Why Ukraine should open its land market to EU citizens and how it will affect the country
In a few weeks, Ukraine will mark three years since the opening of its land market.
The second stage of land reform is currently underway, granting market access to legal entities.
The third and final stage of land reform aims to harmonise Ukraine's land legislation with EU laws, particularly by allowing individuals and legal entities from EU member states to participate in the land market.
The consortium of companies AEQUO, EasyBusiness and CIVITTA, supported by the USAID Agricultural and Rural Development Program (AGRO), analysed the best global practices in land relations regulation and developed the Concept for Harmonising Ukraine's Land Legislation with EU Law.
Read more about the Concept and the overall consequences of opening the land market in the article by Dmytro Lyvch, CEO at EasyBusiness – Selling land to EU citizens: What Ukraine can learn from European countries.
Economic integration within the European Union is built on four freedoms: the free movement of goods, services, capital and labour. Agricultural land falls under the principle of free movement of capital (Article 63 of the Treaty on the Functioning of the European Union, TFEU).
Therefore, market participants (both investors and sellers) cannot be subjected to any restrictions on the movement of capital between EU member states.
However, according to the Land Code of Ukraine, foreigners cannot own agricultural land plots.
These provisions do not align with Article 63 TFEU and can be interpreted as discrimination against EU citizens and legal entities.
Accordingly, Ukrainian land legislation in this part requires amendments. Otherwise, Ukraine cannot become a full EU member.
Allowing land sales to foreigners does not appear as a wholesale sell-off of agricultural land (or, as it is often portrayed, "selling off the country") in any EU country.
Each state has established its clear rules, restrictions or regulatory safeguards.
For example, after joining the EU, Czechia, Estonia, Hungary, Latvia, Lithuania and Slovakia were allowed to maintain their existing regulations for a transition period of seven years, while Poland had twelve years. Furthermore, some countries extended this transition period by an additional three years.
Setting such a transition period is a matter of negotiations between the EU and candidate countries. Ukraine will also have the right to establish its frameworks for land legislation during a certain transition period.
Granting access to the land market for EU citizens and legal entities is needed not only and also primarily for foreigners. On the contrary, such a decision will attract investments, contributing to economic recovery and growth in Ukraine.
First of all, foreign companies entering the Ukrainian market will bring new technologies, advanced practices and skills, boosting productivity in farming.
The greatest positive effect of allowing foreigners into the land market will be felt by landowners.
As global and European experience shows, countries with more liberal market models have relatively higher land prices and rental rates, as well as faster growth in land value.
This will enable landowners to receive fair compensation for the sale or lease of their property.
Opening the land market to EU citizens is not urgent for Ukraine. However, it is crucial to start forming a vision, preparing proposals and reforming legislation today to ensure that Ukraine's national interests are maximally considered during negotiations.