Ukraine Adopts Land Reform
The Ukrainian Government recently adopted a new land reform law effective July 1, 2021, easing the ban on the sale of certain types of agricultural land, although with certain limitations. The opening of the land market, together with implementation of the Ukrainian Government’s Irrigation and Drainage Strategy Until 2030 plan, will encourage farmers to invest in irrigation and drainage technologies.
Ukraine is one of the most fertile places on the planet, with 25-30 % of the world’s reserves of black earth. With 41.5 million hectares of agricultural land, covering 70 percent of the country, agriculture is Ukraine’s largest export industry. In 2018, Ukraine’s agriculture sector, including the processing industry, generated approximately 17% of GDP. In 2018 and 2019, Ukraine continued increasing grain production volumes to 70 and 74 million tons, respectively.
However, Ukraine’s gap between potential and actual production volumes is attributable in large part to a longstanding moratorium on the sale of arable land. The moratorium means that large farms depend on land leases, which hampers access to finance and discourages, for the most part, investment in irrigation and drainage.
Starting in July 2021, agricultural land will be available for sale to individuals and to legal entities beginning in 2024. The World Bank will provide $200 million in loans to help Ukraine create a fair and transparent farmland market. The World Bank estimates that opening of the land market, together with better targeting of subsidies and other measures to improve land productivity and transparency in the sector, could lead to incremental GDP growth of over two percent per annum over the next few years.
Land reform will also create public procurement opportunities related to engineering land reclamation systems, including:
1. Modernization of operational systems
2. Rehabilitation of systems that have fallen into disrepair
3. Expansion of irrigation onto new areas that were previously not irrigated
Modernization of systems that currently serve nearly 150,000 hectares of land will be addressed during the second phase of the Strategy implementation (2021-2024), with needs estimated at approximately $200 million. The estimated cost per hectare is $1,200, or around $1.4 million per pump station, $900,000 of which will be required for farmer-owned sprinklers and power supplies, and approximately $500,000 for pump station upgrades and pipe networks to serve multiple farms.
Modernization efforts will include:
• replacement of high-pressure water-driven center-pivots by low-pressure motor-driven sprinklers
• repairs and improvements to the buried pipe network to reduce failures
• replacement of pumps with newer, low-pressure pumps
• modernization of electrical transformers and control systems, depending on their current condition
• general repairs and improvements to pump station buildings
To learn more about this and other export opportunities in Ukraine, please contact the U.S. Commercial Service in Ukraine office.kyiv@trade.gov.