Page 46 - bne_Magazine_June_2017

46 I Eastern Europe bne June 2017
Tapping the potential of Ukraine’s
“black earth”
Ben Aris in London
Ukraine's parliament refused
to pass a law on May 18 that would have allowed the
buying and selling of land, prompting Agrarian Minister Taras Kutovy to resign.
But if the market were totally liber- alised, according to one estimate the government could earn an extra $1.5bn to $2bn in just the first year and bil- lions of dollars of investment would be unlocked. However, if the reform were mishandled, it could cause a “civil war”, says one of the very few foreign inves- tors into Ukraine’s agricultural sector.
Ukraine, with its famous “black earth” soil, could be an agricultural superpower. Agriculture accounts for about 8%
of Ukraine’s GDP, and the country is second only to Russia in the amount of acreage of farmland in Europe. It has a total of 41.5mn hectares of agricultural
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land – about 70% of the total area
of the country – of which two thirds (32mn ha) is arable land. But also about 7mn are still employed in agriculture, or 40% of the rural population, so
any reform is highly sensitive.
The sector is currently un-investible for foreigners, because of the muddle surrounding the issue of land. Expec- tations of the latest reform are low.
“The land reform concept that Prime Minister Volodymyr Groysman has proposed, however, is unlikely to gain support from either the agricultural sector or from parliament. Due to
its limitations, it will have a very narrow effect on the economy, and a good opportunity will once again be wasted,” wrote Aivaras Abromavicius, Ukraine’s Lithuania-born former minister of economy and trade, who quit in early 2016, claiming entrenched corruption in the government made his job impossible, and Alexey Mushak, a member of the parliamentary Petro Poroshenko Bloc, in a recent blog.
Without a freehold of land or outright ownership of land (something Russia already has) it is next to impossible for foreign investors to get any exposure to Ukraine’s agricultural sector other
“If there is a new bond and I go to my investment committee, they just say no.”