Rada working to further restrict farmland market

The agrarian and
land policy committee of the Ukrainian parliament is working to prepare the
farmland market bill for a vote in the second reading that will impose more
limits on the market as compared to the draft bill approved in the first
reading,
local media reported on Dec. 16, citing lawmakers.

First, no foreign
entities will be allowed to purchase farmland (the first draft allows them to
buy land that a foreign-owned company is already leasing, if it has been
operational in Ukraine for at least three years). The ban will encompass also
large farming holdings that have foreign minority shareholders, according to
Oleksiy Mushak, an adviser to Ukraine’s prime minister. The ban will be valid
until a referendum decides otherwise. MP Yeheniya Kravchuk of the agrarian
committee said members are still working on the wording of such a provision in
the bill.

Second, the limit on
land concentration in one individual or private entity will be reduced further
from about 200,000 ha, as envisioned in the first draft. A range of 5,000 ha to
50,000 ha is being considered, Mushak said, with the higher limit having more
support. At the same time, Kravchuk provided a narrower range that is also
being considered: 10,000 ha to 20,000 ha.

Third, lawmakers are
considering to limit farmland speculation by imposing an additional tax on
resale (no such limits foreseen in the first draft). No details of such limits
have been provided yet.

Also, the government
is going to spend UAH 4 bln of budget financing earmarked in 2020 to reduce
farmer credit costs (to decrease the effective borrowing rate to 5%), Mushak
said. He also stressed the importance of approving the law on farmland sale in
full this week.

Several thousand
Ukrainians are protesting the farmland bill in front of the parliament
today, with shoving
matches with police and broken windows being reported in the media. Former PM
Yulia Tymoshenko, the head of the Fatherland parliamentary faction, called for
protesters to storm the parliament building, warning that the legislation will
result in foreign control of Ukrainian farmland.

Alexander
Paraschiy: The
bill’s final draft is most likely to be available for examination this week.
But it looks like the final version of the farmland market will make purchases
by foreigners impossible (and there is no chance that any referendum will
change this). In which case, the Ukrainian equity universe will suffer because
such conditions will discriminate against Ukraine’s foreign-listed farm
holdings (Kernel, MHP, Astarta, IMC, KSG Agro, Agroton) and will add risks to
their sustainability in the long term.

But overall, even
with the heightened limits and risks, the legislation will be beneficial for
Ukraine’s farming sector growth outlook, especially if the government will be
able to secure adequate financing of cheaper farming loans in the long term.