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Ukrainian agriculture ripe for investors?

Ukraine has traditionally been considered one of the more attractive regions for investment in agricultural production. Baker Tilly Ukraine’s Nataliya Polyanskaya considers how this conventional wisdom holds up on a practical basis

To date, Ukraine has not yet begun operation of a fully-fledged market for agricultural land. While the right to private land property is stipulated in the Constitution, the Land Code of Ukraine imposes a moratorium on sale of land use areas which is valid until 01.01.2012. However, the process of issuing certificates for land ownership has not been completed.

The country contains more than 30%

of the world’s black soil giving it a leading position in Europe in terms of physical geography. These most fertile black soils, concentrated in the steppes and forest steppes, account for about 60% of all agricultural land and cultivation accounts for some 57.5% of land use in the country.

Currently land ownership in Ukraine is

made up of a mix of private, communal and public property. Citizens of Ukraine acquire ownership of land on the basis of: acquisition of the contract of sale, deed of gift, exchange, other civil law transactions; donation of land from state and municipal ownership, privatisation of land previously granted to them for use, etc. Ukrainian legal entities can acquire ownership of land for business purposes by purchase of contract of sale, deed of gift, exchange, and other civil transactions; making land part of the charter

fund of the company by its founders, etc. In addition to the right of ownership, the Land Code of Ukraine specifies the right of land use, rent and easement.

According to Article 19 of the Land

Code of Ukraine, all land can be divided into the following categories, dependent upon its usage: agricultural, housing and public construction; nature protection and intended for nature protection purposes, recreational purposes, historical and cultural; forest fund; water fund; industry, transport, communications, energy, defence and other purposes.

LEASE OF AGRICULTURAL LAND Land plots are leased out to citizens and Ukrainian legal entities, foreign citizens and stateless persons, foreign legal entities, international associations and organisations, as well as foreign countries. Lease of land may be short-term - no more than 5 years, or long-term - no more than 50 years. According to the Land Code, agricultural land cannot be transferred to the ownership of foreign citizens, stateless persons, foreign legal entities and foreign states. Foreign citizens and stateless persons may acquire right of ownership to the land for non- agricultural purposes within localities. They

20 UkraineBusiness insight October/November 2010

may also acquire right of ownership to the areas outside the localities, in which there are objects of immovable property that belong to them by the right of private property. The right to lease land becomes valid after the conclusion of the lease contract and its state registration.

METHODS TO TAKE CONTROL OF LAND SHARES: a) Purchase lease (sublease) rights for up to 50 years. The lessee shall have priority right to buy the land in the future at US $ 100-200 / ha.

b) Purchase the charter capital of an agricultural enterprise – obtaining corporate rights to it. This will allow leasing of land directly from shareholders of the enterprise. Cost: from UAH 1 (with debts) to US $ 5 million for an agricultural enterprise.

c) Agreement on joint activities valid for access to public lands owned by farm units of the Agrarian Sciences Academy of Ukraine and other state institutions.

INVESTMENTS Ukrainian and foreign analysts calculate that investment needed in the country’s agro- industrial complex is about US $ 20 billion. Over the past year there has been a trend

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