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Ukrainian Parliament Pushes Forward Land Reform Allowing Foreign Corporations To Purchase Country

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Ukrainian Parliament Pushes Forward Land Reform Allowing Foreign Corporations To Purchase Country

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On October 17th, the Ukrainian parliament hastily registered bill No. 2178-10 on the Land Reform in the country. The document was discussed in a close circle of deputies from the “Servant of the People”, and in order to prevent “extra” participants in the debate, the committee meeting was simply postponed to an earlier time, without informing any other MP.

According to the document, foreigners will be able to purchase land in Ukraine starting from 2024 onwards.

The document is an alternative to the Government Bill on the Land Market in Ukraine # 2178.

“In the next two weeks, we will be discusding 11 land bills that have been registered in the Parliament.  There is no talk about voting for the bills or directing them for debates in VR. We will discuss all the theses of all the bills with agrarians and only then work out a single mechanism.  I think that there will be possibly developed one single comprehensive bill on the free market of land,” – commented Mykola Solsky, the chairman of the Committee on Agrarian and Land Policy, on the draft law registered in parliament.

Essentially, it introduces the following key changes:

  • reduce land concentration limits within any oblast from 15% to 8%;
  • introduce a 35% limit on the concentration of land within the agricultural land of a specific integrated territorial community;
  • introduce a transitional period until January 1st, 2024, during which legal entities, beneficial owners of which are foreigners, stateless persons, legal entities created under the law other than the legislation of Ukraine, foreign states, will not be able to acquire land from the designation of state, communal property, as well as unitary lands, except for those lands which at the time of entry into force of the law are already leased, to such legal entities, and provided that such legal entities are created not less than 3 years before the effective date of the law;
  • acquisition of land will be possible for: citizens of Ukraine, legal entities of Ukraine created under the legislation of Ukraine, territorial communities and by the state;

So, if a company with foreign capital has been operating in Ukraine for at least three years, then the restrictions do not apply to it, and it will be able to buy land immediately at the time the market launches.

“We have many agricultural holdings with foreign capital that cultivate millions of hectares. And they will be able to immediately buy out land immediately after the market opens. I think this norm will be severely criticized,” says President of the Land Union of Ukraine Andriy Koshil.

A new scheme may appear for foreigners. When, for example, at the stage of opening the market, a Ukrainian dummy company is created, which buys land, and then, after 2024, its shares are officially bought by foreigners.

“Current civil and corporate law makes it easy enough to change founders, sell and buy shares. It is clear that the land law cannot change this. But additional control mechanisms are needed, or at least an answer to the question – what will happen if foreign owners appear before it ends a ban on their land acquisition, say, a year after the market’s launch. Will the company, which has acquired foreign owners, need to sell the already purchased land, or will it not remain in its asset,” Koshil said.

Another expected conflict point is the rate of sale of land to one separate entity or person. No more than 15% of the land in one region and 0.5% of the all-Ukrainian land. Although the agrarian community harshly criticized these figures from the Ministry of Economic Development, saying that the concentration of land in the same hands would be simply menacing.

According to the deputy head of the All-Ukrainian Agrarian Rada Denis Marchuk, preliminary information from the committee said that it wanted to allow a concentration of 0.25% of the total agricultural land. But in the end, they agreed on a figure of 0.5%. Although, according to Marchuk, this is still a lot.

Marchuk also noted that the project has a scheme for speculators.

“There are no restrictions on the purchase of companies with certain land banks. That is, if you wish, you can buy half of Ukraine,” he said.

Moreover, in some alternative projects registered in Parliament, it was proposed to prohibit selling more than 4 thousand hectares to one entity or person.

“There were calculations by the Academy of Agricultural Sciences on the minimum areas, the processing of which allows the agricultural enterprise to work more or less cost-effectively. They are different for agro-climatic zones. By the way, until 2015 the current Land Code contained a temporary rule prohibiting the purchase of more than 100 hectares of agricultural land to one entity, but the ban has expired and there’s no new restriction,” Koshil said.

It is proposed to set the minimum land price at the level of a normative-monetary assessment. On average, in Ukraine it is approximately $1,200 per hectare. At this price, with an installment plan for five years, the land will be allowed to be bought out by the villagers, who at one time designed the land for permanent use under a private or farm household.

Ukrainian farmers consider the land theirs and they will be given the opportunity to buy it:

“Farmers have long considered this land theirs. If the bill is adopted in this form, they will have to pay around $200 per hectare annually (redemption according to the normative estimate, which is about $1,200 euros per hectare and a 5-year installment plan give such a figure) “Although theoretically this fee is possible, for efficient farms,” says Koshil.

The project does not say a word about the soft loans promised to the villages by Ukrainian President Volodymyr Zelensky.

The draft budget 2020, which has already passed its first reading, next year 4.4 billion hryvnias are included in loan compensation. But this amount would not be enough to provide to farmers, at a 2-3% interest.

That is, it turns out that out of several options – to leave everything as it is, that is, until the moratorium is lifted, give priority to Ukrainians to buy land at low prices, and only then sell the land to foreigners.

But with this legislation, it is possible to reach a nightmare scenario in Ukraine, the market opens immediately, despite the arbitrary 2024 date that it will open to foreigners.

“We did not see any phasing that the president promised. Although at the first stage it would be necessary to solve the problems with the cadastre, launch a financial support mechanism, at the second – allow the purchase of up to 500 hectares for individuals, at the third – after five years – you can sell up to 5 – 10 thousand hectoares to legal entities. But only Ukrainian, without providing access to the foreign capital market,” Marchuk said.

It appears that, with this new bill, the situation is exactly that, foreign corporations would be able to purchase most of the land in Ukraine immediately, through various schemes and speculations, and the Zelensky government specifically and unilaterally decides what happens in the country.

Essentially, the young Ukrainian democracy doesn’t appear to be as democratic as Zelensky and Co. would like to present it as.

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