LDN - Business

Ukraine adviser: excluding foreigners from buying land will hurt growth

[November 15, 2019] By Ilya Zhegulev

KIEV (Reuters) - Ukraine's chief economic adviser has told Reuters the government's decision not to let foreigners take advantage once a ban on selling farmland is lifted next year will slow investment, help local oligarchs and hurt growth.

Investors are watching President Volodymyr Zelenskiy's approach to land reform as an indicator of his commitment to a reform agenda that carried him to a landslide election victory in April.

Zelenskiy's party is pushing legislation through parliament to remove a moratorium on the sale of agricultural land that has stood since 2001.

It was a bold move in the face of protests inside and outside parliament, and drew qualified praise from the World Bank and the European Union.

The government says it will add 2-3 percentage points to growth in its first year as it unleashes the pent-up potential of what is already one of the world's biggest grain exporters.

However, in answer to fears that foreigners will muscle out poorer Ukrainians in purchasing plots, Zelenskiy added a rider: the issue of whether foreigners could buy would be decided by referendum, and not before 2024.

Alexander Rodnyansky, an economist at Britain's Cambridge University and chief economic adviser to Prime Minister Oleksiy Honcharuk's government, said the move would be "detrimental to growth, our investment climate".

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Ears of wheat are seen in a field near the village of Zhovtneve, Ukraine, July 14, 2016. REUTERS/Valentyn Ogirenko/File Photo

"If there is no foreign competition, local oligarchs are mechanically granted an advantage (or given a privilege) at obtaining land, especially because they are the least financially constrained and most powerful agents in the economy," he said.

"In fact, this policy structure is perfectly tailored for their needs; they can now buy land with the least possible competition."

Ukraine was also denying itself an opportunity to acquire foreign technology to raise farm productivity, he said:

"China even has a mandatory technology transfer policy for foreign investors, which may have been an option too given the attractiveness of Ukraine's agricultural sector."

Neither Zelenskiy nor Honcharuk's office responded to a request for comment.

But the bill that passed its first reading in parliament on Wednesday sets a minimum price for farmland and limits the area that can be accumulated by any one person or entity.

While praising the reform on Wednesday, the EU said it was safeguards were needed to "avoid the excessive concentration of land in the hands of a few operators".

(Editing by Matthias Williams and Kevin Liffey)

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