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than buying the bonds issued by the leading companies. But every single one of those – with the exception
of one company – has lost investors money, partly because of frauds.
“Don’t get me wrong: I love the Ukrainian agricultural sector story,” said a fund manager from Ashmore Capital at Strategic Council’s Ukraine Investment Roadshow conference in London in March, “but if there is a new bond and I go to my investment committee, they just say no.”
Foreign investors can currently only lease the land from individuals, local councils and other private people, rather than buying land outright. Typically, the terms of the lease provide for rents to be reassessed every year and lease payments may be indexed in accordance with the official inflation rate on the day of payment.
Saudi-owned Continental Farmers Group, which manages 44,000ha near Lviv, is a very rare example of
a foreign investor that has ploughed money into Ukrainian agriculture – and made a success of the venture. But even the group’s CFO Alistair Stewart told bne IntelliNews that it is extremely difficult to operate and the new land law is desperately needed if his company is really going to be able to capitalise on its investment.
“The main issue is that if you don’t own the land then there is little incentive to invest into it,” says Stewart. “You can use things like fertilisers to improve the yields, but its not worth doing things like drainage or building irrigation – making investments that will add to the long-term value of the land.”
In March, Prime Minister Volodymyr Groysman reported that in its latest memorandum the IMF had made it clear that pension reforms and laws to launch an agricultural land market on the Rada’s docket were the key demands, but the plan on the table falls short of the mark, say critics.
“Earlier this month, Groysman pre- sented the government’s plan that allows only individuals to buy land, and only up to 200 hectares per per- son. Parliament will likely reject this concept, since it ignores the fact that Ukraine’s agricultural sector can-
not be globally competitive with land holdings limited to 200 hectares per person that cannot be used as bank collateral,” Abromavicius and Mushak said in their blog. “While Groysman’s initiative is an important and much- awaited step in the right direction, it must be bolder in order to succeed.”
The IMF is watching closely. It released another $1bn tranche from the $17.5bn standby programme in early April,
but attached a scathing comment to the disbursement, singling out the need to liberalise the land market, which “remains underdeveloped due
to a moratorium on the sale of land, limiting the expansion of this key sector and leaving the rural population poor”.
“Ukraine has the best soil in the world,” says Stewart. “But they have to get the reform right. The people need to get something from the value of the land, but the big companies need to survive too. And this has to be done without letting the oligarchic groups dominate, otherwise you
will end with a civil war.”
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Find more Eastern Europe content at www.bne.eu/eastern-europe
Selected headlines from past month:
· Ukraine prepares Eurobond and privatisation programme for autumn · EU Council greenlights visa-free regime for Ukraine
· Ukraine goes overboard with Russian internet bans
· Ukrainian pensioners sing the blues
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