If to launch the land market, it will be a global tectonic shift for Ukraine – economic, ideological and political shift. This process looks rather inevitable. Indeed, in the Memorandum concluded with the IMF there is a requirement to launch a free circulation of land in Ukraine. In early 2018, the moratorium on the sale of farmland should be abolished, which was prolonged already eight times. Until the end of May this year, Ukraine undertook to pass a Law on circulation of agricultural land.
These steps, if they are implemented, will mean the actual introduction of the land market in Ukraine. Subject to the correct legislation, this step will be the impetus for the economic growth of the agricultural sector and the country as a whole. Otherwise, most of the land will legally fall into the hands of the country’s ten richest people.
European and world economic experience of launching the land market gives Ukraine the grounds to hope for the best. This is evidenced by a comparison of the same situation in the countries that have implemented land reform and those, which are restricting its sale. So, in the first group of the states the land is 5-10 times more expensive than in the second one. The average cost per hectare of land in 18 countries, where the state limits the land market (i.e. Russia, Armenia, Serbia, etc.) – is USD 0.5-3 thousand. But in the Western European countries (Japan and the USA), this figure is USD 12-20 thousand per hectare. In Eastern Europe it is about USD 5000.
Thus, 42 million hectares of Ukrainian plough land should cost more than USD 210 billion if to take a price level of the same Poland or the Czech Republic. These funds could become investments that will revive weaken Ukrainian economy. And this is despite the fact that in the conditions of the moratorium farmland is still being sold in Ukraine. However, it is sold at miserly price starting from USD 700 and up to USD 1,5 thousand per hectare. Besides, no any deductions and investments are paid to the budget.
The problem of Ukraine lies in the radical politicization of land relations. Politicians have turned the global economic issue, which, in fact, is the land circulation, into a fetish, which they have been actively using in their own favor for a quarter of a century. Consequently, all this time, the country’s strategic economic asset has not been working properly for the benefits of society.
Politicians did not prepare the country legally for launching the land market. The country does not have the right legislation, which would surely lead the Ukrainian land market to be the European-style. In addition to that, the projects that are hectically offered by the Verkhovna Rada have many legal flaws, which are the risks in development of the land market in case of they are adopted. In order to make an objective picture of the state of the legislation, it is necessary to analyze the weaknesses and legal gaps in the two main projects that should be considered by the Verkhovna Rada.
The Draft Bill No. 5535-1 suggests for establishment of an institute for life annuity. It implies for making payment by the buyer of the rent to the previous owner of the land plot. Such institute will work subject to sale of the land plot at the price equal to its minimum price or which is not exceeding it in one and a half time. Besides, the obligation to pay rent should be transferred from the first buyer to the each next one.
Considering the text of the project, it is not legally stipulated there how to determine the “first” seller of land that will have the right to rent. It is also unknown what will be the penalties for the buyer if he fails to fulfill his obligations to pay it. After all, the project does not contain such provisions on this norm. Therefore, the stipulated norms are able to “kill” the land market from the very beginning of its launch.
But the Draft Bill No. 5535 suggests for introducing a ban for a single legal entity to own more than a third of agricultural land in the territory of one district. It would seem that the motive is correct. However, legally, this restriction does not look so convincing at all. It will just not work, because the agrarian holdings have way too confused structures. They often consist of a large number of legally unrelated businesses, which is confusing. Therefore, nothing prevents them, if wished, to take control of an unlimited number of land plots in the same district.
Moreover, due to decentralization, the district state administrations will soon be abolished together with the old territorial patterns. But the United Territorial Communities (OTG) will be already able to cover the territories of different regions. Therefore, the question would inevitably arise related to correctness of the administrative-territorial division on which the Draft Bill relies.
One of the main issues of the land market is regulation of the order of land consolidation. Experts consider this mechanism as an instrument to counteract illegal acquisitions and blockages of agricultural holdings. It should be thoroughly settled either way. After all, nowadays the owner of the land plot located in the middle of the field is able to block and significantly complicate the work of the other landowners while they use the entire field. At the same time, none of the projects that are being prepared for consideration offers a clear mechanism for resolving the issue of agricultural land consolidation.
Therefore, it is obvious that the existing projects require thorough refinement. Some of them contain quite “exotic” means of counteracting abuses in the land sector. And almost all of them are unable to regulate functioning of the land market in a right way.