Economic Policy Review ISSN 1313 - 0544

The Ban on the Purchase of Land by Foreigners – A Fictional Drama

Author: Nikolay Valkanov / 05.12.2013
Rate This Article:

A ghost roams trough the country during the past couple of days – the ghost of a foreigner who came to buy out the agricultural land of Bulgaria. From January 1st, 2014 the ban on sale of agricultural land to foreign citizens or legal persons (from EU or the European Economic Area – EEA) must be removed. There is a web petition stating: "Let us all get together and defend the legacy that several generations have shed their blood for and stop the sale and "give-away" of Bulgarian land to foreigners”. Under pressure from farmers and after consultations with the National Association of Grain Producers, Minister Grekov embraced the fervent appeal and made a formal interpellation to Brussels if the moratorium might be extended until 2020.

Who would benefit and who would lose from the moratorium’s extension?

In theory, Bulgarian farmers and domestic investors will gain. They expect a decline in the price of land caused be lower grain prices so they will be able to acquire plots without external competition. Respectively those who lose will be the landowners, who would like to sell their properties at a good price. Theoretically all food consumers will suffer from weaker competition as foreign investors have formal barriers to start agri business.

In practice, however, the whole drama is over exaggerated:

  • At present, no one can stop a citizen of the EU or EEA to buy and possess land in Bulgaria. Loopholes in the legislation exist – either for registered in Bulgaria companies or through inheritance. There are numerous examples of individuals and companies from other countries, which have been doing farm business in the country– using both leased and own land – Italians, Greeks, Chinese, etc.
  • There are a number of serious obstacles for doing agricultural business in the country – a fragmented land ownership, cumbersome and expensive procedures for getting water and electricity, lack of skilled labor force, lack of specialists, heavy bureaucracy and corruption pressure from the administration, cultural differences etc.
  • The ban in its current form applies only to individuals and companies from the EU and the European Economic Area, i.e. fears that "the Turks will buy us out" are groundless. Such apprehensions were behind the constitutional ban in 1991. According to the legislation, third-country individuals and entities are able to acquire property only under international agreement. It is a totally different question whether this part of the law is particularly appropriate to the needs of investments and technology in Bulgarian agriculture.

Anyway, if there was such a huge interest in the land, it would have been taken over in one way or another (we already pointed out the current loopholes) long time ago. Here we should recall the numerous attempts by previous governments to attract Qatari, Israeli and other investors to make agricultural business that all completely failed. The painful truth is that we are neither particularly interesting nor particularly attractive for doing business, even in a traditional field such as agriculture.