Home pageAdvanced searchIndexe-mailAdd to favorites
Books by Grigory Yavlinsky
Economics and Politics in Russia
The Center for Economic and Political Research (EPIcenter)
Nizhni Novgorod-Moscow, 1992

4.1 Entrepreneurship and Property

4.1.6 Projected Privatisation of Collective and State Farms


Recommendations for the formation of major private agricultural producers

[previous] [CONTENTS] [next]


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.


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.


[previous] [CONTENTS] [next]