The following is the English translation of the op-ed originally published in Ukrainian in the Novoe Vremya magazine.
Populism and unwillingness to dirty hands with difficult and painful reforms, as well as in many other areas, triumph over common sense and the state’s interests.
First, two comments.
- I kindly request that supporters of political conspiracies should not regard this column as a manifesto, a political declaration, election rhetoric or the like. I am interested neither in election nor power. This column is a cry from the heart, the position of a citizen of Ukraine who is once again shown how reforms that our country urgently needs collide with private interests and populism.
- I want to inform those who like lecturing that everyone should be an expert in their field: As a theoretical physicist, holding a PhD in physics and mathematics, I have solved problems that are an order of magnitude more complicated than the laws that some dear lawmakers work on for years, resorting to demagogy and casuistry, deceiving their voters. So I want to prevent a discussion that everyone should stick to their own field: I am well aware of what I speak.
And now, let us get to the point. Yesterday the Verkhovna Rada once again voted to extend the moratorium on the sale of agricultural land. That is – for another adjournment of what is perhaps the most important economic reform in the country.
Agricultural land was first given to citizens’ ownership in 1999, and 6 million citizens received land shares. The moratorium on the sale of agricultural land was first introduced in 2001. Since that time, the moratorium has been extended eight times, if including the current one.
How do lawmakers justify the extension of the moratorium?
Argument Number One – lack of regulatory frameworks and mechanisms for the functioning of the agricultural land market. My answer: what prevented you from creating this regulatory framework over the past 15 years? Did you even want to do it, dear lawmakers and ministerial officials? The previous law of 2015 that extended the moratorium even made the cabinet responsible for drawing up a law on the regulatory framework and submitting it to the Verkhovna Rada by March 1, 2016, but this was never done. Why? Silence.
Argument Number Two – land will be bought from the owners of shares at a low price, and people will lose their steady income. My answer: given the fact that people are now extremely poor, and this poverty, by the way, is due to the government as well, lifting of the moratorium can help to create additional financial opportunities for people – particularly those who live in urban areas and do not use their land. Limiting the use of resources is the same kind of limitation on ownership as the moratorium on land.
Argument Number Three – land will be consolidated by foreign investors and large financial-industrial groups. My answer: reduction of the profitability of agricultural business in Ukraine because of falling world grain prices and reduced domestic demand limits the ability of local grain operators to be effective participants in the land market and compete with investors. And anyway, why not have transitional provisions that prohibit the sale of land to foreigners, as is done in many countries?
All these arguments are easy to answer.
What are the negative aspects of extension of the moratorium?
- For land owners – because land cannot be used as a guarantee for a loan or founding contribution to the capital of the company.
Leasing land is an alternative way to make profit from land. But given the fact that the rent was set within 3-5 percent of the normative monetary valuation of land in 1995, the value of land restricts the rental income. As a result, the average price for leasing agricultural land in Ukraine is the lowest of all the neighbor countries, not to mention the EU.
- For existing tenants – because the need to transact a deal every time does not motivate a land operator to invest in land development or infrastructure, including transport infrastructure serving agricultural producers’ assets and storage facilities. Because operators do not know what will happen in 6-10 years when the lease expires.
As a result, investments of Ukrainian agricultural holdings remain at $500-1000 per hectare compared with $5,000-10,000 in the West, and the average grain crop capacity is 45 percent lower than in the EU and the United States.
- For potential new investors – because obtaining the rights to lease consolidated land, suitable for effective agriculture, by signing thousands of transactions with residents of villages, requires substantial investment (depending on the quality of the land, the price can amount up to $300 – $1,000 per hectare). And farmers can purchase only the right to lease the land, which may be lost if they refuse to continue the agreement. This significantly increases the risk of investment in agricultural land in Ukraine.
- Undoubtedly, the moratorium also creates problems for the state because it has more than 10 million hectares of agricultural land, the effectiveness of which remains questionable, as part of it is used without any formal agreements.
Those are the arguments “for” and “against.” And now what would I do, if I were to conduct the land reform?
Here is one of the options: the state owns 11-12 percent of Ukraine’s land. I would start with granting permission to sell that land, because it is the biggest source of corruption and manipulations. When the sale of land contributes to the land market’s formation, private owners will be more prepared, the market will be steady, and people will sell and buy land in the free market. And then, as the third step, I would invite in foreign investors. This is just one of the possible schemes. Where there is a will, there is a way.
If instead of speaking in specifics, we consider idle talk, the situation is as follows: lawmakers, with their stubborn unwillingness to introduce the land market and stubborn continuation of the moratorium that are grounded on reasons of the “lack of legislation,” remind me a poor student who has entered the university to get a diploma rather than to get knowledge. The whole semester he does nothing, and every time the examinations start, he comes to the teacher and asks him to grant a study leave, promising to take the exams next year. We have been signing such “study leaves” since 2001. Each time we are unprepared, because we do not have the law. As a result – neither knowledge nor diploma.
What is up with that? Why is the moratorium extended?
There are two reasons. The first one – politicians who cynically proclaim populist slogans, fool people and use the subject of the moratorium to raise their ratings among a certain part of the population, who do not know much about the truth and from whom this truth is concealed. These politicians’ only desire is to win the next election. They do not think about the future.
The second reason – some agribusiness players who are living perfectly well under low rent conditions. In such circumstances they, as the major land operators, have more opportunities for lobbying than the landowners and farmers, and dictate their terms. In fact, with the introduction of a free land market, many of these operators will not be able to make profits as large as the ones they do now.
It should be noted that there are many progressive operators who do not oppose the land market and support this reform, understanding that it will increase the capitalization of their companies. But populism and unwillingness to get hands dirty with difficult and painful reforms, as in many other areas, triumph over common sense and the state’s interests.
However, the main reason is political populism: cynical parasitism on fear sown by the politicians themselves. Fear that the sale of land will make Ukrainian peasants poorer. But in fact, for centuries Ukrainian peasants earned their living cultivating their own land. The Holodomor artificial famine of the 1930s was engineered to take land away from peasants. Six million people died of starvation because Stalin wanted to collectivize everything and deprive Ukrainians of the sense of private property. Now you, dear politicians, with your populist slogans and fears, want to stop a major reform that would correct an age-old injustice.
Without giving an opportunity to millions of Ukrainian to dispose of their own land, you nourish a sense of irresponsibility deeply rooted in society.
Remember, there is no developed country in the world without the free sale of land. But you know this just as well as I do. You know that countries with barriers to the land market have low GDP and low prices of land. Ukraine is no exception. So land reform, if introduced thoughtfully and carefully, will make each owner more responsible and richer.
In conclusion, I would like to say the following: dear politicians and statesmen, dear deputies and all concerned, your task is to work for the good of the country. I, like all citizens who want to live here, who want their children to live here, urge you to stop your populism and imitations of reform. Stop, like the ostrich, burying you heads in the sand – gold sand that you yourselves eat. Do not overeat it, because it will make you ill.
Your mission is to make history. So, make it! Those of you who are not ready to do so: get out, please, move off with your families to the houses that you have already purchased in countries with regulated land markets. And take with you those who have not yet done this, but dream about it. I hope their income from work can afford them such an opportunity.
Meanwhile, we will be building our country with our own hands.
Svyatoslav Vakarchuk is the leader of Okean Elzy rock band, an ex-lawmaker and a 2015 Yale World Fellow.
