Land Market in Ukraine. Call for Changes? April 2 2019 Kyiv, U , - PowerPoint PPT Presentation

Land Market in Ukraine. Call for Changes? April 2 2019 Kyiv, U , Ukraine

AGRICULTURAL SECTOR IN UKRAINE Agricultural sector plays a crucial role in the Ukraine’s economy and, especially, export THE ROLE OF AGRICULTURAL SECTOR IN UKRAINE UKRAINE’S RANK IN GLOBAL EXPORTS Value added [constant 2010 USD bn] and industry share of GDP [%] #1 SUNFLOWER OIL Value added Industry share of GDP % 13.6 13.4 13.1 13.3 12.8 12.1 11.6 10.5 10.3 10.1 9.5 9.0 #2 GRAINS 7% 7% 7% 7% 7% 7% 7% 7% 10% 10% 10% 10% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 #4 CORN Total Ukrainian export [USD bn] and agricultural share in total export [%] Total export Share of agriculture % #4 BARLEY 68.4 68.7 67.0 63.3 53.9 51.4 49.3 43.4 39.7 38.4 38.1 36.4 #6 WHEAT 9% 9% 12% 19% 14% 15% 21% 21% 25% 32% 35% 34% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ukrainian share in global production and exports in 2017 [%] #7 SOYBEAN 55% Share in global production Share in global exports 32% #8 POULTRY 10% 10% 7% 6% 3% 2% 2% 1% Soybeans Corn Wheat Barley Sunflower oil Sources: EasyBusiness, World Bank, ITC, USDA, FAOSTAT, MEDT

AGRICULTURAL SECTOR IN UKRAINE Ukraine has a number of advantages that contribute a lot to the development of agricultural sector… Ukraine possesses the biggest arable area in Europe …has 40% of its territory covered with the black soil [% [mn ha]… of agricultural land]… 32.5 18.3 11.9 8.8 6.7 6.2 5.7 0.8 10.1 – 20.0% Belgium Belarus UK Italy Romania Germany France Ukraine 20.1 – 30.0% 30.1 – 45.0% 45.1 – 50.0% …and several other competitive advantages: Moderate climate and rainfalls (500-1,000 mm a year) Favorable geographic location and presence of the Azov allow production of crops without irrigation on 60-70% and Black seas allow extensive exports of Ukrainian of arable lands agricultural products to other countries Absence of medium- to large-scale natural disasters 3 wide rivers (Dnieper, Danube and Southern Bug) such as ocean-borne hurricanes, tornadoes, provide further cargo transport modes to European earthquakes, landsides countries (Austria, Germany, Romania, Hungary, etc.) Sources: EasyBusiness, Ministry of Economic Development and Trade of Ukraine, USDA, FAO Stat

AGRICULTURAL SECTOR IN UKRAINE …but its potential is limited because of continuous moratorium on farmland sales The moratorium on farmland sales causes a number of problems… SALES LEASE STATE REGULATION § Disordered property registration § Existence of shadow farmland § Large areas of farmland § Absence of an effective practice of concentration market land price evaluation § Expropriation of ownership rights in § Absence of consolidation procedure § Ineffective legislation that regulates arbitration court (mortgage) § Pressure from tenants on farmland relations § Statutory documents manipulation landowners …that lead to a low farmland value and farmland price in the country 63.7 1,000 65 Farmland value, USD thou 900 60 Farmland rent price, USD 800 55 700 50 600 500 45 42.0 400 39.3 40 11.0 11.0 10.3 10.3 300 10 8.0 7.5 7.0 200 6.2 5 100 2.2 1.2 0 0 Netherlands Austria Ireland Greece Finland USA Poland Czech France Croatia Romania Lithuania Ukraine Sources: EasyBusiness

CURRENT STATE In 2018, the farmland market issue was boosted as ECHR decided that the moratorium is a violation of the private property rights MAY 2018 SEPTEMBER 2018 DECEMBER 2018 The ECHR judged that the moratorium on farmland sales 69 deputies of Verkhovna Rada 231 deputies of Verkhovna Rada violates the private property rights used the decision of ECHR to sue to voted for the prolongation of the of landowners. The judgment came Constitutional Court . The Court moratorium. Only 28 deputies voted into force in Ukraine in August denied their appeal against JUNE 2018 SEPTEMBER 2018 The Coalition against moratorium Farmland.in.ua platform was was created. Currently, 42 established in order to help organizations signed the agreement, Ukrainian landowners to submit including agricultural producers, claim to ECHR banks, NGOs and associations Sources: EasyBusiness

CURRENT STATE Both candidates for the Presidential post support the launching of free farmland market Level of support of farmland market reform PETRO VOLODYMYR VERKHOVNA RADA POROSHENKO ZELENSKYI OF UKRAINE § Declares that he considers § Promises to open the farmland § 69 deputies sued to farmland as a commodity that market in his pre-election Constitutional Court on farmland can be traded program market issue in 2018 § Signed a law on the moratorium § Going to create a necessary § 231 deputies voted for prolongation several times legislative base firstly prolongation of moratorium until 2020 GENERAL AGRARIAN INTERNATIONAL POPULATION COMPANIES ORGANIZATIONS § 2/3 of Ukrainian population do § The largest union of agrarian § IMF demanded to abolish the not support the abolishment of companies in Ukraine ‘Ukrainian moratorium in 2017, but later moratorium agribusiness club’ supported the the requirement was cancelled launch of farmland market In § At the same time, public § World Bank consider the 2018 perception of the reform has a farmland market reform as tendency to improve crucial for Ukranie Sources: EasyBusiness, candidates’ programs, Verkhovna Rada, Rating Group Ukraine, UCAB, IMF, World Bank

EASYBUSINESS’ ROLE EasyBusiness activities facilitated the shift of perception of the importance of the land reform in Ukraine SHIFT OF FARMLAND MARKET MODEL IN UKRAINE Closed farmland Fully liberalized market farmland market Overton Policy paper, Window of Advocacy and roadmaps, video, the communication public presentations, campaigns Farmland publications Market Possibility STATUS QUO EASYBUSINESS RESULTS POTENTIAL EFFECT Absence of consensus on optimal Developed a comprehensive Abolished the moratorium on free § § § farmland market functioning policy paper with 4 market farmland sales model scenarios and their economic § Established fully liberalized effect § Lack of awareness among local farmland market authorities and landowners § Ran communication campaign § Maintained sustainable results of regarding (80,000+ views of the developed the project (online platform for video, 30+ media publications, § Absence of one-stop- shop legal consultations, association of 20+ TV and radio broadcasts) solution for landowners in terms free farmland owners) of legal support Provided advocacy (increased § number of MPs that support the reform from 3 in 2015 to 55 in 2017) Sources: EasyBusiness

INTERNATIONAL EXPERIENCE ANALYSIS In order to examine the international experience, 60 countries were chosen using two-stage filter system SECOND LEVEL FIRST LEVEL Average value added in agriculture Doing Business Rank per employee (>USD 550) Index of Economic Arable area (>325,000 ha) Freedom Global Competitiveness Arable area as a % of total area Index (>5.6%) SHORT SUMMARIES REGIONAL PROFILES COMPARATIVE TABLE 8 separate regions Mechanism of market functioning Objective and preconditions of the Quantitative restrictions reform Mechanism of implementation: methods Price restriction and actions Main qualitative and quantitative results Tax burden Sources: EasyBusiness

INTERNATIONAL EXPERIENCE ANALYSIS Methodology of market type identification is based on three-stage filter system DO DO FORE REIGN GNERS RS HAVE A ARE THERE AR ARE THERE AN AR ANY IS T IS THE P PRIV IVATE P PROPERTY Y AR ARE THERE PR PRICE RI RIGH GHT TO BUY QU QUANTITATIVE OTHER OT YES YE YES YE FORMED FO RESTRI RE RICT CTIONS? RESTRI RE RICT CTIONS? RESTRI RE RICT CTIONS? FARMLAND FA NO NO YES YE NO OPEN WITH FULLY LIBERALIZAED FULLY RESTRICTED RESTRICTED FOR 1 2 3 4 RESTRICTIONS MARKET MARKET FOREIGNERS Tajikistan Croatia Croatia Moldova Greece Romania Nicaragua Australia Estonia Albania Albania Russia Denmark Slovakia Panama Austria Spain Bosnia and Bosnia and Iran Finland Hungary Paraguay Belgium Italy Herzegovina Herzegovina Korea France Turkey El Salvador Ireland Czech Macedonia Macedonia Morocco Sweden Georgia Uruguay Netherlands Republic Serbia Serbia Nigeria Switzerland Argentina Canada Germany USA Azerbaijan Azerbaijan South Africa Bulgaria Brazil Japan Portugal Armenia Armenia Tunisia Latvia Guatemala Cameroon UK Kazakhstan Kazakhstan Lithuania Honduras Dominican Kyrgyzstan Kyrgyzstan Poland Mexico Republic Sources: EasyBusiness