Київ
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In the next 10 years, Ukraine can receive USD 100 billion, if it opens land market – experts

Київ, November 07, 2016.

Farmers don’t have enough resources to cultivate their land plots, moreover moratorium on selling land violates constitutional rights of Ukrainians while countries that open land market have the highest GDP says research.

There has been a moratorium on the sale of agricultural land in Ukraine since 2001. Therefore, 7 million farmers, who jointly own 28 million hectares of land shares, are owners only de jure. This was stated by Dmytro Livch, expert at EasyBusiness, at a briefing held at Ukraine Crisis Media Center. “In fact, the farmers are against the extension of the moratorium on land sales. They just have no money to cultivate the land. The average rental price for their land is UAH 900 per hectare per year. At the same time, the expected market value of an average share in 2017 is UAH 100,000,” he explained. “For some reason, everyone considers farmers to be stupid and expects them all to sell as soon as possible. Give farmers the right, and they will decide what to do. The moratorium is illegal, it violates the constitutional rights of Ukrainian citizens,” believes Konstantyn Dzyuba, the owner of a land unit.

 

Economic indicators

According to the EasyBusiness research, the more closed is the market, the lower is the value of land. The cost of land rent in developed countries with open market is up to USD 250-700 per hectare. “Countries with open markets are the most successful, they have the biggest per capita GDP, higher added value in the agricultural sector, higher price of land,” explained Dmytro Livch. According to him, within the next 10 years Ukraine can earn USD 10-15 billion from rent and tax burden if the status quo continues; if the moratorium is canceled but the market is closed to foreigners – USD 40-45 billion. An open market with some quantity or value indicators will bring USD 60 billion, and fully opened – USD 100 billion growth in consumer, investment and budget GDP.

Ivan Miklosh, Advisor to the Prime Minister of Ukraine Economic Affairs, stressed that currently a working group of representatives of ministries, World Bank experts and researchers are preparing a law that will create conditions for cancelling the moratorium and land market development. According to him, if the land market is open, it will bring USD 1.5 billion of additional investment. “Land is one of the most important assets for development. Now Ukraine has oligarchic system acting without rules. There is market but it is shadow therefore, neither economy, nor people benefit from it, just a few persons. The biggest problem in Ukraine is that these people want to get rent from privileges, ties, government, and the judiciary. Where there is government intervention, where everything is regulated, where there is no open competition – there is corruption and no upgrading. The land market is just like this,” said Mr. Miklosh.

 

Legal aspect

Anatoliy Miroshnichenko, member of the High Council of Justice, stated that a moratorium contradicts the European Convention on Human Rights. People are already drafting a petition the European Court of Human Rights (ECHR). In May, the first petitions were communicated to the Government of Ukraine for it to provide feedback on them. “Who will compensate them for losses? There are 7 million potential petitioners now. Let those who oppose the moratorium answer the question of who will bear losses, if the state brings the situation to petitioning the European Court on a mass scale,” he stressed.

Mr. Miroshnichenko noted that according to Ukrainian law, the moratorium is really indefinite. It will be in effect till the enactment of the law on turnover of agricultural land, but not prior to the date by which it is extended. “The state nullified the ownership and provided nothing in return. Farmers themselves cannot cultivate the land. Doing this manually is nonsense, yet renting farming machines is expensive. To rent a land share is the only way out. Undoubtedly, a rental would be lower,” the member of the High Council of Justice commented on the prospects for farmers.

 

Who benefits from it?

According to Taras Vysotskyi, general director of Association “Ukrainian Agribusiness Club” (UCAB), today the agricultural sector is the locomotive of the Ukrainian economy. But the indicators are at a stop, although they are not bad. To move on it is necessary to invest in long-term projects, and to set the rules of the game. However, the moratorium freezes the situation and prevents the onward movement. “Under the guise of farmers, the moratorium is a very profitable business for those who deal with the disposal of undocumented hectares of land. It belongs to anybody but people. Taxes are not paid, the rent is divided, and everything is fine,” emphasized Mr. Vysotskyi. According to him, the turnover of such land is USD 400-500 million a year.

Kateryna Glazkova, executive director of the Union of Ukrainian businessmen, added that the corruption component of the land market as it is today is USD 2 billion a year. “The market itself will regulate both the prices and the rules. It just should be given a right. The only thing missing is a political will,” she concluded.

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