Debate on Land Ownership

ISET Policy Institute recently held a debate on foreign ownership of Georgian farmland. Simon was one of the panellists.

As readers will recall, since June 2013 the Georgian government imposed a moratorium on farmland purchasing by foreign individuals or foreign-invested enterprises. In 2014 a challenge by an Austrian citizen to this ban was upheld in Georgia’s constitutional court, but despite this the Georgian Ministry of Justice still refuses to transfer land titles to foreign invested enterprises or individuals.

A new draft Land Law was made public by the Ministry of Justice, over 2 1/2 years after the current government gained power. Regrettably consultation with key stakeholders has been less than ideal. The basic terms are:

Foreign-invested enterprises may acquire land between 20-200 ha without special permission. Land plots outside this range require special permission.

Foreign individuals may acquire land plots of between 5-20 ha, under one of three conditions:

(a) The individual has a Georgian spouse

(b) The individual lives in a “Georgian Household”

(c) The individual holds Georgian residency

If the individual loses their status (a), (b) or (c) , they must sell the property within six months.

A discussion from various investors, business organisations, parliamentarians and government officials followed.

Our comments:

(1) It appears this draft with developed by people with no knowledge of agriculture, and the restrictions appear completely arbitrary.

(2) It is unclear that the legislation will protect smallholders any more than existing legislation does.

(3) Excluding or restricting foreign capital from broadacre cropping of basic commodities such as wheat, sunflower, and maize (which require properties of 1000-3000 Ha to be produced cost-effectively) damages Georgia’s national security. In particular, Georgia’s dependence on imported wheat for bread (over 70% imported from Russia, Ukraine and Kazakhstan) makes Georgia’s future as a sovereign state vulnerable to naval blockade and aerial destruction of road and rail links with Azerbaijan and Turkey, should a future conflict with our northern neighbour resume. The full force of foreign capital and expertise, which is typically obtaining yields four times that of domestic smallholder producers, should be brought to bear on this segment for the food security of the nation.

(4) The restrictions on individual purchases almost certainly conflict with the Georgian constitution, and hence will be challenged in court once again. This will likely delay the adoption of a new land law even further, damaging Georgia’s credibility as an FDI destination.

(5) A six-month deadline for disposing of a farmland asset is unreasonably short.

(6) Forced sale due to loss of residency could be abused by the Ministry of Justice to expropriate land from foreign individuals. In addition, it fails to recognise the highly mobile nature of professional people today, who may take assignments all around the world during their working life while returning to a home base, or several homes bases, between engagements.

(7) Being a member of a “Georgian Household” must be the coyest euphemism for a foreign businessman shacked up with his mistress ever conceived………

To develop Georgia’s 2 million hectares of farmland to a fully productive state will require more than USD$2 billion in state expenditure on basic infrastructure over the next decade (irrigation, drainage, roads, electricity and gas) and a further USD$8 billion in private capital on farmland property development and processing facilities. Georgia does not have the domestic capital base nor the managerial capacity to accomplish this without foreign investment, technology and managerial inputs. Any legislation that impedes the flow of capital into the agricultural sector will ultimately harm the very people it is intended to protect.

Advertisements

კომენტარის დატოვება

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / შეცვლა )

Twitter picture

You are commenting using your Twitter account. Log Out / შეცვლა )

Facebook photo

You are commenting using your Facebook account. Log Out / შეცვლა )

Google+ photo

You are commenting using your Google+ account. Log Out / შეცვლა )

Connecting to %s

%d bloggers like this: