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
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
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
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.
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