LAND REFORM IN UKRAINE: GAINS AND DRAWBACKS
Report of the Center for Land Reform Policy in Ukraine at the
UN ECE WPLA Workshop on Legal Empowerment of the Poor in the UN ECE region
“A Road Map for the Implementation of Land Policies”
hosted by STATENS KARTVERK
(Norwegian Mapping Authority, Cadastre and Land Registry)
Bryggen, Bergen, Norway, 10-11 April 2008
Reporter: Max Fedorchenko, LL.M
SLIDE 1 (cover page)
Dear colleagues,
This report is prepared and presented by the Center for Land Reform Policy in Ukraine – an independent non-governmental organization established in 2001 with the purpose to provide information, legal, analytical support to stakeholders within the course of land reform in Ukraine. I would like to thank Norwegian Mapping Authority, Cadastre and Land Registry for inviting me for this workshop, for giving me privilege to speak and also for making my participation possible.
SLIDE 2: Land Resources of Ukraine
Ukraine is a country with vast and rich land resources. In combination with moderate climate, water resources and diverse transport routes it makes Ukraine a very promising country from the point of view of agriculture. At the same time geopolitical changes and delays with reforms resulted in sharp decline of agriculture which began in 1992 and cost Ukraine almost 70% of its agricultural output (in money terms). Taking into account that 32% of Ukrainians (today almost 15 million) live in rural areas where agriculture is practically the only employer, it is clear that land and agrarian issues are of utmost importance – from the macroeconomic point of view as well as from the perspectives of alleviating poverty and improving living standards.
SLIDE 3: Land Reform in Ukraine
The goals of land reform become clearer if we look at the pre-reform land use and ownership structure. Before 1991 all land belonged to the state. Agricultural land was in permanent use of collective and state farms. Land, machinery, crops, cattle – everything was state or collective property, and there were few incentives and even fewer possibilities for efficient working. Thus these goals were self-evident.
SLIDE 4: Results of Land Reform
By the year 2000 the state lost its position as a monopolist land owner. It significantly influenced the way the agrarian business was organized: state and collective farms almost disappeared; instead there were more than 46 thousand individual farmers and 18 thousand private agricultural companies. Not by chance that change coincided with the beginning of the recovery of the whole agrarian sector, which by today regained half of what it lost. Nowadays it brings about 15% into Ukrainian GDP.
SLIDE 5: Results of Land Reform
One of the most important tasks for the land reform to begin and to succeed was creation of appropriate legal basis supporting the development of new land ownership structure and competitive redistribution of land resources. Over 17 years Ukraine developed new land legislation governing land reform, land management and land market. There are still missing positions – in particular, principal laws on land market and land cadastre are still debated. Nevertheless, today we reached the point when it is more important to ensure complete observance of existing laws rather than development of new ones.
New legal basis allowed for mass land privatization and land titling. More than 30 million hectares of land was privatized, about 27 million hectares have already been titled. Thus the conditions for releasing the value of land have been created. Lease of agricultural land brings to rural landowners about half a billion dollars a year.
Release of the value of land into market circulation required an institute which did not exist before 1991 – the monetary land valuation. Nowadays there are respective laws, schools, and licensing and control procedures. So far monetary valuation was completed on 70% of territory of settlements (4.5 mln ha) and 50% of areas outside settlements (26 mln ha). The valuation itself raised proceeds of the land tax by 25-30%. Completion of monetary valuation along with land inventory (settlements 4.4 mln ha, 40 mln ha outside) will facilitate prevention of informal and free land use and allow for land becoming one of the most significant sources of revenue for municipalities.
Municipalities became entitled to own land in 2004. Demarcation of state and municipal land in kind will make local self-governance less dependent on state budget and more capable. It will also allow for public participation in redistribution of land (6.9 mln ha to do, 0.6 mln ha is done).
As a result of land reform measures, an active land market is established and operating in settlements of Ukraine. The more active land market is, the more money it brings into local budgets: since 1994 cities, towns and villages gained at the land market 1.38 billion dollars; only sales of 2007 amounted to 700 million dollars (OBS: USD 200 million was raised through sale of just ONE 120-ha parcel in the capital). Introduction of land auctions remarkably increased proceeds of local budgets.
Cadastral works and services have been significantly deregulated and privatized. Geodetic, surveying and valuation works and services may be performed by private entities. State has given up its monopoly and established a system for preparation, licensing and control of private land surveyors. It is clearly facilitating the working of land market.
SLIDE 6: Results of Land Reform
When land reform was declared, the issue of rural development was not adequately addressed. The goals of reform aimed at better efficiency of agrarian production; the fact that inefficient collective and state agricultural enterprises were main donors and investors of rural areas was not taken into account.
Upon dissolution of collective farms the burden of maintenance of social infrastructure in rural areas shifted towards local budgets which were ill-prepared for the task. The state used to channel its subsidies for rural development through collective farms and it kept doing that without understanding that private property for land and assets turned farms into business, and that the support for agrarian business was quite different from support for rural development.
Without embarking upon priorities of rural development and amount of necessary funds, we would only stress that so far there is no authority clearly responsible for and concerned with rural development. Every institution performs its bit of work, and the whole undertaking is not well-coordinated.
Privatization of agricultural lands was not always done thoughtfully, with understanding of long-term effects of such undertaking. Sharing of agricultural land produced about 7 million plots with area from 1 ha to 9 ha. Even in terms of paperwork and fees cultivation of a significant single tract is complicated and costly: an average farm with the area of 5 thousand ha has to conclude and register in cadastre 1250 lease contracts. Larger producers are facing tens of thousands contracts. Consolidation of land is not on the agenda because law imposes so many restrictions and prohibitions upon transactions with agricultural land.
Parcelization had another gruesome outcome - melioration systems were either destroyed or abandoned, protective forest stripes were cut for wood. Land becomes subject to ever rapid and massive impoundment and erosion.
In many cases degraded and low-yield lands were privatized. Realization of such measures as preservation, aforestation and grass land renovation is not accomplished by landowners and cannot be fulfilled by the state, as land is in private ownership.
Perspectives of spatial development were also out of focus in the course of privatization. Therefore today it is necessary to buy land from private owners for the construction of objects of regional and national infrastructure. While state can do so, private entities are prevented from doing that because law puts almost a total ban on sale of agricultural land. It significantly impedes investment activities – our rapidly growing economy requires more land for commercial and industrial use, but our land policy disregards this need.
Gratuitous privatization of land which was originally designed and widely used to give free and unobstructed access to land for every citizen became extremely difficult in terms of its duration, complexity, procedure and corruption. Recently it became subject to abuse. It is used for the sake of appearances. Privatization is held on dummies in order to evade payments or legal restrictions. State and local communities lose their property, budgets lose money, and shadow market is filled with new parcels.
SLIDE 7: Results of Land Reform
State land management system suffers from the absence of unity and consistency. As of now, public land is sold and leased out by: Cabinet of Ministers of Ukraine, 315 local state administrations, 11521 local councils, State Committee on Land Resources and State Property Fund of Ukraine. Distribution of competence is marked with obscurity and corruptibility. As a result, number of offences, abuses and crimes are growing every year.
General effects of inefficient state land management and unjustified restriction on transactions with land led to the situation when vast areas of agricultural land are out of any sort of use. The study of 2006 proved that out of 11.4 million ha of state-owned agricultural land 5 million ha were not used and 4.5 million were in permanent use (which produces the lowest possible revenue). At the same time state land often becomes object of informal use – about half of all revealed violations of land legislation are connected with unauthorized use of these lands.
Private agricultural land shared the same fate. Recent data shows that 1.43 million land shares are not in use; 98965 shares belonged to deceased who left no heirs; 1.3 million shares are neither farmed by their owners, nor leased out. In toto, 4.8 million ha are vacant.
The spatial planning system is also in critical situation – law foresees that this system includes General scheme for planning the territory of Ukraine, schemes for planning territories of regions and districts, general plans of settlements, detailed plans of territories and plans of separate land plots. Our recent study proved that many components of this system are missing or out of date – first of all, at the level of regions and settlements, therefore planning of territory of Ukraine is carried out mainly at the level of separate land plots. In such situation it is difficult to give due consideration to public interests.
Modern state land administration shall be based, inter alia, upon the idea of securing adequate protection of land rights and effective, simple, fast and safe trade in those rights. Effectiveness of Ukrainian state land administration and land market may be low – absence of full-fledged land cadastre and land registry turns the state into a bystander, almost an observer. At the 18th year of land reform Ukraine does not have even a law on cadastre (only few articles in the Land Code). Thus created cadastral system with all its technological advances and shortcomings does not enjoy the appropriate level of legitimacy.
The situation with the land registry is even worse. The law on registry was adopted in 2004, however, not a single provision of this law is implemented, and ministries are still disputing the right to do registration.
SLIDE 8: Results of Land Reform
Issues and challenges described above as well as factors like absence of effective separation of business and state, lack of political consensus in respect of land market resulted in a halt which was put upon the land market and, to a great extent, upon social and economic development (first of all, of rural areas). Insolvent political ideas and concealed economical interests imposed moratorium on transactions with agricultural land. But juridical laws cannot abolish economical laws – and land market operates in a shadow readily provided by corrupted bureaucrats and judges, with all the drawbacks and deficiencies common to black market.
Lease has become the only way for disposal of agricultural land. Land lease market is having monopsonic nature, and lessees often impose upon landowners unfavorable conditions, they reduce and delay ground rent, pay it in kind at inadequate price or do not pay at all. Such relations are highly detrimental for rural landowners living at the brink of poverty.
Law in clear and indisputable terms requires that sale of state- or municipality-owned urban land shall be done through auctions. Till today land auctions are still rarely used – little “technical” omissions and minor legal tricks keep land out of auctions. In many cases it looks like the principle “For my friends, anything; for my enemies, the law” is fully applied. Again, this practice compromises interests of sustainable development of cities and local communities. Moreover, with sale of significant areas of urban land the actual power-center shifts towards private domain and out of local elected bodies. Long-term lease as an alternative is not very welcomed.
Maybe the very fact that private interests are so deeply intertwined with discharge of public administration explains why system for acquisition and protection of land rights remains so cumbersome and unreliable after 18 years of land reform.
SLIDE 9: Agenda for Land Reform
The principal measure which could improve the current situation is clear and definite separation of the authority and the business. Only then there will be possibility for establishment of transparent, safe and effective land market and good land management with all social and economic benefits stemming from them.
In order to achieve that separation, it is necessary to create such general framework conditions for business which would exclude the necessity to participate in the working of government agencies with the purpose of protecting own business and gaining competitive advantages. Not the last place in this context belongs to realization of legal liability measures for abuse of power – such measures should be not only provided for by the law, but also should be applied in a uniform and impartial manner, in order to prevent the authority turning into business.
Furthermore, land management should be based on clear, plain and formal provisions of state land policy, which would not leave much space for bureaucratic discretion. Land policy shall be fully implemented in legal acts; administrative bodies entrusted with application of such acts shall become an integral system or at least have clear-cut areas of responsibility and formal links and established procedures for cooperation.
The issue of rural development shall be finally addressed with all responsibility and honesty. The program for rural development shall be driven first of all by article 3 of the Constitution of Ukraine which says that “an individual, his life and health, honor and dignity, inviolability and safety are the highest social value in Ukraine”. No doubt that operational utilities, passable roads, accessible and affordable medical care, education, social and legal protection, employment assistance will make living of Ukrainian rural population not just bearable but also dignified.
Creation of the state land cadastre and land registry should become a top priority of the agenda of land reform in the nearest period. Effective and fruitful steps towards this priority will ensure general positive effect of land market functioning, in particular, in the context of poverty reduction, land consolidation, spatial planning and environmental safety.
Thank you for your attention!
SLIDE 10: Contact information
