Rada approves farmland reform, prohibiting foreigners

Ukraine’s parliament approved in the early morning of
Mar. 31 in the final reading the land reform bill launching the nation’s first
farmland market. The bill drew 259 votes, compared to 226 needed. The People’s
Servant faction, aligned with the president, gave 206 votes (out of a total of
248), while the rest came from the pro-Western European Solidarity and Voice
factions (36 total) and independent MPs.

The final version of the legislation has yet to be
published. Based on media reports, we conclude that the law stipulates that
privately owned farmland will become tradable as of July 1, 2021, not October
2020, as had been planned initially. Before Jan. 1, 2024, only individuals will
be allowed to purchase farmland, at a limit of 100 ha. Afterwards, domestic
corporations will become eligible to buy farmland, with a limit of 10,000 ha.
Land lessees will have the pre-emptive right to purchase their land, and they
can pass this right to third parties.

No foreign individuals, or companies in which
non-residents have any stake, are allowed to buy farmland before a special
referendum is held on that issue. The exception to this rule is banks, which
can take farmland as collateral and foreclose it, irrespective of their
ownership structure. However, if a bank forecloses a land plot, it is obliged
to sell it within two years.

Alexander Paraschiy: While the
land reform does not look as liberal as its earlier draft half a year ago, its
approval is a real breakthrough. The reform offers a lot of opportunities for
micro farmers and protects those who lease the land from landowners. However,
it gives little opportunities for large farming holdings, thus providing no
additional incentives for investments into farming enterprises.

The most important aspect of the legislation’s
approval is that it brings Ukraine closer to securing IMF and other
international funding that is critically needed amid the coronavirus crisis.