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Automatically translated version. May contain inaccuracies compared to the original.
Pole position* of Derzhzembank
The Cabinet of Ministers has not given up hope of resolving the issue of expanding the powers of the State Land Bank as soon as possible.
Soon bill No. 2181a may again be submitted for consideration by the Verkhovna Rada.
It provides for transferring more than 10 million hectares of state-owned land to the management of PJSC "Derzhzembank".
Earlier, on 10 October, the document was included on the agenda, but it was withdrawn from the vote at the last moment.
Foreword
As Ekonomichna Pravda wrote, the bill caused an outcry in parliament. However, deputies were not upset by the transfer of state land to the management of the PJSC.
The negative reaction was sparked by a provision that would grant Derzhzembank the exclusive right to purchase agricultural land from 1 January 2014, while a moratorium on the sale of plots remains in effect for all other market participants until 2016.
According to EP sources, the agrarian committee of parliament will soon reconsider the bill, and then two options are possible. First — the document will be submitted in the same form; second — the controversial provision on canceling the moratorium on buying and selling plots for Derzhzembank will disappear from the act.
The scandalous provision of bill No. 2181a granting Derzhzembank the right to buy arable land. Click to enlarge
As is known, the author of the document is a deputy from the Party of Regions, owner of the company "Agromars" — the TM "Havrylivski Kurchata" — Yevhen Sihal.
However, committee members say in private conversations that the bill is being pushed by a powerful "link" between First Vice Prime Minister Serhiy Arbuzov and Agrarian Minister Mykola Prysyazhnyuk, whose efforts placed the document on the agenda.
At the press service of the First Vice Prime Minister, EP could not get an explanation of whether he actually supports this initiative. The head of the Ministry of Agrarian Policy, however, expressed his view to journalists the day before at the All-Ukrainian Agrarian Forum.
"No one will receive a preferential right. Derzhzembank will be the holder of land that is not parceled, has no heirs and has state status. Its task is to effectively lease the land for long-term rent. If there is a market — it will buy on an equal basis," Prysyazhnyuk told Ekonomichna Pravda.
Yevhen Sihal
Right of first night
Ultimately, the agrarian minister’s words do not correspond to the philosophy of previous legislative proposals on the land market that the government submitted to parliament.
In the bill "On the Land Market" by regionalist Hryhoriy Kaletnik, which survived only the first reading and was rejected, it was proposed to grant a state specialized institution a priority right to purchase any land plot that would be sold.
The same provision is contained in the alternative initiative of the State Land Agency, which has not yet reached the Rada — the bill "On the Circulation of Agricultural Lands." There, a separate article is devoted to the preferential right of state institutions and bodies, including Derzhzembank, to acquire land.
EP also obtained calculations from the State Agency of Land Resources from 2011 concerning the prospects for creating a State Land Bank. Those documents indicate that even then the government planned to create an institution that could freely buy up the plots it needed.
"At the legislative level it is necessary to secure for the SSU (State Specialized Institution — EP) the sole preferential right to purchase agricultural land plots in case of their sale," the documents say.
According to the developers, such advantages would allow Derzhzembank to sell or lease contiguous land blocks whose sizes would reach 100 ha. The average size of a share in Ukraine is 4,2 ha, which, the calculations emphasize, "does not contribute to conducting highly efficient commercial agricultural production."
Officials also believe that such intermediation by Derzhzembank would guarantee a "safe sale of land" to agricultural enterprises.
Hryhoriy Kaletnik. Photo from Kaletnik's personal website
According to Volodymyr Lapa, CEO of the Ukrainian Agribusiness Club, there is no sense in this.
"Supporters of Derzhzembank, when talking about its creation, mention international experience and cite examples of similar structures — BVVG in Germany or SAFER in France. However, none of these institutions in Europe ever had such preferences as the preferential right to purchase," the expert says.
The new prospects do not please producers either, especially agribusiness holdings that lease hundreds of thousands of hectares of arable land. They see only a threat in Derzhzembank.
"A preferential right to buy land is an ideal raider instrument. In Ukraine almost all quality land is leased, and the lessee is an ideal target for raiders. It is enough to buy the lease rights to just a few plots in a land block, and operations will be blocked," says one representative of big business.
PJSC "Derzhzembank" Board Chair Svitlana Skosyrska believes this is the predictable reaction of agribusiness holdings and companies that "use non-transparent schemes to cultivate land and pay next to nothing for it."
Land assets
As the head of the bank notes, plans for privatization and disposal of land are not currently being considered. "Lands that are currently leased will continue to be leased as before," she assures.
Skosyrska sees the main mission of the institution she leads as putting the management of state lands in order. In her view, this will help dismantle dubious schemes of leasing arable land and attract additional funds to the state structure.
Svitlana Skosyrska. Photo dzbank.com.ua
Overall, the institution should receive about 10,7 million hectares of state land. At the same time, 2,6 million hectares are planned to be transferred to the bank's authorized capital as early as 2013. At least, such figures were voiced earlier.
Currently, according to Mykola Kalyuzhny, director of the Department of Land Relations of Derzhzembank, the State Land Agency is conducting an inventory of state plots. It is expected that by the end of 2013 there will be information on 50 thousand plots, with a total area not exceeding 2 million hectares.
This concerns a quarter of all state land. Gaining ownership of this resource could allow the structure to receive 1,5 billion UAH annually, officials believe.
By the way, the inventory of these nearly 2 million hectares by the State Land Agency will cost the state a lot — 250 million UAH. Thus a full inventory in this case would cost taxpayers more than 1 billion UAH.
A provision limiting the maximum area of land in one owner’s possession to one hundred hectares prevents transferring inventoried lands to the bank. It is in effect until 1 January 2015.
Sihal's bill was supposed to solve this problem. In fact, until the provision on the expedited cancellation of the moratorium for Derzhzembank was discovered, it was believed that this was the document’s main goal.
However, whether before or after the moratorium is lifted, Derzhzembank will still buy land. Such plans are evidenced by the preliminary calculations of the innovation’s ideologues. In particular, there are plans to purchase 750 thousand hectares by 2025 — on average 55 thousand hectares per year.
Year
Funds for operating activities, million UAH
Estimated market value of 1 ha of land, thousand UAH
Area of private land that the SSU plans to buy,* thousand ha
Area of agricultural land under management, million ha
2013
634,66
12,72
49,89
9,194
2014
714,38
13,48
52,98
9,244
2015
792,18
14,29
55,43
9,297
2016
868,24
15,15
57,31
9,352
2017
942,78
16,06
58,71
9,409
2018
1 015,96
17,02
59,68
9,468
2019
1 087,96
18,04
60,30
9,528
2020
1 158,95
19,13
60,59
9,588
2021
1 229,06
20,27
60,62
9,649
2022
1 298,44
21,49
60,42
9,709
2023
1 367,23
22,78
60,02
9,770
2024
1 435,54
24,15
59,45
9,830
2025
1 503,49
25,60
58,74
9,889
Calculations were made before the increase in the normative-monetary valuation, which from 1 January 2012 rose from 11,8 thousand UAH to 20 thousand UAH. At that time it was not yet known about the extension of the moratorium until 1 January 2016.
*SSU - State Specialized Institution
Chair of the Ukrainian Agrarian Association Volodymyr Makar says that Derzhzembank should learn to manage at least the land that already belongs to the state.
"Derzhzembank may receive 10 million hectares of land. This area equals the area of Bulgaria. Effectively managing such a land bank without the appropriate experience is a very difficult task," he emphasizes.
Attracting funds
The land is, in effect, already with Derzhzembank. It remains only to make changes that would allow the institution to circumvent the current limit: no more than 100 ha in one hand. The question is different: where to get the money? The plans are ambitious — both lending to farmers and buying land after the moratorium is lifted or even earlier.
The bank's main resource will be budgetary 70-90 million UAH that will remain with the institution after forming capital of 120 million UAH. These funds have already been provided.
Photo info-prom.com.ua
As Komersant-Ukraine writes, citing the bank's chairman, by the end of 2013 the plan is also to attract 3,7 million USD under a UN program, 10-12 million USD from some German fund, and the largest amount — 500 million EUR — from two unnamed European banks.
From a source in the Cabinet, EP learned that Ukrainian officials, while in Washington, proposed involving the World Bank in the project. However, both sides denied this information. Moreover, the WB press service stated that their experts never supported the idea of creating a land bank.
In addition, there is another important income item — rent payments for land that Derzhzembank will provide to agricultural enterprises. It is expected that the institution will receive at least 1,5 billion UAH annually for this. According to Skosyrska, funds received from rent will go to lending farmers.
The plan is to involve other banks as well. Through them the institution wants to lend to villagers, taking on 80% of the risks. Previously, the head of the land bank reported that lending agreements have already been concluded with Oschadbank and Credit Agricole.
Estimated calculations of Derzhzembank's income and expenses, 2011 year, million UAH
Year
Total
Payment of land tax to local budgets, 0,1%
Maintenance expenses
Transfers to the state budget, 30% of income
Other expenses, up to 10% of income
2013
565,24
34,28
51,00
359,97
119,99
2014
626,79
38,32
52,00
402,35
134,12
2015
686,88
42,26
53,00
443,72
147,91
2016
745,68
46,11
54,00
484,18
161,39
2017
803,33
49,89
55,00
523,83
174,61
2018
859,97
53,60
56,00
562,78
187,59
2019
915,57
57,25
57,00
601,11
200,37
2020
970,71
60,85
58,00
638,90
212,97
2021
1 025,05
64,40
59,00
676,23
225,41
2022
1 078,83
67,92
60,00
713,18
237,73
2023
1 132,17
71,41
61,00
749,82
249,94
2024
1 185,15
74,88
62,00
786,21
262,07
2025
1 237,86
78,32
63,00
822,41
274,14
The China factor
There is currently much talk on the market that the accelerated transfer of land into Derzhzembank’s authorized capital is allegedly connected to negotiations between the Ukrainian government and China, which in recent years has actively been buying arable land around the world.
China's foreign exchange reserves reach 3,6 trillion USD, and the Celestial Empire is actively investing in acquiring agricultural land. China lacks sufficient domestic land resources to meet its demand for agricultural products. It is therefore logical that they are interested in Ukrainian chernozem soils.
On one hand, market participants, their lobbyists and political forces opposed to Derzhzembank may be interested in spreading such information. Besides seeing a monopoly in this state structure, some also trace its connection to the "Family," partly evidenced by the composition of the PJSC "Derzhzembank" board.
On the other hand, EP sources say the Ukrainian side has serious problems in relations with China, in particular due to unsatisfactory fulfillment of contracts for grain deliveries to the Celestial Empire under a 3-billion loan. So the Cabinet may make concessions. The question is only how significant they will be.
Photo UP
Another question is what the scheme for alienating land in favor of the Chinese might look like.
According to Taras Kutovyi, a deputy from the UDAR party and a member of the agrarian committee, there are many such schemes, and Ukraine is fertile ground for their implementation. In particular, he suggests that a scheme similar to the one used in the case of the company "Khlibinvestbud" could be launched but on a larger scale.
"This has all happened before. All linear elevators have long been privately owned by a Cypriot company. It is not excluded that the same will happen with this story," he stresses.
At the same time, Derzhzembank rejects the likelihood of such a scenario. According to Skosyrska, the bank does not intend to raise funds secured by Ukrainian land.
"There were no negotiations about a loan from China under the land bank programs. The information in the press is inaccurate. Most likely it was spread specifically so as not to let the land bank develop," she says.
*Pole position (Eng. Pole position) — the most advantageous starting position.
Ekonomichna Pravda
Document: PDF proof of the original version of the news item "Поул-позишн* Держзембанку". It records the publication content at the moment of the first scan, the preservation date and the source: ANTIKOR.
