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What Harm did Moratorium on the Purchase of Agricultural Land by Foreign Nationals Inflict on Georgian Economy?

According to the non-governmental organization “Transparency International”, the Constitutional Court of Georgia considered unconstitutional the Parliament’s decision to ban the sale of agricultural land.

Basis for the judgment was NGO’s lawsuit over Parliament’s decision that violates the rights of individuals and thefreedom of entrepreneurial activity.

“The court decided that the suspension of the right to alienatethe land, even temporarily (the moratorium was in effect until the beginning of 2015), does not correspond to the Constitution of Georgia and the decision should be abolished” – says the decision of the Constitutional Court.

Moratorium on the purchase of land by foreign citizens in Georgia was adopted in July 2013 and will expire on December 31, 2014.

Basis for the decision was the Government’s intention to develop a unified state policy in relation to land, land registry, and generally create single and transparent rules for land use.

Supporters of the ban argue that there was danger of unsustainable land privatization, which in turn would be reflected poorly on the environment and security of the country, although it is not specified exactly what kind of dangers it involves.

What can be said quite clearly is the fact  that the moratorium has had a negative impact on the investment climate in Georgia.

In the first place there was uncertainty because no one knows what will be the common land policy, accordingly, there is a risk that the ban will be extended – and this is not conducive to attracting investment.

Investors , who have already purchased the land and would like to expand the business, also  face  serious problems,many are forced to sell the already purchased land – it causes serious discontent among investors.

It should be noted that the restrictions on the purchase of land by foreigners operate in many countries, although most of them are the  countries  in transition – mostly members of the European Union, which are trying to protect the agricultural sector from the complexities associated with the union with several countries – such as the difference in land prices, which creates a non-competitive environment.

Such restrictions exist in the Czech Republic, Hungary, Estonia, Lithuania, Latvia, Poland and Slovakia – they are not the same everywhere – for example, in Poland, foreigners can buy land only if married to a citizen of the country and live inPoland for at least 2 years. Limitations also apply to domestic companies with foreign capital.

 In the Czech Republic  a similar system operate, the only difference is  in term of residence- in this country  it  makes  3 years.

In Estonia, the emphasis is laid on the area of ​​land – 10 hectares of land foreigners can buy without any restrictions,buying more than 10 hectares by  the same rules as in the Czech Republic and Poland.

NGO “Transparency International” believes that development of cadastre and rights of land use should not interfere with the economic interests of the country.

“The most important task of the government  is to attract investment. In addition, it should be noted that a significant part  of arable land is left untreated in Georgia, respectively, a ban on the sale of land is not appropriate “- say in theorganization.
According to Chairman of  Parliamentary Committee on Sector  Economy Zurab Tkemaladze, the decision of the Constitutional Court was hasty.

 “The Constitutional Court did not give Parliament or the Government time to develop a law on land use during the periodof the moratorium. The court ruled in a situation where Parliament is on vacation, and elections are held  in the country .With regard to the land issue, the state should have the ability under the law to limit the right to purchase agricultural land “- he notes.