Transcript 200543163640166

Transformation,
Restitution, Privatization
in Agriculture
Prof. Ing. Jiří Tvrdoň CSc.
Characteristics of development of agriculture till 1989
The installation of a communist dictatorship after 1948 meant the
beginning of conscious discrimination against and destruction of natural
relationships in the agricultural sector. This sector, based on a wide
spectrum of private-ownership relation and entrepreneurially organized,
was the outcome of long-term and stable development which had started
with historical changes in the mid-nineteenth century. Agriculture at that
time, based on a farming class, had over the century built up a very
progressive framework. The communist regime severed this continuity, of
development, liquidated everything that had been linked with previous
ownership relations and entrepreneurial structure ans instead of the tried
and tested market economics established a centralized, planned system of
the Soviet type. The basic instrument of the regime collectivization, which
took place in several waves (1950-1952, 1955-1959) and the forcible
concentration of production in unmanageable organizational units after
1970.
In addition to the establishment of concerns of a formally cooperative character (essentially similar to the Soviet "Kolhoz")
the state to a large extent managed to carry out the
misappropriation of farmers' property and its restructuring in
the form of large state-owned farms.
After 1966 there were signs of a relaxation of directive forms
of management and a gradual extension of market relations,
but the Soviet occupation and subsequent "normalization"
policy arrested this process.
Gross agricultural production in 1980 had grown by 21.6% in
comparison with 1970, but the surplus of agricultural products
was supplied to the former USSR and Soviet armed forces for
inflated payments. The rise in agricultural production,
however, elicited a disproportionate subsidy for agriculture
from the state budget.
The main consequences of the period 1948-1989 for agriculture can be
summarized as. follows:
a) the liquidation of farmers as a class, of private ownership relations and
the whole entrepreneurial structure,
b) the establishment of a collective and state-managed form of organization
of production, expressed in the alienation of the farmer from the land and
other property and his transformation into a waged employee,
c) the liquidation of the best farmers - these were branded as 'kulaks' and
driven from the villages, and often physically attacked,
d) the creation of a confused situation in relation to property right relations,
which is now hampering the process of restitution,
e) the creation of marked overproduction of food at massive subsidies and
economic losses. This overproduction covered not only food selfsufficiency within the republic but also supplies of food for export. To a
significant extent this was a matter of export to eastern European countries
and meeting the needs of the foreign armed `forces on Czechoslovak
territory,
f) the establishment of centralized production-technical base in
agriculture, especially through the amalgamation of strips of land,
the construction of high-capacity facilities for breeding farm animals,
and the merger of primary production enterprises in agriculture,
g) the progressive emergence of new generations of workers in
agriculture, who obtained higher qualifications but who entered the
production process with concepts of labour and agriculture that had
crystallized in socialist conditions,
h) change in the form of agricultural management brought a series of
predominantly negative influences to bear on the countryside,
i) One of the- biggest negative consequences is the global orientation
of the education and training of young people to the socialist form of
management in agriculture. This has created deep-rooted mental
tendencies which can only be changed over a long period (e.g.
waiting for directives from above, lack Úf independence In decisionmaking etc.)
Summary of Changes 1990 - 1993
In the centrally directive system, agriculture was one of the
sectors given strong preference, and this was the reason for
its disproportionate size and low efficiency. The transfer to
a market economy has meant heavy pressure on agriculture
to adapt, in terms of size, structure and performance, to the
new economic conditions and market possibilities.
Material Aspects of the Changes:
the hinge of reform was the settlement of legal property
relations in agriculture.
This involves three processes:
1) Restitutions. On the basis of upheld claims there have been
246,000 of these, of which 88,000 have related to state-owned
farms - there is no figure comparable in other sectors
agricultural property in state-owned estates to the value of 13.7
billion Kč has been returned.
2) Privatization. 971 state concerns and state limited companies to
the value of 155.5 billion Kč (after subtraction of property not
subject to privatization, property designed for restitution and
restitution compensation payments). Was privatized.
The progress of privatizing agricultural primary production
concerns was partialy down by restitutions. The unprivatized
property of farms in direct state ownership was leased pending
privatization
While the decision on how to privatize was made centrally for each
SOE, everybody was free to draft a „project" for a company
proposing the application of one or more privatisation methods.
Large-scale privatisation thus amalgamated decentral (drafting of
projects) and central (decision making) elements. Privatisation
projects could cover one or more of the following standard and nonstandard methods:
1. public auctions or tenders,
2. direct sales to predetermined buyers,
3. free transfer to municipalities or social securities bodies and
4. transformation into joint-stock companies and subsequent
distribution of shares (e.g. through the voucher scheme or standard
methods).
3) Transformation. This entailed the transfer of the property of cooperatives into the private ownership by legal and natural entities.
1205 co-operatives with a total area of 2.55 million ha. of land and
an average area of 2,117 ha. have undergone this transformation As
a result 1,658 new co-operative or commercial subjects have come
into being, managing 2.33 million ha of agricultural land with an
average of 1,408 ha.
The number of workers in agricultural co-operatives fell to 180,000
by 30 Sept. 1993, and this represents a fall of 16.7% from the
beginning of 1993:
By 30 Sept. 1993 entitled persons had been compensated for the
loss of property to 66%, representing property of 12.7 billion Kč.
Transformation of collective farms
-- to leave the property in the transformed co-operative and
remain or become a member of the co-operative, leasing their
land to the co-operative;
-- to leave the property to be used by the transformed cooperative
on a rental basis (the owner is not a co-operative member);
-- to withdraw 2 the property from the use of the co-operative and
operate it as an individual farmer, or as a group of farmers
forming a new agricultural enterprise; or
-- to withdraw the property from the use of the co-operative and
lease it or sell it to another enterprise in agriculture (individual
farm, corporate farm or other co-operative).
The most important and sensitive phase of collective farm
transformation was the transfer of collectively-owned property. This
property was essentially the additional assets accumulated over the
years of the collective farm. For all collective farms, a
transformation plan had to be drawn up and approved by a majority
of persons concerned. These included:
-- members of co-operatives, if they were members before 30
November 1991;
-- owners of land and owners of other property (to an accounting
value greater than CZK 30 000) used by the co-operatives, provided
they applied for ownership within three months of the
transformation law coming into force.
In these plans, the net asset value of the collectivelyowned property of the farm (which excluded all land and
other privately-owned property that had originally been put
into the co-operative) was calculated in accordance with
the latest quarterly financial statement preceding
presentation of the transformation plan. For this calculation,
account was taken of such items as debts, the value of
holdings in joint agricultural companies, investment
liabilities and a provision for outstanding property
restitutions. The result was the modified net asset value.
25 per cent of this amount was offered to members in the form
of shares for sale at what was assumed would be an attractive
price, but very few shares were sold. Any shares not taken up
were returned to the share pool. All remaining shares in the
pool were then distributed to individuals according to the
following criteria:
-- 50 per cent in proportion to the area of land originally put
into the collective farm;
-- 30 per cent in proportion to the value of other property
originally put into the collective farm;
-- 20 per cent in proportion to the number of years worked on
the collective farm by members or workers.
The number of co-operatives increased by 40 percent, but
the land area used by the co-operatives fell by 11 percent.
The average area of a collective farm before transformation
was 2 130 hectares; immediately after transformation, the
average area of a transformed co-operative was 1 360
hectares.
At the start of the process, it was expected that most
collective farms would be transformed into business entities
as private individual farms rather than into new co-operatives.
So far, this assumption has proved to be wrong, as the
majority of members of the original collective farms decided to
adopt the new co-operative form.
b) The excess of supply over demand dating from the 1980s was the basic
problem of agricultural primary production at the beginning of the
transformation.
There was a fundamental fall in the entire market with eastern European
countries.
From the beginning of 1993 the volume of trade with the Slovak Republic
decreased. This was particularly marked in relation to the supply of traditional
commodities - sugar, potatoes, meat, and dairy products.
At the same time the food market in the Czech Republic contracted. This
occurred as a result of several reform measures which influenced prices: the
removal of negative taxes on turnover, the liberalization of prices, the
withdrawal of consumer subsidies in other fields, change in the system of
taxation. Self-supply of food among consumers increased. Meanwhile habits in
food-consumption remained entrenched.
c) There has been major change in the dimensions of agricultural production.
By 1992, in comparison with 1989, the number of workers in agricultural
production had fallen by more than 43%, the value of the basic products in
purchase prices has decreased by cca 10%, and numbers of livestock have
fallen, especially cattle (by 15.7%).
d) An important negative influence on the income situation has
been the pre- privatization effect of state enterprises, an effect
which is still widespread, especially in relation to state-owned
estates.
e) The influence of differential yield on the restructuring of
agricultural primary production has so far been to a considerable
extent masked by movements in supply and prices. It is, however,
already beginning to have a discernible effect on contributing to
changes in the distribution of production
f) Significant currency devaluation has had a fundamental effect
on the price of imported inputs. Agnculture has not been able fully
to exploit the opportunities for improving exports which have
been provided by devaluation. This is
because of protective measures (import quotas and compensatory
subsidies, reference and threshold prices) by the importer states,
especially the states of the European Community.
g) The interest rate has risen sharply. New credits are not easily
accessible for agricultural producers. They are provided maximally
for the middle-term. Longterm loans do not exist.
h) Another partial factor has been the influence of the government of
the CR's radical reduction of duties and subsidized on a range of
commodities, for example, starch, fruits. Competition from imported
subsidized products has put substantial limits on the sale of local
industrial potatoes, including industrial seed potatoes. Reduction in
production of the market has not been accompanied by any
equivalent response, particularly from European Communities. Their
protective policies in agricultural commodities have prevented us
from exploiting the advantages of the radical devaluation at the
beginning of our economic reforms for the export of agricultural
surplus.
The worldwide economic recession has also had an impact on
traditional, areas of production and the processing of agricultural
products (e.g., wool),
i) The social and demographic dimension has also seen
striking changes from 1989 to 1993. In comparison with the
starting year 1989, when the average number of registered
workers employed in agricultural primary production concerns
was 531,000, there was a marked fall - in 1991 to 403,000, and
in 1992 to 300,000 persons. In addition in 1989 there were
approximately 60,000 workers employed in secondary
production, and these are not included in the figures given
above.
1. State of Czech Agriculture as of December 31, 1995
Czech agriculture became stabilised in 1995, the decline of agricultural
output was stopped and it experienced a revival.
The growth of national economy continued in 1995 and created a space for
the growth of agriculture while maintaining its share on GDP.
The 1995 developments in the Czech economy confirmed that the period of
adjustment accompanied by the decline of economy in the first four years of
transformation had ended. The transition has started to economic growth with
macroeconomic structural adjustments reflecting the requirements of the gradual
integration of the Czech Republic among developed countries. The growth has
taken place in an acceptable social environment. For the first time since the
beginning of transformation, gross agricultural output experienced an increase
compared to the previous year.
In 1995, agriculture accounted for 3,1 % of GDP, 4,6 % of total employment in
the civilian sector of national economy, 5,6 % of investments by entrepreneurial
sector and 3,7 % of total credits. The macroeconomic importance of agriculture is
substantially higher when measured by the share of household expenditures spent
on food, which is still some 30 %.
Ownership changes in agriculture have been mostly completed
As of December 31, 1995, the Land Fund of the Czech Republic
ilnplenlented 406 of the total of 422 approved privatisation projects
for state agricultural enterprises. Of the total of 316 state farms and
similar state enterprises operating on agricultural land that had
entered the privatisation, 161 were dissolved as of December 31,
1995. By the same date, the Land Fund was renting to leaseholders
937,293 hectares of agricultural land and other state owned
immovable assets in the value of CZK 15 billion. The share of settled
restitution claims in agriculture increased from 57,8 % on December
31, 1994 to 81,9 % on December 31, 1995. The remaining 18,1 % of
restitution claims are subject to legal proceedings or to a complicated
process of entitlement documentation.
Adjustments in the structure of agricultural businesses
continued through 1995
There was an increase in the number of farms run by natural
persons (by 9,1 % according to the Register of economic
subjects) and in the number of corporate farms (by 14,2 %). A
decline continued of the number of state farms and cooperatives. State enterprises operate 1,7 % of agricultural
land. Private sector operates 98,3 % of agricultural land.
1995
A high share of leased land is a characteristic feature
Leased land accounts for 95 % of the total land farmed by
entrepreneurial subjects, including bigger sized natural persons
(above 500 hectares).