Agricultural Reform in Russia · A View From the Farm Level

This report begins with a summary chapter that presents background information on recent agricultural reforms in Russia followed by the main conclusions of a study on the changes. It states that Russia has had a formal program of land reform and farm restructuring in place since 1991, and that these reforms have produced a radical change in the distribution of land ownership: as of 1994, the state holds less than 20 percent of agricultural land, while the individual private sector accounts for 12 percent of farmland. The remaining 68 percent of agricultural land is in collective management, most of it divided into paper shares to individuals. The introductory material is followed by two general chapters that analyze the economic context of the reforms in Russian agriculture and provide a summary of the current legal framework. A presentation of the findings of a survey conducted between November 1993 and April 1994 is organized around three main groups of respondents: managers of large farm enterprises reporting on the reorganization, farm-enterprise employees discussing their participation in the reform process, and private farmers relating their socio-economic situation. The main topics covered in each chapter include land use and tenure during reform, production and labor in a changing environment, adjustment of marketing and supply channels to new conditions, farm finances, and changes in provision of and access to social services in the process of reorganization. The report states that after four years of formal reforms, the traditional agricultural enterprises remain largely intact, but with poorer economic outcomes. Low prices for agricultural products adversely affect theability of farms to generate earnings, and combine with poorly developed financial services to constrain agricultural recovery. The role of land markets in providing liquidity for farm enterprises is poorly understood, and the legal framework for land transactions is ambiguous and contested. The survey found that few shareholders express intentions to exit from the enterprises and use their land and asset shares to establish independent private farms because of insufficiency of start-up capital and unwillingness to assume the risks involved. Rural social services are deteriorating. Farm managers are cutting back on expenditures for social services, and there has been relatively little transfer of social assets to local governments, who have no budget to accept the financial and administrative responsibilities themselves. Russia ' s agricultural reforms have initiated important changes, but have not yet arrested the decline in sectoral performance and rural well-being. Accelerated development of land markets and other institutions that can deliver better marketing and financial services to agricultural producers, and thus increase farm earnings and rural savings, will be key to recovery and growth.