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Land Reform: To Accomplish Or To Forget?

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Without a land reform, Ukraine will not receive the next $4.5 billion in the program of increased funding of the International Monetary Fund.

Farmers in Ukraine do not own land that is cultivated. Rented land cannot be a mortgage in a bank. Therefore, farmers do not have enough credit and investment.

The model proposed by the government does not take into account all agribusinesses. According to the report of the project on support for agricultural reforms, in Ukraine, a total land area of ​​41.8 million hectares is registered. It forms 69% of the country’s territory.

As CASE Ukraine`s CEO Dmytro Boyarchuk explained to ‘Hromadske TV’, there are two models of the land market:

– Brazilian model, which allows farmers to buy large areas of land without restrictions. It reduces operating cost through economies of scale and allows the production of competitive products. In this case, an income from land is accumulated by agro holdings.

– Another model when the owners of the land are individuals who rent it, earning income. It is less effective in terms of production, but it makes it possible to redistribute income from agro holdings to the benefit of land owners.

The market-based countries use a certain compromise between these two models. At the same time, the countries of Latin America, Russia, Kazakhstan and Moldova tend to the first model; the countries of the European Union tend to the second one.

In Ukraine, the most effective producers are agro holdings. According to Baker Tilly, the yielding capacity on their fields is on average twice as high as that of small entrepreneurs.

As Dmytro Boyarchuk says, the proposal of Prime Minister Volodymyr Hroisman is, in fact, a social model, when a significant part of agricultural production revenues should remain in the small land owners` pockets. Which model is better or worse – this is not an issue of economic discussion.

June 26, 2017