What can the EU agricultural land market practice offer?

 In his interview Stefan Verbunt, Resident Twinning Advisor of the EU-funded project “Assistance in the development of an open and transparent agricultural land market in Ukraine” shares the challenges of his recently launched project and views on what could be done to ensure transparent agricultural land market operations in the future.

Stefan Verbunt, Resident Twinning Advisor of the EU-funded project “Assistance in the development of an open and transparent agricultural land market in Ukraine”
Stefan Verbunt, Resident Twinning Advisor of the EU-funded project “Assistance in the development of an open and transparent agricultural land market in Ukraine”

–          What makes the nonexistent agricultural land market in Ukraine nontransparent and what are the main challenges of your project in view of this?

Indeed, there is currently a moratorium on agricultural land sales. So in fact there is no market, because there are no transactions. As a result there are not a lot of incentives for farmers to invest and this really handicaps the development of the agricultural sector.

A lot need to be done. Basically there are two central requirements in order to open up the agricultural land market: the administrative side and the legal systems. If you want to have a functioning land market, you need a proper cadastre. In the recent past Ukraine has developed a Land Information System (National Cadastre System) supported by the World Bank aimed at registering the data on the land plots. On the legal side, the land must be legally registered. When buying land one needs to be certain that the seller has legitimate right to do this and that there are no other obligations on the land. A lot of work has already been done in Ukraine but system still needs improvements. Our project will assist to get these systems and institutions functioning in line with EU best practices.

In Ukraine there are about 7 million individuals (farmers, retired people and others) with land shares, who were given these shares when Ukraine became independent. Of course, after 20 years of independence landowners are really becoming impatient, because some of them want to sell, some want to buy more. This resulted in vast amounts of land (shares) being leased to big companies. These large companies starting from 10.000ha and much more, have an enormous impact on the social structure of the Rural areas. This is of course a political issue.

Another issue is the productivity of land (not to be confused with fertility) which is far below its potential. No one is willing to make long-term investment to increase productivity, when there is not sufficient legal certainty. Foreign investors, companies with the necessary knowledge and equipment, could assist in developing the agricultural sector if only the legal system would allow it.

–          What will be your target audience and the overall strategy of the project?

The project consists of three components. The first component is the legal framework. The second component is about improvements to land related legislation and the third about capacity training.

EU-member states have different law-making philosophies from Ukraine. The Netherlands is most familiar to me of course. We have an umbrella law that is quite general in nature and not detailed. Additionally for other types of legislation needed for functioning land markets (like evaluation, monitoring, a land information system etc.) we make lower level subsidiary legislation. This makes the law-making process easier because if you put all the details in one law, it becomes very broad and complex and is hard to discuss. When everyone wants something, no one feels they are being heard and so getting this type of law passed will be a difficult process. And if you want to change an aspect of a very large law it becomes a really lengthy process. By breaking things up and working with more specific legislation, you make this process more transparent.

Another element of this project is the methodology. In the Netherlands at a very early stage in the process of developing new law we invite all the stakeholders whom we think might have interest in this law, including state institutions, NGOs, farmers’ organizations, municipalities, environmental groups etc. and we have a kind of brainstorming. This process gives us an idea of where the interests of each lies and what the possibilities are for progress. This also guarantees that people are involved and start being committed to the process. So by the time the law gets to the parliament, it has already been extensively debated with many people, making the process in parliament much smoother.

–          Do you think that this model is applicable in Ukraine especially in view of existing law-making procedures?

That’s a tough challenge but ideally we think it could be beneficial that the system which is used in most EU-member states is adopted here. But most important is that it ads value to the current system and that it works for Ukraine. But we cannot change the world in the 21 months of our project implementation. All we can do is small steps, showing to our colleagues how things can be done in a different way. We will try to make the process of law making around agricultural lands more transparent and open.

–          What tools will you involve to achieve this?

We plan to launch a number of seminars for stakeholders. We will as well assist in drafting laws but not writing those ourselves of course, the State agency has lawyers who are very capable of doing this. We will also assist in developing new methodologies according to the EU practices. That’s why we have chosen to work with our consortium partners from Lithuania, Germany, and the Netherlands.

The Netherlands, as well as the other partners, has a very strong history in land management and cadastre. There is no stone or parcel of land in the Netherlands which has not been touched by human hands; everything is documented, legally in place. Our partner Germany also recently went through a transition phase when East Germany joined the West, the re-unification. Lithuania is of course a fairly new EU member state that has undergone some essential elements in complying with the EU-acquis. They will bring their recent experience with changing systems to the table. So we have a balanced mix of expertise.

–          How does the agricultural land market work in the EU? Can farmers sell their agricultural lands, namely in the Netherlands?

There are differences in the systems of the EU and Ukraine, but they essentially work the same. In the Netherlands, for instance, there are two parts of the cadastre: the administrative side and the legal side. We have them in one building and we have essential checks and balances in place, procedures to separate them both and avoid any manipulations.

Other EU countries, – I cannot say if it is the case for all, – have separated these procedures entirely, so they work with two different institutions. A sale itself is quite straightforward. Whoever wants to sell or buy the land needs to address a broker; they fix upon the price, sign an agreement at the Notary and go to the cadastre for further registration.

Ukraine’s moratorium on selling land is largely political. However, it is important to do things sensibly when opening up the market. If you open it up overnight, wealthy people will most likely wipe away all the small farmers. There is also a social element in this. It is important to decide what type of rural countryside Ukraine wants to have. Do you want only big companies and no villages and social structure or do you want to have family-run agriculture in the countryside?

We are here to show our colleagues what we have in our ‘kitchen’ and how we are doing this in the EU-member states. The mistakes which we have made in the past can be avoided here. Our partners can judge by themselves on what can work well in Ukraine. So this is by no means a copy paste type of action.

–          Why is the EU concerned about the agricultural land market in Ukraine? What are the reasons behind launching your project?

This EU-Twinning project is launched because Ukraine asked for this project. The agricultural sector needs development, so it is Ukraine itself who really wanted to do this project.  But yes there is concern. The agricultural sector has so much unused potential and working to a proper functioning agricultural land market is a prerequisite for the agricultural sector to develop.

–          What is the budget of your project and how will that money be spent?

As you know, Twinning is an instrument for institution building aimed at administrative cooperation to assist in strengthening the administrative and judicial capacity more in line with EU-practices. This means spending is targeted to advice, training and capacity building. We cannot spend the budget on goods or products; it is all devoted to capacity building type of activities. The total budget for the project is €1.8 million.

–           Will the ordinary Ukrainians feel the results of your project impact ordinary Ukrainians?  

If you work in the clothing shop in the centre of Kyiv, you’ll never notice anything, of course.  But if you are a farmer you will hopefully notice that it is much easier to get your land registered when selling or buying. It will be a straight forward and transparent procedure. You will be able to see on the Internet site what we are planning to do, how this is going to be done.

A large part of this project is focused on anti-corruption, and that means open and transparent procedures. People will be able to see what is happening and why it is happening, to whom can we turn if there is a complaint, – hopefully with the help of IT-solutions (the Internet).

Twinning Project “Assistance in development of an open and transparent market in Ukraine” is aimed at supporting Ukraine in the development of an open and transparent agricultural land market in line with the best EU practices. It is focused on improving the agricultural land market management, improving land administration in legal and institutional frameworks as well as increasing professional skills of staff.

This project is funded by the European Union. It is implemented by consortium of the Kingdom of the Netherlands, the Federal Republic of Germany and the Republic of Lithuania.

Duration: 2014-2015 (21 month).

EU contribution: €1.8 million.