RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/UKR/96/Rev.1
23 April 2002
(02-2285)
Working Party on the
Accession of UkraineOriginal:  English
ACCESSION OF UKRAINE
Status of Reforms of Property Relations and Development
of Legislation in Agriculture
Revision
The Governmental Commission on Ukraine's accession to the WTO has submitted the
following revised information with the request that it be circulated to members of the Working Party.
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Reforms in the Agrarian Sector of the Ukrainian Economy in 2001
During 2001, the Government of Ukraine continued to undertake organizational measures to
create a favorable economic environment for the functioning and development of reformed
agricultural enterprises and the formation of a civilized agrarian market.  As a result, in 2001 positive
trends in agriculture, as well as in the economy in general, could be observed. Investments in
agricultural production followed the successful implementation of land reform; the abandonment of
state-run input supply mechanisms, better financing of agriculture through preferential credit schemes
and increases in the purchasing power of the population supported positive tendencies in agriculture.
Approval of the new land Code of Ukraine is one of the greatest achievements of land reform
in 2001.  The Land Code of Ukraine in its new wording resolves the issue of its compliance with the
Constitution of Ukraine, and aligns the provisions of the Land Code of Ukraine with land laws and
Presidential Decrees.  It contains norms of direct application, as opposed to general declarations.  Themain achievement of the Land Code of Ukraine in its new wording is the fact that it confirmed all the
existing practices of privatization of land for agricultural purposes, in particular, the issuance of
certificates of  the right to a land shares.  The Land Code of Ukraine creates grounds for further
improvement and development of land relations not only in the agrarian sector but also in the field of
land for non-agricultural purposes on the following principles: inviolability of the right of privateownership of land and inclusion of land into market circulation, social justice in re-distribution of
lands which are in state and communal ownership, and the combination of high economic
effectiveness with ecological safety in land use.
During 2000-2001, economic mechanisms for regulating land relations were implemented.
Money evaluation of agricultural lands was conducted.  Money evaluation of non-agricultural lands
has been continuing. The basis for land sales and purchases is being established. The legal
establishment of ownership rights to land, i.e., en suring the issuance to peasants of state deeds of
private ownership of land is the most important in this process.  As of the end of year 2001, of the
6.8 million individuals who have acquired the right to a land share, 6.6 million, or 97.6 per cent, had
obtained their certificates of the right to a land share.  Moreover, 2.2 million holders of certificates ofWT/ACC/UKR/96/Rev.1
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the right to a land share, or 34 per cent of their total number, have exchanged certificates of the right
to a land share for state deeds of private ownership of land.
37.6 thousand private farms have been using almost 2 million hectares of agricultural lands.
A market for land leases is developing.  Peasants have been leasing over 20.7 million hectares of land.As of the beginning of 2002, 5.3 million individuals leased their land.
Approval of the Law of Ukraine "On Stimulating the Development of Agriculture for the
Period 2001-2004, No.2238-III, dated 18 January 2001, in the beginning of the year, established the
main guidelines of state regulatory policy in the agrarian sector for 2001 and for the following years.
The Law reinforced the policy of protecting revenues of agricultural producers by establishing pledge
prices for agricultural products and ceiling tariffs for electricity for agricultural use. According toArticle 10 of the said Law, expenditures from the State budget for financing the development of
agriculture should be not less than five per cent of total budgetary expenditures.  Upon approval of the
said Law, in the year 2001 the moratorium for conducting bankruptcy procedures for agricultural
enterprises was cancelled.  This simplifies the system of relations between borrowers and lenders, as
well as ensures protection of lenders’ rights.
The credit policy of the Government of Ukraine in the year 2001 was aimed at increasing the
financing of the agro-industrial complex by commercial banks and improvement of the system of
relations between participants in the credit market.  At the expense of the State budget of Ukraine
under the Resolution of the Cabinet of Ministers of Ukraine "On Partial Compensation of InterestRates of Credits Extended by Commercial Banks to  Agricultural Producers and Other Enterprises of
the Agro-Industrial Sector"
 No.59, dated 27 January 2001, partial compensation of the rate of interest
on commercial banks’ credits  provided to agricultural producers and other enterprises of the
agro-industrial complex took place (in the amount of not less than 50 per cent of the discount rate
established by the National Bank of Ukraine). For these purposes, 150 million Hryvnias (aboutUS$30 million) was allocated from the State budget of Ukraine.
The interest cost compensation mechanism gave a powerful impetus to the growth of
commercial credit financing of the agrarian se ctor.  During 2001, credit extension by commercial
banks to agriculture on these terms more than tripled, showing a 3.4 times increase against 2000 (the
equivalent of US$512 million versus US$ 152 million).  In 2001, the number of commercial banks
providing credits to the agro-industrial sector increased to 88 as compared with 56 in the year 2000.In addition, agro-industrial enterprises received from commercial banks US$ 520 million of credit
funding outside of the compensation system.  Credit repayment rate in 2001 equaled 92 per cent .
The reduction that has occurred in the use of non-monetary forms of payment demonstrates
significant new relations in the agro-industrial complex.  In 2001, barter payments constituted 18 percent of the total volume of sugar sales (in 2000 it constituted 37 per cent); 13 per cent for cereals
(28 per cent in year 2000); 12 per cent for sunflower seeds (39 per cent in year 2000) and
seven per cent for vegetable oil (19 per cent in year 2000).
Approval last year of a range of governme ntal food programs involving grain and cattle
breeding was aimed, first of all, at increasing agricultural output.  Improvement of cultivation
technologies, increased use of purchased inputs and very favorable weather conditions allowed
fulfillment of the tasks for year 2001 laid out  in the Program "Grain, Years 2001-2004".  During
2001, active work on the draft Law of Ukraine "On Grain and Grain Market in Ukraine" took place.
Measures provided by the said draft Law are aimed at stabilization of the situation in the grain marketand increasing the effectiveness of production and grain marketing.WT/ACC/UKR/96/Rev.1
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Upon approval of the new wording of the La w of Ukraine "On Insurance" on 4 October 2001,
mandatory insurance of agricultural crops and perennial plantations for state agricultural enterprises,
as well as cereals and sugar beets for agricultural enterprises of all ownership types was introduced.
In order to improve the situation in the consumer market, to stabilize prices for animal
products and to promote the development of anim al husbandry, Decree of Ukraine’s President "On
Measures to Stabilize the Situation in the Consumer Market and to Develop Animal Husbandry in the
Years 2001-2002" No.100 of 17 February 2001 was issued which determined some corresponding
measures, including the drawing up of a Program of Stabilization and Development of Animal
Husbandry for the Years 2001-2004.  The latter was approved by Resolution of the Cabinet of
Ministers of Ukraine "On Measures to Stabilize and Develop Animal Husbandry and Poultry
Farming" No. 799 of 11 July 2001.
Further development of physical infrastructure related to agricultural markets has been taking
place.  Currently, 35 accredited commodity exchanges have been operating in all regions of Ukraine.
In 2001, 372 agro-trading houses and 906 wholesale markets for food and vegetables were created;
162 auctions of live animals and 1,423 fairs were held.  The network of purchasing points expandedsignificantly.  The number of such points reached more than 20 thousand.  Activities to promote the
creation of company shops, machinery and technologies stations and service points have been
continuing.
Provision of consulting services and education of agricultural producers is an important
aspect of the further development of agricultural production under the new economic conditions.
Advisory services, networks of which, are being created at the national and regional levels, are
designated to meet these needs.  The draft Law of Ukraine "On Agricultural Advisory Service" was
drafted for successful development of the Ukrainian advisory service.
Increases of personal income played a significant role in stimulating the internal demand of
consumers in 2001. The normative basis for resolving issues in the social field is being established.  In
particular, the President of Ukraine ratified Decree No.637, dated 15 August 2001, which approved
the Strategy for Overcoming Poverty.  The integr ated program for ensuring implementation of the
Strategy for Overcoming Poverty is being developed. The increase of pensions, decrease of wage
arrears and creation of new jobs through development of entrepreneurial activity, small businesses,
and services, including foreign investments, are all aimed at resolving the main issue – overcomingpoverty in Ukraine.  Among the most important measures in this direction are the following ones:
creation of conditions for independent employment of the population, development of entrepreneurial
initiative, improvement of conditions for conducting entrepreneurial activities and creating a
comprehensive competitive environment, optimization of state intervention into the financial and
business activities of business agents, simplification of the procedure for receipt of permits forconducting entrepreneurial activity, optimization of the procedure for registration of business agents,
etc.
The above-mentioned reforms, which are supported by the relevant legislative and normative
acts, supported decentralization of property relations in the agro-industrial complex.
Status of Reforms in Property Relations in Agriculture and Purchasing of Ukraine
During 2001-2002, the following legislative and normative acts were approved in the field of
privatization of agricultural enterprises and decentralization of relations:
1. Law of Ukraine "On Stimulating the Development of Agriculture for the Period of 2001-
2004"   No.2238, dated 18 January 2001;
2. Land Code of Ukraine (the new wording), dated 25 October 2001;WT/ACC/UKR/96/Rev.1
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3. Presidential Decree "On the Main Basis of the Land Reform in Ukraine," No.372, dated
30 May 2001;
4. Presidential Decree "On Measures on Ensuring Protection of Ownership Rights of
Peasants in the Course of Reforming the Agrarian Sector of Economy," No.62, dated
29 January 2001;
5. Law of Ukraine "On Amendment of the List of State-owned Enterprises which are not
Subject to Privatization," No.2657, dated 12 July 2001;
6. Law of Ukraine "On Evaluation of Propert y, Proprietary Rights and Professional
Valuation of Activity in Ukraine," No.1790/3, dated 29 September 2001;
7. Resolution of the Cabinet of Ministers of Ukraine "On Settlement of the Issues on
Ensuring Protection of Ownership Rights of Peasants in the Course of Reforming the
Agrarian Sector of Economy," No.177, dated 28 February 2001; and,
8. Decree of the Cabinet of Ministers of Ukraine "On Measures Regarding Fulfillment of the
National Program for Support of Small Businesses Development in Ukraine for the Year
2002."
In 2001, the process of reforming agricultural enterprises continued.  As of 1 October 2001,
there were 3,500 farms owned by individuals (single person enterprises), constituting over a quarter of
all private agricultural enterprises. The number of business partnerships grew to 7,500 (or 55.4 per
cent of private agricultural enterprises) while the number of agricultural co-operatives declined, as
compared with the end of 2000.   Additionally, 1,452 new private farms were registered in the course
of reforming collective agricultural enterprises.  The number of registered private farms reached 40.8thousand.
Issues relating to the sharing of property of the reformed enterprises (former collective
agricultural enterprises) are being resolved.  The Presidential Decree "On Measures on Ensuring
Protection of Ownership Rights of Peasants in the Course of Reforming the Agrarian Sector ofEconomy," No.62, dated 29 January 2001, provides for ensuring a possibility for each former member
of a reformed collective agricultural enterprise to obtain his property share of the reorganized
collective enterprise.  6,313,000 individuals have the right to a property share.  4.4 million or
69 per cent have obtained their certificates.  73 per cent of agricultural enterprises have determined
the amount of individual property shares of their members.
As of 1 October 2001, 54.1 thousand individuals had sold or otherwise disposed of their
property shares.  3.6 thousand of such individuals tr ansferred their property rights to other owners on
the basis of civil agreements.  Under mutual consent between individuals who own property and
enterprises, property was transferred to 7.5 thousand of agents of entrepreneurial activity on the basis
of lease agreements.  The value of the leased property is US$ 2.5 billion.
Privatization authorities, along with other governmental bodies, conducted significant work
on privatization of state-owned property in agricultur e.  Privatization of state-owned property is being
undertaken pursuant to the following legislativ e acts of Ukraine: the Law of Ukraine "On
Privatization of the State-owned Property", "On Peculiarities of Property Privatization in the
Agro-Industrial Complex, "On Property", "On Joint Stock Companies" and others.
Along with reforming property of agricultural enterprises, reforming property of processing
enterprises, agrarian service enterprises and construction in the agro-industrial complex was
undertaken.
As of today, 8,257 enterprises out of 8,964 enterprises of the agro-industrial complex (state
farms, processing enterprises, agrarian service enterprises and construction) are subject to
privatization, of which:WT/ACC/UKR/96/Rev.1
Page 5
- 6,980 (85 per cent) enterprises have been completely privatized;
- 1,020 objects of the agro-industrial complex are at the stage of completion of the
privatization process; and,
- 176 objects of the agro-industrial complex are at the stage of preparing privatization
plans.
As of 22 March 2002, among 2,540 state farms, eight enterprises were at the stage of
preparing privatization plans, nine enterprises had effectuated registration of founding documents as
well as securities and information on their issue, and 2,391 enterprises were either in the process of
selling shares or had completed that process.  Of this latter group, 2,316 enterprises were privatized
with over 70 per cent of their property privately owned, and, within this group, 2,013 enterprises were
100 per cent privately owned.
For fulfillment of the Presidential Decree "On Urgent Measures on Putting into Order
Activities of State (National) Joint Stock and Holding Companies," No.1049, dated
7 November 2001, the issue of reorganization of the State Joint Stock Company "Khlib Ukrainy"
(Bread of Ukraine) has been examined with a view  to changing the organizational structure of this
Company.  Currently, the State Joint Stock Company "Khlib Ukrainy" controls 81 granaries.  80 of
them are in the list of enterprises prohibited for privatization.  This constitutes only 14 per cent of the
total number of enterprises of the former grain storage and processing system.  The State Joint Stock
Company "Khlib Ukrainy" was not included in the List of enterprises which keep a monopoly status
on the national market.
All 443 enterprises, which store and purchase grain but were not included into the statutory
fund of the State Joint Stock Company "Khlib Ukrainy," are in the process of privatization.
As of 22 March 2001, the sale of shares of all 443 enterprises had commenced.  Completion
of privatization is in its final stage.  Thus, according to the information of the State Property Fund of
Ukraine, as of 1 May 2000, 401 enterprises were privatized with a sale depth of over 70 per cent (as
of 1 March 2002, the comparable number is 443).  As of 1 May 2000, 146 grain-purchasing
enterprises were privatized with the sale depth of 100 per cent (as of 1 March 2002, the comparable
number was 330 enterprises).
Main Priorities of State Agrarian Policy and Legislative Provision of further Reforms in the Agrarian
Sector
The following are the main priority directions  of further reforms in the agrarian sector.
1. Administrative reform:
- To improve the system of state management and regulation of the agro-industrial complex
in the direction of ensuring the needs of each individual for information and services, and
comprehensive support to the development of private initiative;
2. Land and property relations:
- To improve the regulation of land relations on the basis of the new Land Code of
Ukraine; expedite and simplify the procedure for issuing state deeds of private ownership
of land with the aim of creating a legal basis for development of the land market;introduce a unified system of property rights’ registration for real estate; improve
regulation of land and property lease relations; develop and implement a strategy on
protection and rational use of land for agricultural purposes in the process of completing
land privatization.WT/ACC/UKR/96/Rev.1
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3. Financial and credit policy in rural areas:
- To introduce the system of medium and long-term low interest credits for agricultural
enterprises of all types of ownership and activities;
- to develop alternative credit institutions, for example, credit unions and cooperative
banks; develop micro-credits;
- to create the normative and legal basis regarding risk insurance for agricultural activities;
- to extend possibilities of financial leasing and transformation of leasing into an effective
mechanism for the technical re-equipment of agricultural production; and,
- to stabilize the income of agricultural goods producers by introducing pledge  purchases
of agricultural produce.
4. Development of entrepreneurship and markets
- To expedite investment and innovation processes through legislative formation of a
favorable tax and investment climate and improve technologies available to agriculturalproducers;
- to create a system of agricultural advisory services and support associations of regional
land owners (Agrarian chambers) with the aim of protecting their social and economic
interests;
- to increase the concentration of the commodity  exchange market and put into order the
types of agreements made on commodity exchanges; and,
- to develop advertising and other marketing se rvices with the aim of improving the quality
of specialists’ training and effectiveness of scientific research and their implementation
into production practices.
5. Social policy in rural area:
- To work out a program of social development of rural areas, which should provide for
ways of resolving demographic issues, development of education, health protection,
housing construction; to improve the system of social protection of the rural population;
to approve programs for creating new jobs, employment and re-qualification; to develop a
program of improvement of general and professional education in rural areas.
6. Foreign economic activity
- To develop measures regarding support to export of agricultural produce, expand its
infrastructure and create favorable conditions for expansion of produce sold on foreignmarkets; and,
- to harmonize the national trade law according to the EU requirements (in particular,
regarding certification and standardization requirements).
Further, the following draft laws, which were drafted by the Government of Ukraine and will
come into force in the years 2002-2003, making the process of reforming the agricultural sector of
Ukraine irreversible:
- "On Amendment of the Law of Ukraine "On Collective Agricultural Enterprise" (it was
prepared for the second reading on 7 February  2002);
- "On Mortgage" (it was considered in the second reading on 17 January 2002 and it was
returned for the completion of its development );WT/ACC/UKR/96/Rev.1
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- "On Amendment of the Law of Ukraine "On State Regulation of Agricultural Produce
Imports" (the draft Law was submitted to the Verkhovna Rada of Ukraine on 22 February
2002.  It was registered for consideration on the Verkhovna  Rada of Ukraine);
- "On Amendment of the Law of Ukraine "On Quality and Safety of Food Products and
Food Raw Materials" (the draft Law was submitted to the Verkhovna  Rada of Ukraine.It was registered with the Verkhovna  Rada of Ukraine);
- "On Grain and Grain Market in Ukraine" (the Verkhovna  Rada of Ukraine approved it in
the second reading on 7 March  2002);
- "On Amendment of the Law of Ukraine "On Commodity Exchange (it was submitted to
the Committee of the Verkhovna  Rada of Ukraine in February 2002);
- "On the Agrarian Chamber of Ukraine (it is under consideration in the Verkhovna  Rada
of Ukraine);
- "On Amendment of the Law of Ukraine "On Plants Quarantine" (it was approved as a
basis for further development and prepared for the second reading); and,
- "On Amendment of the Law of Ukraine "On S eeds" (the Verkhovna Rada approved this
draft as a basis for further development).
The following draft laws are being developed:
- "On State Registration of Real Estate";
- "On Private Peasant Farms";
- "On Lands Protection".
Therefore, during 2001, the process of reforming property relations in the agrarian sector of
the economy continued.  Beginning in 2000, significant changes of property relations and forms took
place.  In the course of fulfillment of the Presidential Decree "On Urgent Measures Regarding
Acceleration of Reforming the Agrarian Sector of Economy," No.1599/99, dated 3 December 1999,the structure of non-state-owned agricultural enterprises underwent significant changes. Currently,
agricultural producers are represented by private and corporate forms, which occupy 97 per cent of all
agricultural lands of Ukraine (except for an insignificant number of state farms).
In the year 2001, further steps in the reform of enterprises in the grain-products system took
place. 100 per cent of grain-purchasing enterprises were privatized with a sale depth of over
70 per cent.
The results for 2001 confirm that creation of conditions for formation of a class of private
owners and the development of transparent market relations in the agrarian sector continues.
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