Land & Eu Accession
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LAND & EU ACCESSION LAND & EU ACCESSION REVIEW OF THE TRANSITIONAL RESTRICTIONS BY NEW MEMBER STATES ON THE ACQUISITION OF AGRICULTURAL REAL ESTATE JOHAN F.M. SWINNEN AND LIESBET VRANKEN CENTRE FOR EUROPEAN POLICY STUDIES (CEPS) BRUSSELS The Centre for European Policy Studies (CEPS) is an independent policy research institute based in Brussels. Its mission is to produce sound analytical research leading to constructive solutions to the challenges facing Europe today. The views expressed in this publication are those of the authors writing in a personal capacity and do not necessarily reflect those of CEPS or any other institution with which the authors are associated. This study has been commissioned by and prepared for the Internal Market and Services Directorate-General of the European Commission under contract ETD/2006/Internal Market/F1/57. The European Community holds the copyright of this study (which is also available from the European Commission’s website at http://ec.europa.eu/internal_market/capital/reports/index_en.htm). ISBN: 978-92-9079-827-9 © Copyright 2009, European Community All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means – electronic, mechanical, photocopying, recording or otherwise – without the prior permission of the Centre for European Policy Studies. Centre for European Policy Studies Place du Congrès 1, B-1000 Brussels Tel: 32 (0) 2 229.39.11 Fax: 32 (0) 2 219.41.51 e-mail: [email protected] internet: http://www.ceps.eu CONTENTS Preface & Acknowledgements................................................................................... i Executive Summary ................................................................................................. iii 1. Introduction .........................................................................................................1 2. Conceptual framework........................................................................................2 3. Legal restrictions maintained by the new member states on the acquisition of agricultural land by foreigners...................................................4 3.1 General nature of the restrictions....................................................................4 3.2 Country-specific restrictions...........................................................................4 3.3 Actual foreign land ownership......................................................................13 4. Ownership restrictions and land markets .......................................................15 4.1 Land sales versus rental transactions............................................................15 4.2 The efficiency of land sales and rental transactions .....................................17 4.3 Land tenure and farm structures ...................................................................20 4.4 Property rights imperfections, transaction costs and (other) legal restrictions ....................................................................................................24 4.4.1 Unfinished privatisation .....................................................................24 4.4.2 Unknown ownership and co-ownership .............................................26 4.4.3 Transaction costs ................................................................................27 4.4.4 Other costs..........................................................................................28 4.4.5 Other legal restrictions .......................................................................28 4.4.6 Summary ............................................................................................28 5. Foreign investment, market imperfections and land......................................30 6. EU accession and NMS-7 land markets...........................................................32 7. Evolution of land markets in the NMS-7 and comparison with the EU-15............................................................................................................35 7.1 The development of land sales and rental markets .......................................35 7.1.1 Land sales...........................................................................................35 7.1.2 Land rental..........................................................................................38 7.2 Trends in land prices.....................................................................................39 7.3 Changes in land contract terms.....................................................................52 8. Socio-economic structure of the agricultural sector: Development and comparison with the EU................................................................................... 54 8.1 Unemployment and GDP............................................................................. 54 8.2 Share of agriculture in employment and gross value added......................... 54 8.3 Labour productivity ..................................................................................... 59 8.4 Yields and land productivity........................................................................ 63 8.5 Summary...................................................................................................... 65 9. Conclusions........................................................................................................ 68 Glossary of abbreviations........................................................................................ 72 Bibliography............................................................................................................. 73 Appendix I. Data sources ........................................................................................ 76 Appendix II. Additional tables ............................................................................... 78 About the authors .................................................................................................... 89 PREFACE & ACKNOWLEDGEMENTS his publication represents the final report of a study carried out on behalf of the European Commission, Directorate-General for Internal Market and TServices under contract ETD/2006/IM/F1/57. The study draws substantially from background country reports by Jerzy Wilkin and Jan Falkowski (Poland), Jan Pokrivcak and Pavel Ciaian (Slovakia), Tomas Doucha and Ladislav Jelinek (Czech Republic), Raul Omel and Rando Varnik (Estonia), Daina Saktina and Sarmite Barvika (Latvia), Istvan Feher and Szabolcs Biró (Hungary), and Pranas Aleknavicius and Marius Aleknavicius (Lithuania). Pavel Ciaian provided important additional input on the conceptual framework and data analysis. Eleni Kaditi contributed valuable assistance with the management and administration of the study. Overall guidance and comments on the design and approach of the study were provided by European Commission officials at the Directorate-General for Internal Market and Services, the Directorate-General for Agriculture and Rural Development, and Eurostat. None of the previously mentioned experts or officials is responsible for the content of this publication. The opinions expressed in this study and the analysis and arguments are the sole responsibility of the main authors, Johan F.M. Swinnen and Liesbet Vranken. | i EXECUTIVE SUMMARY fficient land transactions and a functioning land market play an important role in economic development and growth. The exchange of land, including the Epurchase of land by foreigners, will improve productivity, enhance access to capital, technology and knowledge, and hence stimulate economic development. These insights underpin the principle that accession to the EU implies the integration of the accession countries into a single free market, also with respect to land. During the negotiations for the 2004 accession, however, candidate countries requested the possibility to maintain existing national provisions restricting the acquisition of agricultural land or forests by foreigners. They considered these derogations necessary in order to protect the socio-economic agricultural structure of the countries from shocks that might arise from the differences in land prices and incomes with the rest of the Union, and from the problems in the local rural credit markets. The combination of these factors was expected to lead to a massive sale of land to foreigners. Seven new member states – the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland and Slovakia (hereafter the NMS-7) – were granted transitional periods during which they could maintain existing provisions of their legislation restricting the acquisition of agricultural land or forests, in derogation of the freedom of capital movement. In that context, a mid-term review of the transitional measures was stipulated, to determine whether the transitional periods should be shortened or terminated. This study reviews these transitional measures and their impact. The following restrictions are in place: • After accession to the EU, foreigners generally cannot purchase agricultural land for a transitional period in the NMS-7. • The transitional period is 7 years for the Czech Republic, Estonia, Hungary, Latvia, Lithuania and Slovakia, and 12 years for Poland. • There are differences among the NMS-7 in the implementation of these restrictions, for example in the way ‘foreigners’ are defined in the legal restrictions, and in the conditions that foreigners have to fulfil in order to (exceptionally)