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Putting People in Control of Their Land to Realize Ukraine’s Potential

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Land reform will allow Ukraine to capitalize on its economic potential and improve the lives of Ukrainian people – but a lot still needs to be done before a successful land market opening.

I have now had the privilege of being the World Bank’s Regional Director for Eastern Europe for a little over two months. Returning to Ukraine after almost twenty years, I have been impressed by many recent achievements on Ukraine’s reform path.  Many of these are complex, and consequential – creating an independent gas transmission system operator that is already helping safeguard Ukraine’s gas transit revenue; continuing, in the face of opposition and setbacks, to strengthen anti-corruption institutions; undertaking the difficult process of resolving non-performing loans in state-owned banks; and moving, amidst the unprecedented global pandemic, to protect pensioners and other poor and vulnerable Ukrainians.

Today, the immediate challenge Ukraine faces is the COVID-19 pandemic – first to immediately reduce both the mounting toll on health and lives, and then to rebuild livelihoods and incomes. But what reforms are most needed to restore and even improve incomes for the average Ukrainian in the aftermath of the epidemic?

There are many that are required. But for me, the greatest promise is offered by the set of measures around agricultural land reform. Here again, much has been accomplished, most notably when, this past March , the Rada voted to end the nearly two-decade old moratorium on the sale of farm-land. This was a critical first step to unlocking Ukraine’s greatest source of growth. But it is not enough. The next and necessary step is to advance fundamental measures around the governance of land – to allow ordinary people and local governments to benefit from their land without intimidation, bureaucratic interference or corruption.

Land reform that truly allows owners and users to take control of their land can be transformative. By World Bank calculations, for Ukraine as a whole, this can permanently add almost one percentage point a year to economic growth. For landowners currently leasing out their land, this could provide up to  $3 billion every year. For rural residents and small farmers, this can create some  $24 billion of collateralizable assets that allow them to invest in irrigation, horticulture or non-agricultural small enterprises. And for local communities and local governments, this can provide an income stream of up to  $2 billion annually to better the lives of Ukrainians.

The Ukrainian authorities have already made enormous strides in this direction by passing a package of legislation that reduces raider attacks and land-related schemes, makes land data publicly accessible, and allows local communities to plan land use.

But there is much more legislation around land governance that is needed to ensure all the benefits of land reform for every Ukrainian. And just passing the laws is not enough – once that is done, there is the need to draft implementing regulations, to set up institutions to administer these regulations, and to actually implement measures.

Moreover, for improved land governance to lead to more investment, and thus income, it is especially important that Ukrainian landowners or land users be aware of their rights and how to exercise them, and have these rights protected. This is particularly true for small and medium farmers. They must be able to have any actual or attempted violations of their rights redressed quickly. Farmers and other private participants must know how to use land as collateral to access credit. Banks and other financial institutions must be able to professionally assess the value of the collateral and have the incentives to lend to smaller borrowers. Once relevant laws and regulations are in place, there is thus a need for a broad-based legal awareness and a financial literacy campaign.

All of this takes time – and time is running out.

By the most conservative estimates, the needed regulations, institutions and implementation could take at least nine months. The land market opens on 1 July 2021. So, it is essential to pass the appropriate laws by the end of September, at the very latest.

If this deadline is missed because of entirely avoidable delays, there is a real risk that on the date the land market opens, Ukraine will miss this golden chance. Even more, there is the danger that opening the land market in the absence of these strong legal and regulatory safeguards will result in an echo of the 1990s privatization – leaving the market vulnerable to the powerful and well connected and actually worsening land-related corruption and inequality.

Together with our partners, the World Bank has long advocated land reform as a key for Ukraine to develop the productive potential of its abundant land resources. We see this as central to revitalizing the incomes of average Ukrainians, especially in rural areas.

This is a once-in-a-generation opportunity to unlock the sector’s growth potential through investment in high value-added crops and agri-processing and, most important, to transform the welfare of millions of Ukrainians. Ukrainian parliamentarians and policymakers have to ensure that we do not miss it.

World Bank The article was first published in Ukrainska Pravda

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Eastern Europe

Lithuania is left in the dust

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The nearly completed Nord Stream 2 is again in focus. It has become known that the U.S. Senate on January 13 failed to pass a bill to slap sanctions on Russia’s Nord Stream 2 natural gas pipeline sponsored by Republican Senator Ted Cruz. The tally was 55 in favor and 44 against the bill that needed 60 votes to pass. Those who voted against his bill said it risked breaking unity in Washington and in Europe. U.S. senators said also Cruz sanctions on Nord Stream 2 could harm relations with Germany which is very important for the U.S. foreign policy and economy.

Top Ukrainian officials, as well as Lithuanian government supported Cruz’s bill, arguing the United States should do everything in its power to halt the pipeline project.

The link is designed to export gas from Russia directly to Germany by bypassing Ukraine, through which Russia has sent gas to Europe for decades. That would deprive Ukraine of lucrative transit fees and potentially undermine its struggle against alleged Russian aggression. The decision will allow the completion of the gas pipeline to Europe without the imposition of further US sanctions. Earlier Lithuanian Foreign Minister Gabrielius Landsbergis said that the a deal between the United States and Germany on the Nord Stream 2 pipeline was a “mistake”. It is interesting that the vote came as U.S. and European officials held high-level talks with their Russian counterparts. It is quite possible that the decision about Nord Stream 2 pipeline was the result of these negotiations.

This fact has sparked anger and has become great political disappointment for the Lithuanian officials who view the project as a security threat.

Lithuania, positioning itself as the main Ukraine’s patron in Europe, is confused with such U.S. decision. Lithuania promotes the U.S. interests and support all American initiatives even to the detriment of its own interests. Only this month Lithuania took a number of steps to prove its commitment to US policy. Lithuania even has dared to challenge China, one the main US strategic competitors. It continues to spend millions of dollars on military purchases from the U.S. using the narrative of “the threat from the East”. In December Lithuania signed an agreement with the U.S. to improve military interoperability.

The more so, the Lithuanian government has decided to accelerate its planned purchase of a multiple launch rocket system (MLRS) amid Russia’s military buildup on its border with Ukraine. The decision to buy US’ Lockheed Martin system in 2026, two years earlier than Vilnius previously planned.

The country also regularly holds political consultations with the U.S. officials to coordinate its further actions. But the U.S. in its turn does not pay attention to Lithuania’s opinion and makes decision in its favour.

Lithuanian government should gain Lithuanians’ support and pay attention to their needs. The matter is discontent in Lithuanian society is growing every day. Thus, on January 13, the usual commemoration of Freedom Defenders saw loud booing and heckles from the crowd of protesters who called on the government (and the parliament) to resign.

It is obviously that the threat from the East is not so real as threat to be fired due to loss of confidence in near future.

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Eastern Europe

Rebuilding of Karabakh: Results of 2021

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Image source: azerfocus.com

The restoration work in Karabakh entered the active phase in 2021 as several projects had been completed and the foundations for new ones were laid down. The restoration process in Karabakh started right after the November 10th declaration that ended the 44-Day War between Armenia and Azerbaijan. After the war, Azerbaijan liberated its territories that constituted about 20% of the total territory of Azerbaijan and were occupied by Armenian forces in the early 90s.

During the occupation, about thirty years, Karabakh was subject to ruthless destruction and looting by the occupants. As a result, most of the social infrastructure, including residential buildings, schools, and hospitals, were totally destroyed, and most parts of the occupied territories were left empty. Despite the fact that the total destruction in Karabakh makes the restoration process complex and time-consuming, Azerbaijan immediately started the restoration process. For this purpose, the plan for socio-economic development of the liberated territories was prepared, and for the implementation of this plan, “Coordination Headquarters” and 17 working groups on different areas were established. In 2021, $2.2 billion was allocated from the state budget for the restoration process. The same amount of funds is planned to be directed to the restoration process in 2022 as well. The allocation of the necessary financial resources and the establishment of the state bodies for the efficient organization of the recovery process led to the rapid implementation of projects in 2021.

The most notable project that was almost completed in 2021 was the Fuzuli International Airport. The inauguration of the airport took place in Azerbaijan’s liberated city of Fuzuli in Karabakh on October 26. It was the first airport built by Azerbaijan in the liberated areas, and its construction took only eight months. It was built in accordance with the highest international standards, which enables it to accommodate any type of aircraft. A runway with a length of 3000 meters and a width of 60 meters has been put into operation at the airport. The first test flight to Fuzuli International Airport was performed on September 5, 2021, when the largest passenger aircraft of Azerbaijan Airlines, named Karabakh, landed at the airport. Because of its location, the new airport is considered as an “air gate of Karabakh”. Along with Fuzuli airport, the foundations of the other two airports in Lachin and Zangilan districts were also laid down in 2021.

The year 2021 was also marked by the establishment of the Horadiz-Jabrayil-Zangilan-Agband highway. The foundation of this road was laid on October 26, with the participation of the leaders of Azerbaijan and Turkey. With a length of 124 km, it is part of the Zangezur Corridor, the establishment of which was envisioned in the November 10 declaration. The Zangezur Corridor is a very important project that is going to change the transportation architecture of the South Caucasus and its neighborhood. Its proximity to the Karabakh and connection to the main roads in the region will accelerate the restoration and development of the Karabakh.

Within the framework of the restoration process, another important event in 2021 was the foundation of the first “smart village” in Agali village in the Zangilan district on April 26. As of October, the construction work on more than 110 hectares in Agali village was underway. It includes the construction of 200 ecological houses, 4 non-residential buildings, a smart school for about 360 students, and a kindergarten for 60 children. Work on establishing smart agricultural infrastructure on approximately 600 hectares of land is also ongoing. According to the restoration program, it is planned to re-establish cities and villages in the liberated territories based on the “smart city” and “smart village” concepts. Thus, after the Agali village, this concept will be implemented in other areas of Karabakh.

In 2021, the highway that connects the Fuzuli and Shusha cities was also opened. As this highway passes through the territory that was used to liberate Shusha city, it has a symbolic meaning for Azerbaijan, and therefore it is named “The Road to Victory.” The Fuzuli-Shusha highway is part of the Ahmadbeyli-Fuzuli-Shusha highway, one of the main highways in Karabakh. It is 101.5 km in length and reduces the distance from the capital Baku to Shusha to about 363 km. The foundation of another important transport project, the Horadiz–Agband railway, was also laid in 2021 and its construction continues. This railway is 100 kilometers long and has strategic importance as it will connect the mainland of Azerbaijan with Nakhchivan, Azerbaijan’s landlocked exclave, through the Zangezur corridor.

Along with the mentioned roads, the opening ceremony of the 28-kilometer highway that connects the city of Tartar with the villages of Sugovushan and Talish took place in 2021. The length of this road is 28 kilometers, and as planned, the extension of this project will include 22 kilometers of highway from Talish to Naftalan. Construction and planning work on various transportation projects such as the Barda–Aghdam railroad, the Fuzuli-Shusa railway, and the Toganal-Kalbacar highway were also continued.

Comprehensive works in the energy sector were also carried out within the framework of the restoration program, based on the strategy for transforming the liberated territories into “green energy” zones and connecting the energy infrastructure in those territories to Azerbaijan’s general energy system. In 2021, with a total capacity of 20 megawatts, “Gulabird”, “Sugovushan-1” and “Sugovushan-2” small hydroelectric power stations (HPS) were reconstructed and put into operation in the liberated territories. In total, nine digital substations were built in the Karabakh and East Zangezur regions. Simultaneously, in the Aghdam and Jabrail regions, the construction of “Aghdam-1,” “Aghdam-2,” and “Jabrayil” substations as well as the Karabakh Regional Digital Management Center has been completed.

The other important project in the energy sector was the foundation of the Digital Station Management Center in Fuzuli. This project, implemented for the first time in the South Caucasus, allows through automation to reduce the impact of the human factor on the operation of the network, increase reliability and reduce losses during the transmission of electricity. All these projects in the energy sector serve to maintain the energy security in liberated territories and to transform these territories into “green energy” zone.

All the mentioned projects show that Azerbaijan has actively worked for rebuilding Karabakh in 2021. It will enable Azerbaijan to fully integrate the Karabakh economy into the Azerbaijan economy and to use its economic potential in upcoming years. As the liberated territories have great potential in sectors such as agriculture and energy, it will also positively affect the development of the non-oil sector in Azerbaijan. Implementation of all projects that were started in 2021 will not only contribute to the economic development of Azerbaijan, but will also transport Azerbaijan and Karabakh to the transport and economic center of the region.

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Eastern Europe

No borders to struggle against COVİD-19: Solidarity of humanity can help the situation

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Just as COVID-19 does not recognize borders, it is necessary to build the struggle against it on the basis of organization, solidarity, mutual assistance, the use of positive experience, and it should not recognize borders.

2021 was a year of continued struggle against the pandemic and of the emergence of new variants of the virus. The South Caucasus also was not away from COVID-19 and its variants. Azerbaijan continued its effective fight against COVID-19, making the most of the lessons of previous years and the opportunities for rapid response. The vaccination campaign, which was conducted as well as in highly developed countries, is a real sign of performance in this sector. During the year Azerbaijan gave humanitarian and financial aid to more than 30 countries in order to fight the pandemic, made a voluntary financial contribution of 10 million US dollars to the World Health Organization and freely donated 150,000 doses of vaccine to four countries.

The newly appointed head of the EU delegation to Azerbaijan, Petr Michako, also stressed the high level of vaccination in Azerbaijan. The capital – Baku is working closely with The European Union in this direction. The European Union and the World Health Organization have supported the fight against COVID-19 in Azerbaijan with the necessary medical equipment. Medical personnel in Azerbaijan have been repeatedly provided with respirators, goggles, transparent masks and overalls for this purpose. All equipment sent for the safety of medical personnel fighting the virus on the front lines was tested for compliance with quality and safety standards. Kestutis Jankauskas, Head of the EU Delegation to Azerbaijan, said that his organization, as a “Team Europe”, is helping to prevent, detect and combat the COVID-19 pandemic. “Healthcare workers are at the forefront of the fight against the COVID-19 pandemic, which increases their risk of contracting the virus,” he said. -They are our heroes and they need protection. “As part of the Team Europe initiative, the EU has launched an individual COVID-19 package with a budget of around € 32 million to support urgent needs and socio-economic recovery.

In 2021, Azerbaijan achieved major progress in combating the pandemic and the global economic crisis and in mutual cooperation. As a chair of the Non-Aligned Movement, Azerbaijan put forward an initiative to establish a UN High-Level Panel on global restoration after COVID-19. The member states of the Non-Aligned Movement took a unanimous decision to extend Azerbaijan’s chairmanship of the movement for another year, until the end of 2023.

Azerbaijan proposed a resolution at the UN Human Rights Council on behalf of the Non-Aligned Movement on equal and universal access to vaccines for all countries and the resolution was passed unanimously in March 2021. This resolution showed Azerbaijan’s stance on the increasing vaccine nationalism in the world and became an international success.

As a result of all measurements now the number of people receiving the second,third and further doses of the vaccine in Azerbaijan has exceeded 40 percent. Azerbaijan is one of the countries in the continent where the number of virus infections is rapidly declining. Azerbaijan is doing its best to observe this trend around the world. Solidarity can help the situation.

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