GOLDEN MEAN OF AGRARIAN REFORM

Indeed, the decree holds tremendous potential, although we cannot say it is timely. It is late by at least several years. The overwhelming majority of the collective agricultural enterprises are making losses and running up big debts today. Their equipment has almost completely worn out. They experience acute shortages of mineral fertilizers, a wide range of plant protection chemicals, fuel, and lubricants. Flouting state-of-the-art technologies and scientifically-approved sowing and harvesting methods is a regular occurrence. In other words, we see a sharp drop in the level of farm work, which in general has made it impossible to apply comprehensive techniques in the process of raising many agricultural crops (including sugar beets), and hence low harvests, high production costs of farm produce, high prices of foodstuffs, etc.

The presidential decree provides for the revision of some basic legal standards to reform the agrarian sector of the economy on the principle of the private ownership of land and property.

The peasants are being granted the right to freely withdraw from the collective agricultural enterprises, retaining the land plots and property shares belonging to them. On the basis of this, they can organize private or lease-holding businesses, agricultural cooperatives, economic associations, and other legitimate production entities largely based on leasing principles. The decree emphasizes the necessity to sign agreements and pay compulsory rent, when owners lease out their land plots and property shares to private, lease- holding, and other economic entities.

The presidential decree provides for a series of measures to complete the formation of an agrarian market infrastructure, in particular, the organization of commodity exchanges, wholesale markets, agrarian trade houses, procurement cooperatives, auctions, etc. These are to help market all kinds of agribusiness products and supply commodity-producers with the logistical resources and raw materials they need. In particular, this is of great importance for the sugar market, for it has a direct bearing on the performance of the beet sugar industry. It is envisioned for the first time that the balance sheets of agricultural entities will include the value of land they possess, which testifies to a genuine transfer of the agrarian sector to a market economy.

The presidentially initiated reform of the agrarian sector is good not only because it is socially and market oriented but above all because it is economically well-balanced: collective farms now provide only a third of the gross agrarian output, while 15% of private farmland provides 60% of the total agrarian product. The economic advantages are obvious.

We do not discuss here the constitutionality of this decree. What is important for us is that there is no alternative to the proposed version of reforms in the agro- industrial complex. At the same time we are worried whether the decree gives enough time to implement such decisive and comprehensive transformations.

For example, what about the creditor’s and debtor’s indebtedness of the former collective farms? Our worries are based on the fact that the problem of who will legally inherit the collective farms’ debts first of all because the material and technical resources supplied has not been settled in terms of legislation. Collective farms owe considerable debts to both state and private entities. It is an open secret that the future owners of the now collective property and land will be far from delighted if they get stuck with all this collective farm debt. It is also unlikely to stimulate peasant initiative.

This is also a most important and vital point for the Ukrintertsukor Joint Venture, which, using loans Germany gives under Cabinet of Ministers of Ukraine guarantees, imports into this country’s customs territory material and technical resources critically needed by our agricultural enterprises and sugar plants for growing the sugar-beet. The firm has brought here over the past four years 1,167 units of farming equipment, more than 1 million liters of plant protection chemicals, and 150,000 sowing units of high-quality sugar beet seed. It imports and utilizes all this on a contractual basis as part of joint production arrangements with 253 beet sowing enterprises and 54 sugar plants located in 17 oblasts of Ukraine. However, total debts of our agricultural partner enterprises to Ukrintertsukor alone has exceeded UAH 140 million, which corresponds to over 100,000 tons of sugar. These funds should go to the state budget, for they in fact are supposed to form the latter (see the law On the Budget), so we have borrow to pay current debts.

Unfortunately, we cannot say loan debts are fixed figures, especially if the loans were taken in a foreign currency. The Ukrintertsukor example demonstrates the point that on the day the Ukrainian government approved the project of advanced-technology sugar-beet raising (almost at the moment of receiving the respective hard-currency loan), the hryvnia/German mark exchange rate was UAH 0.71 per Deutschmark; now it is UAH 2.83/DM.

The exchange rate problems are only being exacerbated as time passes, and it is not clear how and at whose expense the accruing amounts will be covered. We think this should be of serious concern for not only the farm commodity producers, who have taken out hard-currency loans, but also for the executive authorities, who are also responsible for the ever-deepening financial and economic crisis in this country.

It is obvious to all that the formation of normal economic relations in the countryside is a fundamental condition for achieving the objective set by the President. There is an ocean of work here: mortgage banks, agrarian banks, positive interest of domestic bank capital in agricultural production, and many other things. We would like to believe that the new Prime Minister, Viktor Yushchenko, and his team not only understand the necessity of establishing effective economic relations in the countryside but can also offer a market-oriented solution of this problem.

We still have a chance to regain the leadership first of all on the food markets of CIS countries, which we in fact stupidly lost. This will require considerable effort and new approaches not only on the part of the agrarian sector but also of the structures that carry out the President’s foreign economic course. This will require making comprehensive and balanced decisions. But who will fulfill them? The Ministry of Foreign Affairs is involved in the economization of foreign policy. At the same time, the ministry directly responsible for the development of foreign economic ties is being dissolved, having existed for fewer than eight years. To activate its economy, any developing country, as practice shows, has to speed up the development of its foreign economic factor. How are we going to do this? By way of the second secretaries of embassies and former People’s Deputies co-opted by them? We so far see no other actors, for the Ministry of the Economy will be so cumbersome and hard-to-run in its new reformed version.

We are also worried about the short time span for market transformations in the agribusiness complex. The deadline to fulfill the presidential decree coincides with the beginning of spring farm work, and we can only hope the involvement of peasants in the organizational and bureaucratic solution of the problem will not undermine the spring sowing itself and not cause a poor harvest in 2000, which would in fact a great evil, one that could lead to a still greater disaster: the rejection of the very idea of market transformations in the minds of Ukrainian people, which will in the long run distance Ukraine from prosperity and wealth for many decades to come.

By Yevhen IMAS, president,
Ukrintertsukor Joint Venture,
Meritorious Economist of Ukraine,