4.1 Entrepreneurship and Property
4.1.6 Projected Privatisation of Collective
and State Farms
Recommendations
for the formation of major private agricultural producers
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There have been numerous attempts to create
a cooperative
network of large private farms by reorganizing collective
and
state farms within the framework of current legislation.
However, many farms simply "change
their signs" in order to
obtain tax breaks and subsidies: exemption from land tax,
5%
insurance and pension tax from the consumption fund,
compensation for credit payments from the budget at annual
interest rates of over 8%, etc.
The essence of the proposals comes down
to the elaboration of
systematic recommendations for the reorganisation of farms
into
associations of agricultural enterprises which actively
utilize
an effective infrastructure. (The proposals are based on
plans
elaborated at the Russian Agricultural Academy's Agrarian
Institute under the leadership of V.Y. Uzuna (Ph.D. Econ.)
and
experts from Rostov Oblast).
The one-time, complex transformation of
a farm into an
association of agricultural entrepreneurs includes:
- the formation of an integral structure
from the newly created
enterprises (peasant farms, production and service
cooperatives, small businesses, joint stock companies, various
types of partnerships, and associations of agricultural
entrepreneurs);
- the allocation of land, assets, financial
means, and credit
indebtedness to the newly created enterprises, and the transfer
of separate entities to the municipality;
- the division of the balance sheet of the
transformed farm,
and the establishment of balance sheets for the newly created
enterprises; and
- the legal registration of the new enterprises,
and the
liquidation of the previous farm.
The structure of the new enterprises includes:
- peasant farms created on the basis of
the land and property
shares of the members of one family or close relatives.
These
may include bought or leased shares of other workers of
the
farm;
- partnerships for joint cultivation of
the land. If several
legally independent peasant farms are created to replace
the
team or leasing group, then they may formally or informally
unite into such a partnership;
- production cooperatives based on large
entities, which cannot
be broken up into peasant farms without a loss of efficiency.
These include cooperatives to sell produce, for material
and
technical supplies, for the processing of produce, repair
and
techni cal services, transport services, construction and
financial services.
The material basis for the creation of such
cooperatives
consists of the equipment, technology, and premises of the
previous production structures of the collective and state
farms. Workers employed there earlier may choose to set
up
joint stock companies, partnerships, and private enterprises
based on this, using their own shares. They may also become
employees of the cooperatives created by the private farmers.
The enterprises are united into an association of agricultural
entrepreneurs. The material base of the
association includes the buildings, technology, and equipment
formerly used by the administration of the collective or
state farm. Membership in the association is voluntary for
all enterprises created to replace the public farm. In this
connection, one or several associations may be created in
place of a single collective or state farm. The association,
as the coordinating body of the newly created enterprises
and organisations, will ensure a gradual transition from
an administrative system of farming to sectoral unions of
peasant cooperators. During the initial period, usually
of up to 5 years, participation in the association by the
newly created enterprises may be made compulsory. The aformentioned
structures cannot be created without a legal registration
of the redistribution of shares.
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The procedure for the allotment of land
and propertys to the
newly created enterprises must include:
- the division of the land and property
into shares;
- applications from all the shareholders,
indicating their
recommendations for the use of the land and property shares;
- the determination of the list of newly
created enterprises;
- the purchase, sale, exchange, and leasing
of the land and
property shares;
- applications from the managers of the
newly created
enterprises for membership in the cooperatives, with an
indication of the size of the share contributions; and
- a division of the land and assets in kind,
and their
allocation to the newly created enterprises.
The key element of the system of interrelated
large
agricultural and contiguous private production units involves
the coordination of their economic interests. To this end,
negotiations are held and agreements are
concluded on the
leasing of land and prop erty shares. The newly created
enterprises come to an agreement regarding the exchange
of land
shares for assets shares, or vice versa. The exchange is
effected either at the nominal value (a rouble's worth of
arable land per rouble's worth of assets), or the terms
of the
exchange are determined by the consent of the parties.
When dividing the assets, one must at all
costs retain the
technological integrity of the resources allocated to the
separate enterprises, i.e., to transfer the livestock along
with the related premises, the workshops along with the
equipment, the grain s torehouses and threshing floor along
with the related sorting and loading machines, etc. Retention
of the technological integrity could mean that certain
enterprises receive assets, worth more than their the shares,
and that other enterprises receive conversely less. Hence,
the
need to sell, buy, lease or exchange shares could arise
again.
If the value of the assets actually obtained does not
correspond to the value of the shares, then the indebtedness
must be registered as a credit. The crediting terms are
determined by agreement with the debtors.
The commission for the reorganisation of collective and
state
farms must prepare the following: - reports on the general
meeting of workers of the collective or state farm, on the
approval of the sizes of the land and property shares of
the
workers, approval of the division of the farm into separate
peasant farms, partnerships, and cooperatives, and on the
organisation of the association and the approval of its
Charter; and - a plan for the organization of the use of
the
land prior to its division, and the balance sheets of all
the
newly created enterprises, including the association. Documents
are prepared for registration at the office of the executive
committee of the regional council.
For peasant farms:
1. State deed of land ownership, and contracts
for the leasing
of the plots of land.
2. Applications for the registration of
the peasant farm.
For partnerships and cooperatives:
1. Extracts from the minutes of the constituent
meeting or the
constituent agreement.
2. Applications for the registration of
the partnership or
cooperative.
3. The charter.
For associations of agricultural entrepreneurs:
1. The constituent agreement or excerpts
from the minutes of
the constituent meeting.
2. Applications for the registration of
the association of
agricultural entrepreneurs.
3. The charter.
The Charter is the main regulator of the
relationships between
members of the association. It regulates the rights,
obligations, and liabilities of the members of the association,
and includes the goals and tasks of the association, the
rights, obligation s, property and liabilities of its members,
the management of the association, and the terms for the
cessation of its activity. Agreements on loans of property
shares (monetary funds), of land shares, or of property
may be
concluded between members of the association (or pensioners
and
members of the association). Such agreements stipulate the
size
of the loan, the terms for repay ment of the rent, the interest
on the credit to the borrower, and the duration of the lease.
The agreements may be concluded both between individual
members
and between associations as a whole. All agreements must
be
registered at the association council, which assumes the
responsibilities of arbiter in cases of dispute or violation
of
an agreement. The association's Charter stipulates the
application of various sanctions for breaches of agreeme
nts.
It is advisable in the administrative procedure to limit
the
potential of transfer of ownership of land to pensioners,
but
at the same time strengthen the mechanisms of compensation
and
indexing for this category of individuals. It is also necessary
to el aborate a clear mechanism (e.g., like the labour
participation coefficient) to increase the land and property
shares of the chairman (director), specialists, and team
leaders. In terms of economic measures, one should consider
the
expediency of introducing or increasing the land tax for
private farms, the accumulation of these and other funds
in
regional land banks in a bid to buy land from peasants who
cannot efficiently use t he land, with the consequent transfer
of the lamd first into leasing, and then its sale (by
instalments) to more efficient farmers.
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