ings of in­di­vid­ual com­pa­nies some­times reach 1 mil­lion hectares. There are cer­tain ma­nip­u­la­tions when land is reg­is­tered to broth­ers, in-laws, daugh­ter com­pa­nies and so on, but I know what I'm talk­ing about. This is not the limit: land banks could grow to a few mil­lion hectares if noth­ing is done.

How can we pre­serve na­tional in­ter­ests while in­tro­duc­ing a land mar­ket?

The na­tional in­ter­est will be pre­served and the na­tion will con­trol the sit­u­a­tion when we have at least 400-500 thou­sand fam­ily-run farms. We want to cre­ate con­di­tions for the mass es­tab­lish­ment of such farms in Ukraine. Europe is strong be­cause most coun­tries, such as Aus­tria, France and Ger­many, pur­sue a na­tional pol­icy to­wards the de­vel­op­ment of small farms. On av­er­age, 13 hectares per farm.

It is clear that each re­gion will have its own spe­cific char­ac­ter, but these farms will op­er­ate in a global con­text and must have all the right con­di­tions for dom­i­na­tion. Which is a chal­lenge. To­day, 60% of gross agri­cul­tural pro­duc­tion is made with the same tech­nol­ogy as 100 years ago: a plot of land, a hoe and man­ual work. At best, there is some small-scale equip­ment. This is a tragedy. But at the same time, it is a sign of the huge po­ten­tial in

Ivan Tomych is pres­i­dent of the Ukrainian As­so­ci­a­tion of Farm­ers and Pri­vate Landown­ers. Born in 1958 in the IvanoFrankivsk Oblast, he grad­u­ated from Kami­anets-Podil­skyi Agri­cul­tural In­sti­tute in 1987 and sub­se­quently re­ceived a doc­tor­ate in Agri­cul­tural Sciences. Was in­volved in agribusi­ness for many years. Since 1997, he has been the head of var­i­ous pro­fes­sional agrar­ian as­so­ci­a­tions. Tomych was MP in the 4th con­vo­ca­tion of the Verkhovna Rada.

hu­man re­sources and cap­i­tal that has not yet been given the op­por­tu­nity to show it­self.

So our main bat­tle is to in­tro­duce a na­tional pol­icy of sup­port for small farm­ers. This will make it pos­si­ble to over­come poverty, pro­tect the land and build an eco­nom­i­cally stronger coun­try. Peo­ple will start scream­ing that we want to turn Ukraine into an agrar­ian coun­try again, but that is not the point. The war led to us los­ing a sig­nif­i­cant part of the coun­try's po­ten­tial in in­dus­trial, per­son­nel, ma­te­rial and tech­ni­cal as­pects. It is utopian to think that we will be able to quickly re­vive the ma­chineb­uild­ing sec­tor, for ex­am­ple. Es­pe­cially since the war is still on the ta­ble. How­ever, with land it is pos­si­ble to set off a so­cio-eco­nomic ex­plo­sion that will im­prove the well­be­ing of cit­i­zens within one year.

With the sup­port of the state, the ef­fect could be enor­mous. If we have up to 0.5 mil­lion fam­ily farms, this will pro­vide up to 2 mil­lion ru­ral jobs. If you cre­ate the right con­di­tions and op­por­tu­ni­ties to earn the liv­ing, peo­ple will go there. The ex­pe­ri­ence of the 1990s showed that aca­demics, pro­fes­sors, bal­leri­nas and pi­anists started farm­ing. I can give you spe­cific ex­am­ples. At that time, peo­ple saw the op­por­tu­nity to re­alise them­selves and start a busi­ness. A lot of them man­aged to do it. There­fore, it is only pos­si­ble to make the coun­try more suc­cess­ful in a short time by de­vel­op­ing the agrar­ian sec­tor based on fam­ily farm­ing and co-op­er­a­tion. Such an ar­range­ment should not be mo­nop­o­lis­tic, but should oc­cupy at least half of the land, com­pared to 20% to­day. In ap­prox­i­mate- ly four to five years, when such a sys­tem is formed and farm­ers have sub­stan­tial cap­i­tal and op­por­tu­ni­ties to at­tract fi­nanc­ing, we can talk about in­volv­ing an ad­di­tional ac­cel­er­a­tor for agri­cul­tural de­vel­op­ment by in­tro­duc­ing a land mar­ket. That is, the land mar­ket should be set up on this base – an agri­cul­tural sys­tem with an em­pha­sis on fam­ily farms. Then it will be a fac­tor in im­prov­ing the well-be­ing of Ukraini­ans.

We have been fight­ing for this con­cept for a long time. De­spite dif­fer­ent ap­proaches, it was adopted at the gov­ern­men­tal level on Septem­ber 13, when there was an an­nounce­ment that next year's bud­get would in­clude UAH 1 bil­lion (US $37.7mn) in sup­port of this con­cept. The only prob­lem is that over the years of in­de­pen­dence, we have adopted dozens of con­cepts and pro­grammes, but none has been im­ple­mented. There­fore, I would very much like the sit­u­a­tion not to de­velop as usual this time, so that this three-year con­cept is con­stantly im­proved and then ex­tended to a longer pe­riod. I am un­der no il­lu­sion that ev­ery­thing will be im­ple­mented very quickly, but there is some hope. We will fight for their im­ple­men­ta­tion.

Ex­pec­ta­tions to­wards the gov­ern­ment are high. It must do what no­body has done be­fore: make a trans­par­ent, di­rect, ef­fec­tive, non-cor­rupt sup­port sys­tem for farm­ers that will gain the trust of the tens and hun­dreds of thou­sands of or­di­nary peo­ple who will be able to change their lives within two or three years by tak­ing ad­van­tage of state sup­port for agri­cul­ture. Then next year may be a turn­ing point. It is pos­si­ble to form 60-70 thou- sand farms dur­ing this time. To­day, we have only 33 thou­sand, so we can at least dou­ble this amount. This is not enough, but on this ba­sis, we can con­tinue on to growth rates that will pro­vide 400-500 thou­sand farms in five years. Then there will be a chance for de­vel­op­ment.

Oth­er­wise, the prob­lems in the land sphere will only keep grow­ing. The scale of land grab­bing shows that the is­sue is so deeply rooted that the con­se­quences will be cat­a­strophic if it is not solved soon.

How long is needed to pass all the nec­es­sary laws? Is the cur­rent par­lia­ment pre­pared for this?

I be­lieve that this par­lia­ment is not able to com­plete the land re­form. The re­form in gen­eral, not just the adop­tion of one sin­gle law on the cir­cu­la­tion of agri­cul­tural land. There is no other way to look at it, be­cause there is no coali­tion and the pro­fes­sional com­po­si­tion of the cur­rent Verkhovna Rada is very weak. There­fore, I do not hold out any hope in this re­gard. The only thing I would like is to pro­long the mora­to­rium and put re­sources in the bud­get to sup­port farm­ers.

What is the gov­ern­ment miss­ing to cre­ate an ef­fec­tive sup­port sys­tem for small and medium-sized farm­ers?

If you an­a­lyse the im­ple­men­ta­tion of all agrar­ian pro­grammes dur­ing the pe­riod of in­de­pen­dence, you can see sev­eral com­mon key fac­tors. First, the po­lit­i­cal will of the top fig­ure re­spon­si­ble for a par­tic­u­lar fo­cus area. In our case, the Prime Min­is­ter. Does he have the will? I can­not say for sure. I can see that Hro­is­man wants to do some­thing and he is be­gin­ning to un­der­stand the is­sues, but that is not enough.

Sec­ond, the abil­ity of the pub­lic ad­min­is­tra­tion sys­tem to per­form the tasks at hand. I re­mem­ber how we sup­ported the farm­ers with Pres­i­dent Kuchma. Within three months, the whole sys­tem of gov­ern­ment joined us. Back then, it was still mono­lithic and could be called the most man­age­able sys­tem in the his­tory of Ukraine. Kuchma con­structed it based on au­thor­i­tar­ian prin­ci­ples. But at the time, it worked. Then, Ukraine had a his­toric chance to put what I am talk­ing about into prac­tice, which would have dis­pelled all the dan­gers that even­tu­ally ma­te­ri­alised. In­stead, ma­nip­u­la­tions started at the end of the year 2000: the sys­tem of gov­ern­ment and the ad­min­is­tra­tion of agri­cul­ture be­gan to fal­ter. Agri­cul­tural hold­ings sprang up against this back­ground.

The trans­for­ma­tion of col­lec­tive and state farms be­gan, the land was lib­er­ated and a scram­ble for it started be­cause of the oli­garchi­sa­tion of the agrar­ian sec­tor. Yes, it had pos­i­tive sides too. In 1998-1999, farm­ers worked by bar­ter­ing, they ex­changed an­i­mal hides. Peo­ple were paid in saw­dust and straw. The changes that were made also had a ben­e­fi­cial ef­fect in any case. By 2001-2002, all the land was sown, yield in­creased, as well as ex­ports, and in­vest­ment ap­peared. But the de­vel­op­ment process was un­con­trolled and bi­ased to­wards the hold­ings, which forced out ev­ery­one else. The sys­tem of gov­ern­ment did not cope with this threat. Big busi­ness be­gan to fi­nance the gov­ern­ment and form their own par­lia­ments that worked against the in­ter­ests of Ukraine. To­day, the ad­min­is­tra­tion sys­tem has col­lapsed.

Con­se­quently, two fac­tors are im­por­tant: po­lit­i­cal will and the sys­tem of gov­er­nance. With­out them, noth­ing will hap­pen. I am con­vinced that cer­tain ac­tions will be taken in the right di­rec­tion. But small steps will not give us any­thing. We need rad­i­cal, resolute ac­tion. Re­forms


are needed in the fullest and deep­est sense of the word. Con­cep­tual changes that will lead to a new qual­ity of life and eco­nomic op­por­tu­ni­ties.

In this con­text, it is nec­es­sary to limit the re­sources and fi­nan­cial ca­pa­bil­i­ties of those who have funded po­lit­i­cal projects in to­day's par­lia­ment. To be frank, I am sure that only an en­tirely new po­lit­i­cal scene with great cred­i­bil­ity will have the chance to quickly change the sit­u­a­tion. Be­cause the cur­rent sys­tem of gov­er­nance and the level of pub­lic trust do not al­low us to be­lieve that this task can be solved quickly.

If we as­sume that the mora­to­rium will be lifted with­out mak­ing the nec­es­sary changes that you are talk­ing about, what dan­gers will emerge?

The fact that we are not im­prov­ing the cir­cum­stances for launch­ing a land mar­ket is a con­se­quence of in­ac­tion by the au­thor­i­ties, both ex­ec­u­tive and leg­isla­tive. If this process con­tin­ues for a long time, there will be cer­tain risks. If the land mar­ket is in­tro­duced in such con­di­tions, the bomb will ex­plode. There are many ex­am­ples.

First: as of to­day, al­most 3 mil­lion hectares of land have been sold through cor­po­rate rights (see Rent seek­ing on land at ukraini­an­week.com) in com­pa­nies that signed long-term rental con­tracts with the own­ers of land plots. This means there are 700-800 thou­sand peo­ple who do not know that they have sold the land. If a land mar­ket is launched, the own­ers of these cor­po­rate rights would be able to en­ter the mar­ket. The orig­i­nal own­ers will then re­alise that their prop­erty has been sold. What will they do when they open their eyes? They might have rel­a­tives who fought in the ATO and have weapons. They could use them.

Sec­ond: about 10-15% of land plots are claimed by sev­eral peo­ple. If one of them wants to sell, how can this be agreed with the other co-own­ers? There could be con­flicts. It would be good if they were re­solved in court, but what if it ends in fight­ing and shoot­ing?

Third: there are a num­ber of com­pa­nies that do not clearly iden­tify who the real owner is. When they join the strug­gle to buy up land, what will hap­pen to their own­ers? There will be show­downs like in the 1990s.

Fourth: mil­lions of hectares have been sold in a hid­den way. How? For ex­am­ple, a plot owner needs money for med­i­cal treat­ment, ed­u­ca­tion or other needs. They go to the head of a lo­cal agribusi­ness firm and ask for money se­cured against the land plot. They sign an ac­knowl­edge­ment. If the mar­ket is launched, then the own­ers who bought such plots will go to reg­is­ter them. The pre­vi­ous pro­pri­etors will then claim that they did not sell any­thing.

All these are small is­sues. And there are much big­ger ones linked to transna­tional cor­po­ra­tions. Do you think that the dis­tri­bu­tion of their land is com­pletely trans­par­ent? There is so much con­fu­sion there that prob­lems could reach a level where the au­thor­i­ties and Na­tional Guard would have to get in­volved. In the end, ten­sion could rise to an ex­tent where it spi­rals out of con­trol.

Which leg­isla­tive acts nec­es­sary for land re­form have al­ready been passed and what else should still be ap­proved?

The 4th con­vo­ca­tion of the Verkhovna Rada ap­proved 75% of the leg­isla­tive acts pro­vided for in the Fi­nal Pro­vi­sions of the Land Code. 25% is left – not much work. The Law on the State Land Mort­gage Bank has not been ap- proved, the Law on Land Valu­a­tion is out­dated and there is no law to de­fine the le­gal ba­sis for seiz­ing land in pri­vate own­er­ship. That is, we adopted all of the laws ex­cept three. There were 11.

Af­ter the 4th con­vo­ca­tion of Par­lia­ment, no­body re­turned to this and no­body was even in­ter­ested in what had been done. They just started re­al­is­ing their own pro­gramme. For them, the main is­sue was the in­tro­duc­tion of a land mar­ket. Since the phrase "land mar­ket" was get­ting on peo­ple's nerves, it was changed to "land cir­cu­la­tion". Since then, only this law has been tor­pe­doed and noth­ing else.

But the main prob­lem lies in the reg­u­la­tory acts that im­ple­ment the leg­isla­tive frame­work. Even the laws passed by the 4th con­vo­ca­tion of Par­lia­ment still need 70-80% of their sub­or­di­nate leg­is­la­tion to be im­ple­mented. For ex­am­ple, the Law on Sep­a­rat­ing State and Com­mu­nal Land has been ap­proved, but not im­ple­mented. The Cadas­tre Law was passed, but the cadas­tre it­self is only half-full. Even there – the easy part has been filled and the dif­fi­cult bit could take years and years.

In other words, in re­cent years the adop­tion of by-laws and the im­ple­men­ta­tion of laws have ad­vanced by about a few per­cent.

Who ben­e­fits from the cur­rent sit­u­a­tion?

When the land re­form be­gan in 1990 and later, left-wing po­lit­i­cal forces did their ut­most to not give peo­ple any land and stop the land re­form from be­ing suc­cess­ful. They ex­pected that a so­cial­ist sys­tem of gov­ern­ment and some form of the “Eurasian Union” would re­turn. In this way, they hurt the coun­try, with great sup­port from the pop­u­la­tion.

The sec­ond pe­riod be­gan when Kuchma broke down this wall and mech­a­nisms that opened ac­cess to land re­sources be­gan to op­er­ate. Ev­ery­one who had money in Ukraine – and not only in Ukraine – rushed into the agrar­ian busi­ness. They got the idea of tak­ing land plots from vil­lagers. They did not want to de­velop a sys­tem for pro­tect­ing the rights of landown­ers. On the con­trary, if you look at leg­isla­tive changes, farm­ers had their rights taken away from them ev­ery time: the way lease rights were reg­u­lated and rental periods were recorded was com­pletely in­ad­e­quate. There­fore, they stood in the way of the land re­form that the coun­try needed. But they did not suc­ceed in tak­ing the land away from peo­ple.

To­day, the sit­u­a­tion is as fol­lows: those who are in power and have money are in­ter­ested in launch­ing a land mar­ket. At the same time, multi­na­tional cor­po­ra­tions and in­ter­na­tional in­sti­tu­tions are clearly lob­by­ing for a land mar­ket. They un­der­stand that events in Ukraine may de­velop in dif­fer­ent ways, but this will be a mi­nor is­sue if they seize the land. There­fore, the pol­icy in re­cent years has not been to de­velop fam­ily farm­ing and the coun­try­side, but to seize these re­sources and use them for per­sonal gain.


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