Changes planned for the law on foreign ownership of agricultural land

Many low-income Georgians can’t afford to buy lands, while an increasing number of foreigners are coming to start farming in Georgia
Georgia Today | 24.05.13 - 30.05.13

Changes planned for the law on foreign ownership of agricultural land

Amid outcries from local residents against the foreign acquisition of agricultural lands in several Georgian regions, some experts in the agricultural sector drafted recommendations to amend the Law of Georgia on the Ownership of Agricultural Land.

According to the draft bill, foreign citizens can buy only 2.5 hectares of agricultural land, which can be used only for agricultural purposes and must correspond to Georgian social and economic interests. Additionally, foreigners are authorized to own just a 49% share of the land, while the rest should be acquired by a Georgian citizen.

On May 16, at the Agrarian Issues Committee meeting, the changes and amendments to the law were denied considering the fact that the issue needs more research and study. The committee decided not to register the recommendation as a legislative initiative, but as legislative proposal.

However, according to Iveri Imedashvili, the Head of the Staff Office of the Committee on Agrarian Issues, the immediate letter was sent to the government to declare a temporary moratorium on the sale of land and take measures as soon as possible. “We are talking about private lands, as sale of state lands to foreigners is being ceased,” he noted. During the meeting, representatives of the Ministry of Agriculture, Ministry of Economy and Sustainable Development and the Ministry of Justice, stated that the sale of agricultural land to foreigners should be restricted, stopped or sold for just a long-term lease.

According to Gigla Agulashvili, the Chair of the Agrarian Issue Committee, those regulations should be considered cautiously. “The bill should not obstruct the investment sector and scare off potential foreign entrepreneurs,” he explained.

The ownership of land by foreigners was restricted by law until June 26, 2012, after which, the Constitutional Court of Georgia found “unconstitutional and invalid,” some norms prohibiting the purchase of agricultural land by a foreigner.

According to the previous law, a foreigner had the right to become the owner of agricultural land only if the land was inherited or lawfully had been owned by a person who had been a citizen of Georgia previously. At the same time, a foreigner was obligated to sell the land to a citizen of Georgia and/or a Georgian legal entity within the period of six-months after obtaining ownership of the land.

Critics of the current law believe that because the decision of the Constitutional Court of Georgia granted foreigners the possibility to buy lands, Georgian and foreign citizens have in fact found themselves under the same regulations. Their idea is that since many low-income Georgians can’t afford to buy lands, and in light of the increasing number of foreigners who have the wherewithal to start farming in Georgia, Georgian citizens are placed at a disadvantageous position.

Commenting on the planned changes to the law, Paata Koguashvili, one of the authors of the draft bill, said that the initiative doesn’t completely prohibit foreigners from buying Georgian land. “Many countries have some kind of quota stating that only a specific amount of land can be owned by a foreign citizen,” he noted, adding that their changes and norms are based on the constitution and the experience of “many developed countries.”

For instance, neighboring Turkey’s law on land ownership states that a foreigner can only buy 2.5 hectare land in Turkey with the consent from the Turkish Council of Ministers. In addition, Kazakh law grants foreign legal entities and citizens to own land designated for industrial and residential use and may rent all other categories of land; agricultural land can be acquired for a 10 year term. The recommendations state that foreigners that want to own agricultural land in Georgia should have legally lived in Georgia for 10 years, and have the corresponding education and 5 years experience.

According to the Kakheti Information Center, 15,000 hectares of land in the region has been sold to foreign citizens, among which, 9,000 hectares where bought by foreigners in Dedoplistskaro, Sighnaghi and the Sagarejo regions. This trend has triggered dissatisfaction among many locals, with some people even calling it an ‘invasion.’

For Georgia, agriculture remains an important yet declining sector in terms of GDP contribution. From 1991 – 2001, the World Bank estimated a contraction in agricultural production of 11% per year. In 2011, agriculture accounted for 8% of GDP, down from 8.4% in 2010 and 9.4% in 2009.

However, the sector still provides an important safety net for the rural population, with some 50% of the labor force employed in the sector. 95% of farmers are small farmers, typically cultivating around 1hectare of land and owning up to two cows and, as a result, yields and output are low.

Both Mikheil Saakashvili and Bidzina Ivanishvili see agriculture as a priority, though their visions of recovering the struggling sector differ: While the previous government favored a more liberal policy and would invite experienced foreign farmers to come to Georgia, the new authorities show more of a protectionist approach.

Fady Asly, the Chairman of International Chamber of Commerce, notes that foreigners are keener on investing in agriculture in Georgia than Georgians themselves. “If agriculture is the priority then prohibiting acquisition of agricultural land to foreigners can affect its development,” he explains, adding that the solution to this problem could be long-term leases for 15-30 years, while a 99 year lease in his opinion is too long.

The issue has triggered keen interest among the international media as well. Al Jazeera’s English web-page and The Guardian report that most of the foreigners who have acquired land in Georgia are Punjabi farmers and who in turn received the information from an Indian consulting company that Georgia’s lands are the cheapest and most fertile in the Caucasus region.

A promotional video is posted on YouTube showing the agricultural lands of the Kakheti region where an Indian citizen talks about the privileges of Georgian land and the cheap workers. The video also provides information on who to contact.

Additionally, Crown Immigration Consultancy Services and its subsidiary Crown Land Developers and Builders LLP, promote Georgian agricultural land in India via its web-page and offices in Tbilisi and several regions of India. A flashy banner on their site catches your eye and informs that one can buy one acre of land for only $890, which is approximately a 4,047 sq. meter area. The Guardian reports that the Punjabi farmers are paying $950 for each hectare for a 99-year lease, which is much less then in their native country.

“I would say that currently Georgian law on ownership is not clear, as some Georgian and foreign investors have faced problems when they bought lands in the past. Apparently, those lands were not subject to sale. This needs to be clarified before the government decides to lease the land or to sell the land,” said Asly.

By Baia Dzagnidze

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