The buying/selling of agricultural land is the main subject to be discussed in Kyiv on 5 February 2009, at the debate held by the Foundation for Effective Governance in partnership with Intelligence Squared, London. The first public debate on the motion: "Ukraine needs an agricultural land market now" is carried out as part of a wider forum on the problems of sustainable economic and business development in the country.

The moratorium on buying/selling farmland imposed in 2001 is a major obstacle for land acquisition in Ukraine's agrarian sector of the economy. At the same time, the moratorium prevents detrimental consequences of land sales under imperfect legislation. The panelists' debates and voting of the audience will center on two viewpoints; to abolish the moratorium now or wait for changes in legislation first.

Today few people doubt the urgency of fostering an agricultural land market. Advocates of the immediate lifting of the ban believe that since its introduction, there has been no expected boom of agricultural production and that no reasonable level of food security has been achieved; moreover, Ukraine has lost opportunities in the foreign food markets. Additionally, the quality of life among the farmers who rented land parcels in the early 1990s has deteriorated considerably, instead of being improved as a result of efficient rural entrepreneurship. It is important to understand why this happened. One reason may be the lack of land ownership and the resulting lack of incentive for improving the quality of land or its long-term productiveness among tenants. .

Investments and bank loans are two key constituents of agricultural development. However, favorable financial terms cannot be secured without the right to own land. Private local investors are frightened by the insecurity of tenure, while foreign investors consider agriculture as an area that is too risky to invest in.

The moratorium discourages the farmers from the productive use of land, its improvement and its development. The main condition to achieve sustainable growth in the agrarian sector of the economy is to engage high technologies on big land tracts. A low financial turnaround on the small and medium-size land parcels that were leased to farmers in the early 1990s does not allow for such investments into these technologies and improvement of land quality.

However strong the arguments in favor of launching an agricultural land market may be, this market cannot develop without effective legislation and the united cadastre. Two laws – "On the Market of Land" and "On the State Land Cadastre" – have to create favorable conditions for the farmland market in Ukraine by strictly defining the way and order of its valuation. Sadly, both laws are suspended; their final adoption is impeded by political instability in the country. The single cadastre and the registration of owner's rights will allow the technical inventory of real property and secure the conditions for fostering a land market. The procedure, however, may take several years. During this time, the agricultural sector of the economy may suffer terrible losses from the stagnating market – a scenario even sadder than the current one – when land relations are regulated by the existing legal system, notwithstanding its many drawbacks.

Proponents of the market economy maintain that land market can function in Ukraine even under its current legislation. For the time being, farmland can be acquired following the same procedure that regulates the acquisition of non-agricultural land.

The experience of other countries (countries of the EU, including Eastern Europe; the United States, Canada, Australia, and New Zealand), where agricultural land markets are fully operational, reveals that the attempts at financial speculations can be stopped by legal measures. To establish civilized market relations in agriculture, it is essential not to impose prohibitions; moreover, authorities must do their best to develop the laws which will grant more rights and freedoms to the citizen and let them freely manage their land property.

Those who support the launching of an agricultural land market only after adopting the corresponding laws, believe that the absence of legal ownership is not a major reason of agrarian setback. The worsening of the situation in agriculture since the establishment of the moratorium could be the result of overlooking modern technological achievements in the field and of employing an uncompetitive rural workforce.

If the moratorium is lifted, there is a risk that banks which service farm loans might reclaim land assets as collateral for unpaid loans and would eventually become major land owners. The wish of the rural populace to rapidly improve their financial position may urge wide-scale land sales at a token price.

Launching an agricultural land market under current legislation may create a situation when several financial profiteers procure land and sell it away at higher prices. This will affect the costs of agricultural produce and eventually stir inflation. There is also a chance of negative societal alterations, caused by a lack of sufficient expertise in land trading among the public for many decades.

The Parliament voted for the prolongation of the moratorium until January 2010. It is essential to decide throughout 2009 what has to be done with the ban in the future. Is it necessary to lift it and launch a free market for agricultural land, and work in parallel on the legislation? Or is it better to wait several years for the completion of the laws and the united cadastre, and launch the market afterwards? These are the main questions to be discussed on 5 February 2009, by prominent experts along with potential participants of the land market. This is all the more important as making such a decision must depend not on the preferences of the political elite but on the true requirements of the Ukrainian economy and the interests of the real players of its agrarian sector.

Agricultural reform is one of the key economic reforms as defined by the FEG in Ukraine's Economic Development Agenda. In the opinion of most Ukrainian and foreign experts, agriculture is one of the areas with the greatest underestimated potential for Ukraine's economic growth. Establishing a fully operational farmland market is the most important element of the agricultural reform, vital for increasing agricultural productivity and maintaining the prosperity of land.
 

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