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Agrarian evolution of Ukraine
What is wrong with the agrarian reform of the 1990s? Why did we fail to create a real landowner and a competitive market in Ukraine? Threats from the concentration of land resources in Ukraine and implications for the country's future.
8 September, 2025
Reforms
Governance and Regulations
Politics & Law
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Agrarian reform is one of the most important components of market transformations in Ukraine since its independence. According to the main ideologists, its primary goal and objective is 'to revive a real owner and master in the countryside.'
From an economic perspective, the content and consequences of the agrarian reform were largely determined by the concept of distributive (non-competitive) privatization, which was implemented in practice through the division into shares of property and land from collective and state agricultural enterprises (collective and state farms).
The main stages of agrarian reforms in Ukraine
The first stage involves the denationalization and/or privatization of the property of state and collective agricultural enterprises, based on their sharing (1990-1994).
These measures were intended, in the rhetoric of the reformers, to "revive" the "cooperative nature" of collective farms and the "sense of ownership" and "sense of mastery" of their workers. Ideally, this would have increased their interest in the preservation and efficient use of the shared means of production and transformed collective and state farms into so-called collective-private farms.
Very quickly, it became clear that sharing property did not change anything at all in the motivation of the newly minted "owners." Therefore,
L"a thesis was invented about the need to "educate" this feeling. As noted, "the emergence of the term 'education by property’ is not accidental. One must not only know about property or simply get used to it, but it must go through the body and soul, as they say, and only then will it become a factor that will turn an employee into a real owner, a master, and eliminate his alienation from the means of production and the results of labor. And this does not come soon and not to everyone equally quickly"."L
Source: Property in agriculture. Edited by academicians of the Ukrainian Academy of Agrarian Sciences V.V. Yurchyshyn, P.T. Sabluk - K.: Urozhay.", 1993
Since property sharing did not revive the "sense of ownership and mastery," and it was probably not possible to "educate" it either, it was decided to share land in addition to that. Land division was viewed as a complement to property division in enhancing the reform of property relations in collective enterprises. In other words, it was believed that if the 'sense of ownership' over the property share were combined with the 'sense of ownership' over the land share, the employee of a collective enterprise would also regain the 'sense of being a master.'
The second stage of land reform in Ukraine was the division of agricultural land of former collective and state farms (1994-1999).
The main theses of the land reform were proclaimed in the Report of the President of Ukraine, Leonid Kuchma, to the Verkhovna Rada "Through Radical Economic Reforms" in October 1994. In particular, it provided for the free transfer of land of collective agricultural enterprises into collective ownership and the subsequent free transfer of land to each member of a collective agricultural enterprise into private ownership, without allocation in kind, in the amount of a certain share in conventional cadastral hectares with the right of association, inheritance, donation, transfer, sale, lease, pledge, and the right of withdrawal with allocation of land in kind.
The following decrees of the President of Ukraine were aimed at implementing the proclaimed distributive land reform "On urgent measures to accelerating land reform in the agricultural sector", "On the Procedure for Sharing Land Transferred to Collective Ownership of Agricultural Enterprises and Organizations" of August 8, 1995, The Law of Ukraine "On Land Lease" of April 23, 1997 (in force until the Law of Ukraine "On Land Lease" of October 6, 1998), "On Guaranteeing the Protection of Economic Interests and Improvement of Social Security of Pensioner Peasants entitled to a Land Share (Pai) of December 15, 1998.
- As of January 1, 1996, 9.3 thousand agricultural enterprises - 96% of their total number - had registered collective ownership of land.
- As of January 1, 1999, out of the 10888 enterprises that received land in ownership, 10859 (99.8%) had it divided into land shares, and 10826 (99.4%) had been issued certificates for the right to a land share (pai).
The number of citizens who had received certificates for a land share (pai) at that time was approximately 6 million people
Source: National Report on the Completion of Land Reform / edited by L.Y. Novakovsky - Kyiv: Agrarian Science, 2015. - p. 11. Available from: http://naas.gov.ua/upload/iblock/4be/доповідь_типография.pdf
Agrarian Reform in Ukraine: Achievements and Miscalculations (UCIPR Analytical Report) // National Security and Defense. - 2001. - №5 (17). p.5.
http://razumkov.org.ua/uploads/journal/ukr/NSD17_2001_ukr.pdf
Agrarian Reform in Ukraine: Achievements and Miscalculations (UCIPR Analytical Report) // National Security and Defense. - 2001. - №5 (17). p.5.
http://razumkov.org.ua/uploads/journal/ukr/NSD17_2001_ukr.pdf
The reformers hoped that as a result of the distribution of property and land into shares, the former collective and state farms, while retaining their ‘collective form,’ would become ‘private in substance.’ It is no coincidence that most of them were renamed ‘collective peasant enterprises (CPE).’ However, quite predictably, the distribution of land into shares did not contribute either to a ‘sense of ownership’ or to a ‘sense of being in charge.’
The scale of plundering of formally private farms by their formal owners did not decrease. As a result of this, along with the price gap between agricultural and industrial products and the oppressive actions of tax authorities, the tendency for the "reformed" farms to collapse became pronounced. At this, the volume of gross agricultural production at the disaggregated enterprises in 1999 decreased by more than 1.8 times compared to 1994.
Moreover, the transformation of property relations in the former collective and state farms, without activating the factor of individual interest and reducing the overall destructive trends in the agricultural sector, did not create the preconditions for the self-development of privatized farms based on natural, evolutionary selection of more efficient forms of management.
This is the reason for the start of the next stage of agrarian reform. The third stage of the land reform was marked by the reorganization of collective agricultural enterprises into so-called "market-type farms", "that would be private not only in content but also in form".
This course was introduced by the Decree of the President of Ukraine "On urgent measures to accelerate the reform of the agricultural sector of the economy" of 3.12.1999. The essence of the decree is the administrative organization of the transfer of property and land shares through the lease mechanism to newly created private entities.
In other words, tired of "educating" the owner-landlord, the reformers moved to actively search for a landlord-tenant, turning owners into landlords. Therefore, it became mandatory to conclude lease agreements for property and land shares. It also established a minimum level of rent of at least 1 percent of the estimated value of the land. The decree also provided for the issuance of state acts of private land ownership to all holders of certificates of land share (pai).
Significant administrative resources were allocated to the implementation of this decree, so, as expected, the vast majority of collective agricultural enterprises (CAEs) were replaced by "market-type agricultural entities" within a record time - by April 1, 2000." As President Leonid Kuchma triumphantly declared at the time, “In a short period, the age-old dream of Ukrainian peasants has been fulfilled – the return of their right to private ownership of land and to private family farming upon it.”
Source: "Historically fair relations in the countryside have been revived." Speech of the President of Ukraine Leonid Kuchma at the meeting of the Commission on Agrarian Policy under the President of Ukraine on December 8, 2000 // Uryadovyi Kurier, December 14, 2000..
An important feature of the land reform was that it was implemented by decrees of the President of Ukraine, which directly contradicted Article 14 of the Constitution of Ukraine, according to which the right to land ownership "is acquired and exercised by citizens, legal entities and the state exclusively in accordance with the law". This required legalizing the changes at all costs, which was done with the adoption of the new Land Code of Ukraine in October 2001. The very process of its adoption was led by the odious Viktor Medvedchuk and was accompanied by a spectacle of political confrontation, where the question was not raised on the merits, i.e., not on the content of the code itself, but simply "for" or "against" its adoption.
This was the end of the "lawless" or "decree" period of land reform. This can also be considered the end of the third and final stage of the agrarian reform of the 1990s.
Formation of a nominal land owner
Since 2000, Ukraine has seen a steady upward trend in commodity agricultural production, especially crop production. This has led to the conclusion that the distributive agricultural reform has been successful. Some of its main proponents began to claim the State Prize of Ukraine, demanding recognition of their significant contribution to the scientific justification of the reforms. Certain individuals, “for an outstanding contribution to the global theory, methodology, and organization of agrarian reform,” were even nominated for the Nobel Prize.
However, it is the degree of scientific validity of the reforms that raises the most concerns. In particular, back in the mid-1990s, at the height of reform activity, the author of this paper warned and argued that the resulting tendency of the public sector to disintegrate was
L""a natural consequence of the gross neglect of agrarian science and practice of existing socio-economic realities. The division of land and property of agricultural enterprises cannot, in principle, fulfill the functions assigned to them"."L
Source: Magas V. Agrarian reform: an alternative to the distributive approach // Ekonomika Ukrainy. - № 10. - 1996.
Magas V. Microeconomic analysis of current trends in the agricultural sector // Ekonomika Ukrainy. - № 12. - 1997
Magas V. Microeconomic analysis of current trends in the agricultural sector // Ekonomika Ukrainy. - № 12. - 1997
The factors behind the current growth of agricultural production have nothing to do with the main factor that the reform was intended to create, namely, the creation of an interested and responsible landowner. In fact, the result of the distributive land reform was the emergence of not so much a real as a nominal land owner.Share
In the early 2000s, a massive campaign of land allocation in kind was launched as a natural outcome of the implementation of the distributive idea. Since the plans and financial capabilities of most land certificate holders did not coincide with those of the reformers, they had to be issued state land titles at the expense of the state budget and a loan from the International Bank for Reconstruction and Development (ratified by Law of Ukraine No. 1776-IV of June 15, 2004) worth more than $195 million.
The main result of the issuance of state acts for land shares was the final assignment of land to economically incapacitated owners.
In addition, this programmed some problems for commercial agriculture related to the consolidation of the necessary land masses, in particular, through parcelization, striping, the interspersing of small plots of other owners in the land masses of farms, the network of field roads, etc. However, over time, it turned out that in most cases these issues disappeared by themselves, since the vast majority of the so-called "owners", having received state acts, did not start using the land.
It is clear that, for various reasons (age, health, lack of money, lack of ability, etc.), only a small proportion of the newly minted "owners" were willing and able to manage the land on their own. Today, more than 90 percent of commercial agricultural production is carried out on leased land.
At the same time, it became clear that new landowners are not able to be effective landlords either, that is, to independently agree on the essential terms of the lease agreement, in particular, the amount of rent, to ensure control over its use and preservation by the lessee, etc.
What Are the Threats of Land Ownership Concentration in Ukraine
Thanks to the distributive land reform, ideal conditions were created for large-scale redistribution and concentration of the world's best Ukrainian black soil.
After all, on the part of potential land sellers, we have competition between almost seven million land share owners. And there is every reason to believe that more than 90% of them either do not plan to engage in commercial agriculture, or are of retirement or pre-retirement age, and/or are below the poverty line.
At the same time, we have an extremely high level of concentration of capital and, most importantly, lease rights to the same land in the hands of several hundred, if not dozens, of oligarchs. This gives them the ability to monopolize land prices in each region. It is clear that these prices will definitely have a downward trend.
The concentration of land ownership is already a real threat to national and state interests. In particular, from 2002 to 2020, the total number of enterprises that owned agricultural land decreased from 57123 to 36227, or by 36.4 percent. At the same time, the number of enterprises that owned more than 5 thousand hectares of agricultural land increased from 511 to 579, or by 13.3%, and their share in the total number increased from 0.9% to 1.6%.
In 2020, they owned 34.2% of all land, with an average size of 11957 hectares. The highest growth rates are observed in the number of enterprises that own more than 10,000 hectares of land. Their number increased from 34 to 184, and their share in the total number increased from 0.06 to 0.5 percent, the share of land ownership from 2.0 to 21.1 percent, and the average size from 15076 hectares to 23261 hectares. Overall, as of November 1, 2020, 6.4 percent of enterprises owned 60.0 percent of agricultural land.
However, these figures do not fully reflect the actual level of land ownership concentration. In Ukraine, horizontally and vertically integrated structures focused primarily on the export of agricultural products - the so-called agricultural holdings - are expanding rapidly. According to some data, the ten largest of them control 2,854 thousand hectares. This accounts for 18.7 percent of the land used by all agricultural enterprises.
Concentration of land ownership is a real threat to national interests.
Its negative economic, social, environmental, legal, and other consequences are already manifesting themselves today.
For example, the prices of buckwheat, a common product in Ukraine, have already been the subject of an investigation by the Antimonopoly Committee. While the agrarian lobby in the parliament easily passes laws that favor the interests of agricultural holdings.
Agrarian oligarchs are already using threats of road blocking as a lever of political influence.
The concentration of foreign exchange earnings in a few dozen agricultural exporters is already a destabilizing factor in the foreign exchange market.
The reduction in the number of crop varieties and cultivation technologies over vast areas dramatically increases production risks in the event of adverse weather or other factors. The predatory focus on growing sunflowers and rapeseed, and the widespread use of pesticides and mineral fertilizers, have a dramatic negative impact on the ecology and condition of Ukrainian black soil.
In essence, today's agricultural holdings act as giant pumps that literally pump abroad the nutrients of Ukrainian land in the form of agricultural raw materials. This is of little or no benefit to the Ukrainian nation. After all, most of the means of production necessary for growing crops (agricultural machinery, fuel and lubricants, protective equipment, etc.) are purchased abroad, and most of the profits of giant agricultural holdings are also transferred outside the country.
Conclusions
The level of threats posed by land ownership concentration in Ukraine is clearly underestimated. The problem is either politicized or believed to be easily resolved by imposing additional social obligations on agricultural holdings, strengthening state regulation, etc.
It is forgotten that agricultural holdings themselves are gaining more and more political influence, which allows them to turn such recommendations into mere wishes. A striking example is the rapid passage through parliament, where the majority is held by the pro-presidential political force, of a provision setting an upper limit on land ownership in Ukraine at 10,000 hectares of agricultural land. Even the bloody Russian-Ukrainian war did not prevent this provision from coming into force on January 1, 2024.
Today, we can observe the same tendencies toward concentration of economic power in the agricultural sector that have already occurred in the industrial sectors of Ukraine's economy. Therefore, there is every reason to believe that this will not only consolidate the corporate market system that has developed in Ukraine, but may also give rise to serious problems. After all, the situation in Ukraine is similar only to the latifundia of Brazil and Argentina.
After all, the Ukrainian agricultural sector already has all the prerequisites to turn into an oligarchic model of latifundia. This means that small and medium-sized farmers will find themselves in unequal conditions: access to land, loans, and machinery will be effectively blocked by monopolists. Thus, the creation of latifundia is not only an economic but also a strategic threat.
Ukraine is at risk of losing its potential for agricultural diversity, which is the basis for resilience and development. Instead, a model is emerging where power and resources are concentrated in the hands of a few, undermining free enterprise and the future of food independence.
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Topics
Reforms
Governance and Regulations
Politics & Law
Vasyl Magas
Associate Professor of Ivan Franko Lviv National University, PhD in economic sciences, specializes in the theory of market reforms, problems of the competitive order formation in the economic system of Ukraine, spiritual foundations of the market economy.
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