After a decade of delays, millions of Ukrainians who own 32mn hectares of land will be allowed to sell it for the first time on a newly created land market that goes into effect on July 1.
The government allocated land to some 7mn former employees of collective farms in a reform in 2001, but imposed a one-year moratorium on the sale of that land that was never lifted.
As small plot holders and unable to raise funding to work the land, many chose to rent their plots to large Ukrainians agriculture concerns that paid risible rents for some of the most fertile land in Europe. The agro-oligarchs then ensured the moratorium on land sales was never lifted, which kept their rents low as their workable land holdings grew through these concession agreements.
Those landowners represent more than 15% of the population of Ukraine and their farmland represents 70% of the country’s arable land, making them a sizable constituency
Ukraine remains one of the few countries in Europe where the sale of farmland is banned. But last year at the International Monetary Fund's (IMF) insistence a law to create a land market was pushed through the Rada, albeit in a much watered down form that limits sales to small plots.
The resistance to the law in the Rada was considerable, with the agro-lobby appending over 4,000 amendments to the bill trying to bog it down, but the law was pushed through in the end in May.
Originally the land market law was relatively liberal and would have allowed for sale of large swathes of land and also the sale of land to foreign investors, but under intense lobbying Ukrainian President Volodymyr Zelenskiy has put off the question of the sale of land to foreigners until a referendum on the issue can be held.
A true liberalisation of land ownership was expected to bring several billion dollars in the first years, as foreign investors are extremely interested in Ukraine’s agricultural potential, and private ownership would also make financing agricultural land easier, which should also lead to productivity gains.
The land liberalisation has also become part of Zelenskiy's de-oligarchisation drive, as the president has vowed to return land stolen by oligarchs through various scams.
Speaking recently at an agricultural forum to mark the thirtieth anniversary of Ukraine’s independence from the Soviet Union, Zelenskiy said: “In 2014, Russia annexed the Crimean Peninsula, which belonged to our state. Over the years of the moratorium [on the sale of agricultural land], some politicians and business people stole land as large as two Crimean peninsulas. Of course, we will do everything to return both.”
Zelenskiy claimed that some 5mn hectares of land was “illegally appropriated” by state officials and politicians and millions of dollars earned from “de facto offshore zones” in the country where no taxes were paid nor labour rights guaranteed. The new law on a land market will shut down what the president called a “huge corruption racket.”
Beyond restoring the right to sell for landowners from July, the most recent reforms transfer an additional 10mn hectares from state to local ownership.