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Ukraine sows seeds of suspicion with land sale plans

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UkrAgroConsult

As Ukrainian farmer Oleksandr Burty hurried to plant winter wheat on his eight-hectare plot, he was suspicious of what he saw as a threat to his land and livelihood — a plan by the government to allow land sales for the first time in years.

“It’s dark, black, the richest land in the world . . . That’s why they want us to sell it,” said the villager from the Kaharlyk region, south of Kyiv, referring to farmland that has long given Ukraine a reputation as the breadbasket of Europe. “If the people sell, it will be bought by the rich and we will be left with nothing.”

More than 6m Ukrainians, mostly workers from former Soviet collective farms, were handed patches of the country’s 41m hectares of arable land in the 1990s. But a moratorium on sales imposed in 2001 to deter speculation prevented them from selling or using it as collateral for bank loans. It has also prevented the state from selling millions of additional hectares, some unfarmed.

Now President Volodymyr Zelensky, who won a convincing election victory in April and followed it up with a solid ruling majority in parliament, is poised to open up the market. Economists say the move will encourage investment and lift growth in the war-torn country from current annual levels of between 2 and 4 per cent.

The land sale plan is supported by Kyiv’s western backers and is part of a new $5.5bn IMF programme that was preliminarily agreed in December. Mr Zelensky’s allies in parliament hope the legislation will be adopted early this year.

Despite losing control over Crimea and far-eastern regions, Ukraine reaped a record harvest in the most recent season, including 75m tonnes of grain and 19m tonnes of oilseed crops. Experts predict the land reforms could boost harvests by an additional 30-40 per cent.

Proponents of the reform say that even landholders who do not want to sell will benefit from being able to lease their land at more competitive prices or taking advantage of bank loans at 3-5 per cent annual interest rates subsidised by the government.

Farmer Oleksandr Burty and his son Volodymyr. Oleksandr said that 'if the people sell, it will be bought by the rich and we will be left with nothing' © Roman Olearchyk/FT

Inability to sell or use farmland as collateral has in previous years cornered millions of landowners into leasing to bigger agricultural groups at depressed prices or borrowing from banks at costly double-digit interest rates.

“It’s long overdue . . . The primary beneficiaries are the current farmland owners,” said Bohdan Chomiak, director of executive strategy at Kyiv-based Ukragroconsult, who added that the land plan would also stimulate more lending from foreign banks. “Less than 5 per cent of land will be sold . . . Even though there will not be any foreign ownership, [a] significant amount of capital will come into the country.”

But the measure is deeply contentious. Suspicions among landowners run deep after centuries of bloody battles for control of Ukraine’s land. Before independence in 1991, Ukrainians under Soviet rule were forced to toil on collective farms while grain harvests were confiscated, a policy that killed millions from famine in the 1930s.

Recent polling data show a majority of citizens opposed Mr Zelensky’s proposals because of fears that oligarchs and foreign corporations would monopolise farming. The government’s legislation has sparked weeks of protests by farmers and others.

“The protests are being held not because we are against land reform,” said Liliya Bortych, a board member at the Agrarian Union of Ukraine, which represents farmers with up to 10,000 hectares of land.

“We are against wild land sales in the way it has been presented . . . We should make sure the land is being bought by farmers who will boost production and growth of the middle class, not for speculation or monopolisation by oligarchs or financial institutions,” she said. “We want to see a clear strategy of how land reform becomes a part of a comprehensive agrisector reform which can change Ukraine’s role from commodity provider to global added-value, food-chain player.”

Partly in response to public hostility, elements of the initial plans have been watered down. The idea of allowing land sales to foreign individuals and companies has been dropped and according to plans will now be decided in a subsequent referendum. Also, land ownership by any single individual or company is, according to Mr Zelensky, to be limited to 10,000 hectares — a decrease from an initial 200,000-hectare limit.

Visiting farmers in December, Mr Zelensky heard them voice their concerns of “a mess” in which they would be “robbed” of their land by big business and mafia interests. “We will protect people,” Mr Zelensky responded. “Most important is that land will remain Ukrainian-owned.”

Kees Huizinga, the Dutch director of Kischenzi Agriculture in the Cherkasy region, south of Kyiv, which farms some 15,000 hectares of leased land, said there was distrust and little support from most landowners. He urged the government not to rush the legislation.

“If these people sell their land, most of them are not going to invest it into something,” he said. “The land market has to be designed in such a way that Ukraine as a country profits to the maximum extent [and] that it is not foreign pension funds and oligarchs that make money on this.”

Some smallholders hope the plan, and government plans to provide subsidised loans to them, will usher in a rural revival.

“I think more will start farming the land themselves . . . We are very poor. The problem has been lack of affordable financing,” said Ludmila Borkivets, a landowner in the Cherkasy farming village of Hryshchyntsi, where most locals lease their land to London-listed MHP, Ukraine’s top poultry producer.

“I hope land that is sold comes to the hands of our smarter youth, so that they will continue to live at home keeping our villages alive.”

 

Financial Time

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