Report on the Survey of Rural Landowners’ Involvement in the Regulation of Land Lease Relations at the Local Level

Major expectations from the land reform included the development of agriculture production in rural populated areas, increase in incomes of the rural population, and improvement in rural employment. However, the main problem is that individuals who received land plots do not cultivate this land on their own. Instead, most land units are leased out to corporations, agriculture enterprises, and commercial farms. The results of a representative survey of individual owners of land plots residing in rural areas, conducted in 2010 and early 2011, show that the number of available options for disposal of land units is still limited. Only 10% of respondents appended land units to their homesteads and cultivate this land on their own. Most often, Ukrainian rural households develop by evolving into commercial farms, but this process is extremely slow. Independent farmers are better off, with 2.6% and 0.6% of respondents selling or transferring their land units as a gift in 2010 and 2011, respectively. The employment structure of the land unit owners demonstrates that as little as 12% are employed in agriculture. Individuals of retirement age account for almost 40% of current land unit owners, who tend to lease their land to agriculture enterprises and limit their benefits from owning land by receiving small rents. In 2001, over 22.4 million ha (or almost 83%) of agriculture land was leased, while in 2011 and 2012, the areas of land leased by land unit owners were reduced to 17.4 million ha or 64% of all land that was split into units. Large agriculture enterprises became major land users, with 90% of them leasing land from private owners. According to the State Land Agency, land unit owners signed 4.5 million leases in 2011, of which, 9% were for one to three years, 48% were for four to five years, 32% were for six to 10 years, and 11% were signed for 10 or more years. Between 2000 and 2010, the percentage of short-term leases increased, while the percentage of long-term leases decreased. The average age of individual land owners in Ukraine is 54 years, and 56.6% of them are women. The survey data also show that the ownership of land units is not accompanied by the ability to work on the land or dispose of it freely. The majority of land unit owners lease their land to other entities, limiting their benefits from owning land. This situation is a result of the distorted land lease relationships in the sphere of land use, which are characterized by the prevalence of lessees' interests over those of lessors. The current system of agrarian production in Ukraine is the result of the agriculture sector's adjustment to actual conditions of quasi-market economy operations in the process of non-systemic reforms. Privately owned companies develop strategies that are not oriented toward the market, and they fight with each other for various state resources and use connections within the government to control the competition. The control over land resources has been playing a particularly important role in this system of quasi-market relations. The policy of reviving large-scale agriculture production based on former kolkhoz and sovkhoz models has led to the development of distorted land lease relationships in the sphere of land use. In Ukraine, land lease relationships are being built in such a way that the interests of lessees prevail against those of lessors. For land relation purposes, a formal land owner is subordinate to a lessee acting as the actual land owner. The actual land owner - the lessee, confronts the formal owner - the peasant, through a recently created system of formal and informal institutions. The survey, which was conducted in various regions of Ukraine, is devoted to existing opportunities for creating basic conditions for developing the institutional environment that would be favorable for engaging land unit owners in the processes of formulating and implementing agriculture land use policies. The favorable institutional environment should include the legislative and regulatory frameworks for setting up associations of small land owners/lessors; a network of authorities and organizations that secure their operations and implement legislative initiatives, government policies in this area, and stimulate consolidation of efforts to solve land problems of the local level.