Friday, 27 March, 2015
From comments made at various social gatherings it seems even some of the bright well educated youth of Ukraine believe the myth that if this land sale moratorium was lifted there would be hundreds of thousands of westerners rushing into Ukraine to buy up 33 million hectares of 'black soil' like a sort of Klondike gold rush. Do people really believe this myth?
For starters there are not hundreds of thousands of western individuals or companies that would wish to rush into Ukraine. There are still multiples of reasons why this 'gold rush' will not happen: geopolitical risks, corruption generally but especially in the agriculture sector, a corrupted legal system, arbitrary tax collection and high taxes etc etc. Then there is the problem of trying to consolidate an economic landholding when the land is owned by millions of ex communal farm workers in 2 to 4 hectare plots. An administrative nightmare for most western financial institutions.
But if a 'mini gold rush' did occur would this be such a bad thing for Ukraine?
Firstly just the sale of 1 million hectares of agricultural land would bring in approximately $1 billion to the Ukrainian economy and in addition another $1 billion to be spent on land and technical improvements to make the acquired land productive.
Then thousands of 'peasants' would receive real value for their land instead of the 'peanuts' they receive from Ukrainian agricultural holdings that lease the land.
From all this incremental activity the government can increase tax revenues. And as these western groups invest into their more economically consolidated land holdings yields go up as does the national income.
The land nor its 'black soil' are not somehow going to 'fly out' of Ukraine leaving great holes in the landscape. It will stay here, receiving the much needed necessary investments and start producing more crops and this incremental production will be primarily for export.
So everybody wins; the land owners get real money for their plots which they probably will spend, the country receives revenue from these investments and increased production for years to come. Ukraine's economic problems are solved.
So what's the problem?