Land reform – Ukraine shall support its border regions

The Ukrainian Parliament is preparing for approval the finalized text of the land reform bill. Agrarian Association of Ukraine (AAU) supports the start of land market, because it will help to improve the Ukrainian economy, as we have already stated in our earlier reports and our #ВідкритаіЗаможнаУкраїна (#OpenAndWealthyUkraine) campaign.

AAU also pointed out that the envisaged exclusion of Ukrainian companies with foreign capital will harm the Ukrainian economy, Ukrainian landowners and foreign investments already employed in Ukrainian agriculture.

Recently published additional details of the forthcoming land reform contain several points fully supported by the AAU, for example exclusion of economic entities whose ultimate beneficiaries: cannot be identified, are citizens of the Russian Federation, are members of terrorist organizations, are in fact governments or government-controlled, are located in offshore zones or included in sanction lists. All this should become a particular subject of appropriate scrutiny and should be clearly regulated and controlled, for example by the Antimonopoly Committee of Ukraine.

Unfortunately, there are also two points that can further harm Ukraine and honest foreign investors.

Above all, it is a potential permanent ban (even when admitted by referendum) for the purchase of land by companies with foreign capital in the region closer than 50 km from the border. We emphasize, that the effort to protect the Ukrainian border is absolutely understandable. Borders must be defended both militarily and economically. But excluding foreign investors forever would be counterproductive. Such a restriction in border areas would further reduce investment and economic activity there. This would result in increasing poverty in border areas and widening disparities between inland and lagging border areas. This is the most common reason why border areas do not feel part of the country and may be prone to secession.

Economically strong border region, which will prosper more than the regions of neighbouring countries, namely Russia, will be the best guarantee of Ukrainian integrity and strength. And of the same importance is the fact, that it would be advantageous for Ukraine to have honest foreign investors in border regions, as investment from the EU or the US will help further align Ukraine’s interests with friendly democratic countries. We have already emphasized that foreign investors are the best advocates of Ukraine’s interests in their countries and governments.

Based on that, we believe that, instead of the proposed restrictions, Ukraine should first and foremost “launch” foreign investors, namely, in such border regions, thereby obtaining a strong buffer in relations with a dangerous neighbour, thereby avoiding the mistakes of the recent past.

The second problematic point is the ban on any participation of Russian or governments in agricultural companies allowed to buy land. This would disqualify agricultural companies traded on the stock exchange if one single share is bought by Russian investor. As this situation cannot be prevented in case of listed companies, it would be more logical to set a limit of e.g. 25 %, resp. supervising company UBOs.

AAU generally supports introduction of the land market. It is certainly rightful to limit Russian capital in acquisition of Ukrainian land. But, on the other hand, stronger ties must be built with the free Western world. Each additional link with democratic countries contributes to the stability and prosperity of Ukraine. Seeing Russia and democratic countries as the same would be a disaster for Ukraine.