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Asia Times
January 14, 2002
Russian privatization: The Code has landed
By Sergei Blagov
MOSCOW - For the first time since the Bolshevik Revolution, Russia is entering a new year with moves to build up a private land market. With a new Land Code in force, Russia is now looking to capitalize on agricultural land, the last frontier yet to be privatized fully.
The Land Code came into force last fall after years of struggle between the Kremlin and the left-wing opposition in parliament. The opposition argued that freedom to buy and sell land will lead to large-scale purchase of land by speculators from impoverished farmers. The Kremlin finally prevailed.
Limited land sales had been taking place even before the Russian Lower House of parliament, the State Duma, approved the law authorizing the sale of land. These sales followed the passing of regional bills by local authorities, notably Moscow, St Petersburg, Samara, Saratov and Nizhny Novgorod.
Now a national Land Code provides clear rights for private parties to own urban and industrial land, reconfirms private right to household plots, and gives private owners authority to decide how to use and transfer their land. The Land Code deferred, however, the key issue of agricultural land transactions to a future "law on turnover of land of agricultural designation".
The current Land Code permits the sale of just about 2 percent of the country's 1.7 billion hectares of land. In a measure expected to boost investment, including foreign investment, the code allows the sale of commercial land and land in cities. It also legalizes ownership of about 40 million household plots. Foreigners have the same rights as Russians under the Land Code, except that they cannot buy plots close to federal borders and in areas of national security. The government is currently working out a list of such areas. Other rules for implementing the Land Code are also being drawn up.
Most farmland in Russia is no longer state property, and private ownership of land is guaranteed by the constitution. The difficulty arises in buying and selling of this land. During the past decade, 12 million farm workers, pensioners, and other rural workers were given 120 million hectares of farm land by way of "land shares". A land share means rights to a specified area in a former collective farm. In theory, a land share can be withdrawn as a separately demarcated farm. It can also be transferred at the discretion of its owner. In practice, red tape has been preventing farmers from doing so.
Over the past decade, the lack of a Land Code has been seen as an obstacle to the development of agriculture. Banks were unwilling to give loans against land unless the land could be sold on closure of a deal. Bank mortgages for buying land are of vital importance to Russian farming, which has been plagued for years by lack of funds. The lack of true private ownership has held farmers back from raising the loans needed to boost production.
The new Land Code legalizes purchase of land, but the lack of clear legislation on sales makes buying near impossible in most regions. Some 40 million people (of Russia's 146 million population) living in rural areas are affected.
The Soviet system of collective farms was highly unproductive. On the other hand, the market value of the nation's land was estimated at some US$5 trillion, according to the Russia's State Land Committee. A property tax of about 2 percent of market value could net a substantial income. The Kremlin is moving now toward making money on Russia's land riches. The federal land service, Roszemkadastr, has been asked to prepare a registry and valuation of all land parcels.
On the other hand, the numbers of state employees serving land has fallen from some 20,000 in 1992 to about 7,000. In some regions, a single inspector has to serve up to 200,000 hectares. With land inspectors' salaries at about $50 a month, graft remains widespread. This year a new federal program will be launched to computerize land and real-estate registration systems, with planned funding of roughly $60 million.
Russia is taking steps on privatization ahead of neighboring Ukraine, the second-largest former Soviet state. Ukraine also enters the year with a new Land Code in force. But Ukraine, which was the grain basket of the former Soviet Union, has opted for a more restrictive code. Ukraine's Land Code lays a moratorium on sale of agricultural land until 2005 and also bans sale to foreigners. Sale of agricultural land is being seen as a way to boost rural economies in former Soviet republics.
But there are still critics who remain wary that unrestricted sale will mean that land will be bought cheap by affluent locals or foreigners, and peasants will again become landless serfs.
(Inter Press Service)
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