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130 Goverment finance

How the new agricultural land sales market in Ukraine might look

Farmer works the fields in Kyiv Oblast, on April 17, 2018. With the 16 year old land moratorium about to end, farmers that were cultivating leased land, might finally be able to own it.

On Sept. 2, President Volodymyr Zelensky decided to end the moratorium on agricultural land sales, effectively in place since 2001. A land market could boost Ukraine’s economy by up to 2 percent yearly, the World Bank estimates.

In a Sept. 5, interview with Novoe Vremya magazine, Timofi Milovanov, Ukraine’s new economy minister, said the ministry is exploring 35 possible versions for land-market legislation.

But according to what appears to be the government-favored version, reported by Ukrainian media, farmland will be sold only to Ukrainian citizens or Ukrainian companies. Limitations on the amount of land that can be purchased will be put in place: no more than 35 percent of farmland in local communities will be sold to one entity, 15 percent in an oblast and 0.5 percent countrywide.

The selloff is to take place through an online procurement platform with transparent pricing. Foreigners will be able to buy Ukrainian farmland only through a company with Ukrainian registration.

Anders Aslund, senior fellow at the Atlantic Council, in a written response to Kyiv Post, says that the most important thing is that the moratorium will finally end. “Thanks to being able to use land as collateral, farmers will be able to get much more bank credits, which will lead to more investment and higher economic growth,” writes Aslund.

“Opening the land market and introducing measures to improve the productivity and transparency of the agricultural sector can contribute to an additional GDP growth of over 2 percent over the coming years,” said Satu Kahkonen, World Bank’s chief officer in Ukraine, Belarus and Moldova, on Aug. 26.

Aslund says the draft law looks right. He points that the law, at least on paper, gives preference to Ukrainians, ensures a transparent procurement, creates a cadastre of land owners, so that buyers’ interests would be protected and protects the state from excessive concentration of land in the hands of large conglomerates.

The biggest question remains how small and medium size farmers will able to buy the land they cultivate.

Oksana Markarova, Ukraine’s financial minister, on Sept. 2, that the ministry in cooperation with Ukrainian banks and international financial institutions will set up a fund, giving out loans to small and middle seize farmers to buy out the land they cultivate.

“Partly with government funds, partly with that of our international partners, we hope, to compensate (high) interest rates,” said Makarova.

Kakhkonen cites that around $500 million is needed for small and medium seize farmers to buy out the land they currently lease.

However, short-term risks remain.

“The unreformed, corrupt courts (may) undermine property rights,” writes Aslund. “The changes in ownership may undermine current successful farm operations.”

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