Kyiv Post, Kyiv, Ukraine, Mar 18, 2004

Some experts say the move will spell continued turmoil in the agricultural sector if the bill is eventually signed into law by the president, and will keep significant foreign investment away from Ukraine.

"If the bill prolonging the ban is approved by the parliament in the final reading and signed by the president into law, this will have a significant negative effect on the development of market practices in the agricultural sector of Ukraine," said Serhy Piontkovsky, a partner with Baker & McKenzie's law office in Kyiv.

"Such a ban will continue to prevent commercial banks from providing normal financing to agricultural producers, since farm land cannot be taken as a reliable security," Piontkovsky said.

He said that under Ukrainian law, non-agricultural land without buildings on it can be sold to private individuals and businesses, including foreign companies, for commercial use. He said, however, that certain restrictions and bans still apply to non-farm land sales, posing a "serious problem, which needs to be resolved before significant foreign investment comes to Ukraine."

As for farm land, Piontkovsky said it's difficult to pin down why Ukrainian legislation treats farm land differently than non-farm land.

"In my mind, this is a complex issue explained by Ukraine's background as an agricultural country, the bread basket of Europe; there's also a strong political lobby of leftist parties, who are against any sale of farm land altogether, and there some major social problems in Ukrainian villages," he said.

"Another factor is that many Ukrainian politicians consider Ukrainian agricultural land to be a national asset, which should not be privatized."

In the debate on the bill, lawmakers expressed concerns that existing land law was insufficiently developed for sales to take place, and fears that wealthy individuals would take advantage of the opportunity able to buy up land at low prices.

Serhy Matvienkov, a member of Regions of Ukraine, a pro-presidential bloc in parliament, said that the distribution of land formerly controlled by state agricultural organizations to private farmers was only 50 percent complete, at best. He added that parliament has not yet passed, or even seen draft laws on the land market and a land mortgage bank, making talk of lifting the ban premature.

"We have not passed legislation resolving all the issues that would allow us to create a market for land today. We are not ready and we have not even begun to deal with the issue," he said.

Other lawmakers, including members of opposition blocs Our Ukraine and the Socialists, made similar arguments against lifting the current ban, saying that tens of laws needed to be passed before Ukraine was ready for agricultural land sales.

In a separate, but related, development, parliament also voted against Ukraine taking a $195 million World Bank loan, which was to be spent on the development of a national land registry. The registry would have recorded the ownership, transfers and value of land holdings. Only 212 lawmakers voted for Ukraine to take up the loan.

The World Bank program's main goal is to complete the issuance of land deeds to individuals and help farmers gain access to bank loans. The Ukrainian government signed an agreement with the World Bank last October.

Pavlo Kulinic, a legal expert on Ukrainian land issues and a consultant for Chemonics, the company managing the United States Agency for International Development's Land Titling Initiative project in Ukraine, told the Post in October that approximately 6.8 million people have received so-called land share certificates, which are only conditional land deeds. He said that about half have exchanged their certificates for deeds, giving them title to actual land parcels.

Kulinic said on March 17 that he agreed with lawmakers that the country was far from ready for a normally functioning land registry system, and that parliament needed to adopt the laws on a state registry of real estate property rights and on a state land survey before spending World Bank money on creating a national land registry system.

He said approval of the loan had been stopped by pro-presidential forces, including the Regions of Ukraine and the Agrarian Party, and not opposition lawmakers.

"Their votes show that the government has taken the correct position in not supporting this loan until parliament passes these two laws," he said.

"The loan is meant to be spent on land registration. So why spend money on it before there's a legal base for it in place?"