Should the “sweetlands” be divided up?

The newspaper Holos Ukrainy pu­bli­shed land market bill on January 25 at the direction of Speaker Volodymyr Lytvyn, the bill having passed its first reading in Verkhovna Rada. It seems that the second reading will be held without further delay on Februa­ry 2, as the head of the Party of Regions faction Oleksandr Yef­re­mov predicted. He said that MPs took the three-week break to better prepare the docu­ment “so that it would not cause any objec­tions.” However, the same po­li­ti­cian in­form­ed the public two weeks earlier still that the relevant com­mittee “worked late into the night the day before yesterday and con­si­de­red all the amendments to this bill.” More­over, he said then that 55 percent of the minority’s amend­­­ments passed the commit­tee.

It is likely, however, that the minority in the parliament does not reflect the whole spectrum of opinions and interests in this very important topic for our country. Sugar producers shared their views on the implications of adopting the proposed land law with journalists on January 24, expres­sing their concern that proposed restrictions on purchasing and leasing of land can deal a severe blow to the sugar industry.

Journalists were told by the chairman of the National Association of Su­gar Producers of Ukraine (NATsU) Mykola Yarchuk that the current marketing year was a good one for sugar beet growers and processors. Average sweet root yield in Ukraine stood at more than 360 quintals per hectare, and the qua­lity was good, too. A total of 77 su­gar mills of the nation produced over 2.3 mil­­lion tons of sugar from this crop, while the domestic market needs just 1.86 million tons. As a result, Ukraine has today 470,000 tons available for export. Almost 6,000 tons of sugar were shipped abroad, to Europe and Central Asia in December only. Negotiations to expand markets are currently underway. It is planned to export 100,000-200,000 tons of Ukrainian sugar.

At the same time, Yarchuk called the price situation on the domestic market “somewhat unfavorable” because the cost of raw materials and energy increased markedly and production costs of Ukrainian sugar mills, averaging 7,700 hryvnias per ton, turned up to be higher than the current market price of 5,660 hryvnias per ton. The industry hopes that the situation will change for the better soon and then stabilize until the start of the next marketing year.

The NATsU chairman forecast the sugar beet sown area at 450,000-500,000 hectares this year, enough to cover domestic market quota, its exact size not yet determined by the government, and more than enough to provide for the country’s domestic sugar consumption. Yarchuk expressed his hopes that it will motivate the go­vern­ment of Ukraine to abandon the WTO quotas on imports of sugar.

However, he has strong reasons to doubt his own forecasts. He said that the sugar producers ge­ne­rally supported the land market bill, but believed that it “had some quite serious deficiencies.” The proposed restrictions on leasing of land were seen as particularly outrageous. Today’s good harvests were made possible by vertically integrated sugar companies creating in the recent years stable land blocks, concentrated around sugar mills and comprising up to 300,000 hectares each. Such blocks harvest up to 70 percent of sugar beets, and up to 80 percent of sugar is pro­duced from their crops. An ave­rage sugar mill needs 15,000-17,000 hectares of land within 50 ki­lometers of the facility for its successful operation. NATsU sees the bill’s restrictions on the maximum size of lease as intended, in fact, to force reorganization and fragmentation of agricultural enterprises that would cause closure of many su­gar mills, loss of jobs, shortage of sugar in the country and renewed imports of the commodity. The industry proposes to erase the restrictions from the text of the bill and allow the market itself to determine the size and specialization of agricultural enterprises. Market participants remind the authorities that nearly all the su­gar mills of the country conducted their IPOs, and harmful provisions of the bill will cause dissatisfaction of investors and block any further investment in the industry.

Attempts to ignore well-known rule against retroactive legislation are particularly disturbing, as the proposed law would oblige the leaseholders to re-re­gister all lease contracts which include 1- to 2-year leases as well as 50-year ones. The director of Sofia law firm Oleksandr Polivodsky obser­ved that “should this restriction come into force, then everybody will have, in fact, to re-register their rights as soon as in 2013. This approach is inconsistent with the principle of legal continuity, under which the lawmaker should respect previous decisions and re­gulations.” In his view, any changes to legislation may take effect only concerning new contracts to be concluded after the law’s entry into force. “The principle of sanctity of contract,” Polivodsky summarizes, “is one of the fundamental principles of a civilized state.”