Ukraine parliament approves first reading of farmland market bill

Ukraine’s parliament
approved on Nov. 14 the first reading of the bill establishing the nation’s
first farmland market. Its provisions were almost identical to the draft submitted on Oct. 11 by People’s Servant MP
Mykola Solskiy, the head of the parliamentary agrarian and land policy
committee. Its main conditions are the market’s launch as of Oct. 1, 2020, with
concentration is a single entity not exceeding 35% in a given district, 8% in a
region/oblast and 0.5% nationally. Foreigners without rental agreements can
enter the market on Jan. 1, 2024. The provision of concentration of land drew
criticism from Fatherland Faction Head Yulia Tymoshenko because it would allow
for a single entity to own as much as 210,000 hectares, when other advanced
economies allow foreigners to own only a few hundred.

Those allowed to
purchase are Ukrainian citizens, Ukrainian companies, companies whose owners
are foreigners and have rented Ukrainian land for at least three years,
territorial communities, and the state. Renters have preferred status in
acquiring the land they are currently leasing. President Zelensky’s proposal
for a referendum to approve the farmland market was
not included in the legislation’s text, but Zelensky said it would be included
in the second reading.

The farmland market
legislation drew 240 votes in favor, largely from People’s Servant faction (227
MPs) and 13 independent MPs. The session examining the legislation was among
the most raucous in recent years, in which the market’s defenders –
representing the pro-presidential People’s Servant party – were fiercely
criticized and jeered by MPs of competing factions. After the vote, the
populist Fatherland party declared its opposition to the coalition government,
joining the European Solidarity party that had declared its opposition in late
August (before the cabinet was formed). Faction Head Yulia Tymoshenko said the
market will lead to Ukraine’s loss of sovereignty. Twenty-five People’s Servant
MPs also didn’t vote for the bill.

Zenon Zawada: The farmland market drive marks the
end of Zelensky’s honeymoon with the public, even earlier than we had expected.
Although he pursued a strictly populist policy until this point, doing whatever
was popular, this time his political team decided to risk its popularity by
advancing the farmland market. We believe its main motivation is to have an
additional argument to present to the IMF in securing a USD 5-6 bln loan
program, which it desperately needs in the coming weeks. Zelensky’s team also
understands that it’s best to adopt controversial legislation early into the
convocation and before political rivalries intensify, particularly within the
faction. In general, Zelensky and The People’s Servant had adopted an economic
liberalization principle, but Faction Head David Arakhamia indicated in an
interview published on Nov. 12 on the liga.net news site that they would even
steer away from that to adopt a more socialist approach.

Additionally, the
farmland market is a lucrative revenue source that doesn’t threaten the
president’s core electorate, which is the younger residents of southeastern
cities. A poll conducted in early November by the Razumkov Center indicated
that urban residents are slightly more likely to support the market’s creation
than rural residents. In a late October poll conducted by the Rating
Sociological Group, residents of southern Ukraine most supported the farmland
market. This includes the cities of Odesa (Ukraine’s third-largest city),
Dnipro (fourth-largest) and Zaporizhia (sixth-largest). The same poll indicated
that younger citizens are more likely to support the market, which is also
Zelensky’s core electorate.

Unfortunately, the
farmland market has taken on a meaning far beyond what is written and planned
in the legislation, let alone the benefits it will bring to the economy. The
opposing parliamentary factions have turned it into a populist billy club to
beat the president and his faction over their head with. It’s particularly
amusing to see those factions who claim to be committed to EU integration
(European Solidarity, Fatherland, Voice) in opposition to a relatively
conservative farmland market proposal. Nonetheless, we expect the legislation
will be approved eventually and signed by the president.