The process of making agricultural land a commodity is the main subject to be discussed in Kyiv on 5 February 2009 during the debates held by the Foundation for Effective Governance together with Intelligence Squared, London. The first public debate on "whether Ukraine needs agricultural land market right now" is carried out as part of the wider forum on the problems of sustainable economic and business development in the country.
The moratorium on trading agricultural lands since 2001 is the major obstacle for acquiring land in the agrarian sector of Ukrainian economy. At the same time, the moratorium prevents detrimental consequences from land sales under imperfect legislation. The panelists' debates and voting of the audience will center on two viewpoints: to abolish the moratorium right now or wait for changes in the legislation first.
Today few people doubt the necessity of fostering the agricultural land market. Advocates of the immediate abolishing of the moratorium believe that since its introduction, there has been no expected boom of agricultural production and no reasonable level of food security has been achieved; moreover, Ukraine has lost its chances for foreign food markets. Additionally, life quality of the farmers who were leased land plots in the early 1990s has worsened considerably instead of being improved as a result of the efficient land utilization. It is important to figure out why this happened. The reason may be the lack of land ownership when the farmer does not see any meaning in improving the quality of the land or its long-term productiveness.
Investments and bank loans are two key constituents of the development of agriculture. However, profitable financial terms cannot be secured without the right to own land. Private local investors are frightened to invest into something they cannot possess, while foreign investors consider agriculture an area too risky to put their money.
The moratorium hinders the productive utilization of the land, its improvement and development. The main condition to achieve sustainable growth in the agrarian sector of economy is to apply modern know-how on big land plots. A low financial turnaround on small and medium-size plots that were leased to the farmers in the early 1990s does not allow investing into this know-how and thus improving the quality of the land.
However strong the arguments in favor of launching agricultural land market might be, this market cannot be developed without good legislation and the united cadastre. Two laws – "About land market" and "About land cadastre" – have to create favorable conditions for the market of agricultural lands in Ukraine by strictly defining the way and order of their assessment. Sadly, both laws are suspended; their completion and final adoption are impeded by political instability in the country. The single cadastre along with the registration of owner's rights will allow the technical inventory of land plots and hence the conditions for fostering land market. The procedure, however, may take several years. During this time, the agricultural sector of economy may suffer terrible losses from the stagnating market – the scenario even sadder than the current one, when land plots are assessed by the existing legislation, notwithstanding its many drawbacks.
Adherents of market economy maintain that land market can function in Ukraine even under its current legislation. For the time being, agricultural land can be acquired following the same procedure that regulates the acquisition of non-agricultural land.
The experience of other countries (countries of the EU, including Eastern Europe; the United States, Canada, Australia, and New Zealand), where agricultural land market is fully operational, reveals that the attempts at financial speculations can be stopped by legislative measures. To establish civilized market relations in agriculture, it is better to act not by means of prohibition but rather by developing the laws which will grant more rights and freedoms to the citizen and let them freely manage their land property.
The supporters of launching agricultural land market only after adopting the corresponding laws believe that the absence of legal ownership is not the major reason of agrarian setback. Worsening of the situation in agriculture since the establishment of the moratorium can be the result of overlooking modern technological achievements in the field as well as of the uncompetitive workforce in the village.
If the moratorium is abolished, there is a risk that banks which service farm loans might reclaim land assets as collateral for unpaid loans and would eventually become major land owners. The wish of the rural populace to rapidly improve their financial position may urge wide-scale land sales at reduced prices.
Launching agricultural land market under the current legislation may cause the situation when several financial profiteers procure the land and sell it away at higher prices. This will affect the costs of agricultural produce and eventually stir inflation. There is also a chance of negative social changes, caused by the lack of sufficient expertise in land trading during several decades.
The Parliament voted for maintaining the moratorium until January 2010. It is essential to decide throughout 2009 what has to be done with the moratorium in the future. Is it necessary to abolish it and launch a free market for agricultural land, and work in parallel on the legislation? Or is it better to wait several years for the completion of the laws and the united cadastre, and launch the market only afterwards? These are the main questions to be discussed on 5 February 2009 by prominent experts along with potential participants of the land market. It is all the more important because making a decision has to depend not on the scheming of the political elite but on the true requirements of Ukrainian economy and the opinions of the real players of its agrarian sector.
Agricultural reform is one of the top priorities of the economic reforms as defined by the FEG in Ukraine's Economic Development Agenda. To the opinion of most Ukrainian and foreign experts, agriculture is one of the areas with the greatest potential of Ukraine's economic growth. Establishing the fully operational market for agricultural lands is the most important element of the agricultural reform, vital for increasing agricultural productivity and maintaining the prosperity of the land.
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