Rural property to be concentrated
President Leonid Kuchma has instructed the Cabinet of Ministers to study his draft decree On Protecting the Proprietary Interests of Peasants During the Reform. This document marks out the second stage of the agrarian revolution in this country. It is clear even now that, in terms of the expected transformations, it will be as important as the first stage, when all Ukrainian collective farms were disbanded two years ago, with property being distributed among peasants. Most probably, the document will take effect very soon. Pavlo HAIDUTSKY, chief of the Main Department of Economic Policies in the Presidential Administration, looked quite determined when he was explaining the decree’s details.
“In what way is the new decree going to protect the proprietary interests of peasants?”
“This document is aimed at concentrating rural property. The decree encourages the founders of agrarian businesses to buy property certificates from former members of the collective farm, peasants.”
“In other words, the state encourages concentration of property rights in the hands of an enterprise manager only?”
“In fact it does. This kind of mechanism would be more effective.”
“Will this infringe the interests of simple peasants?”
“Peasants are interested in high performance of their farm. For the time being, the property certificates of peasants are under lease with the farm manager, i.e., the entrepreneur. But the latter cannot pledge his property, he does not feel he is a full-fledged owner. The peasants are also unaware where and what exactly their certificates are. This transitory and abnormal situation only hinders effective work.”
“Do you think the countryside will immediately work more effectively once property is concentrated in the hands of farm managers?”
“Yes, and there is proof of this. In 1999 Ukraine was still under the collective farm (kolhosp) system. That was financially a totally losing sector. In 2000, when a known decree changed the structure of property in farms, the sector registered 9% growth in output and a UAH 1.4 billion profit in only one year. But while earlier 11,000 kolhosps had 6.5 million peasants as formal founders, latest reports say only 100,000-150,000 people are founders of agrarian enterprises in Ukraine. In other words, this economic effect was achieved owing to the concentration of property with an effective owner or, in fact, in the hands of former kolhosp chairmen. The latter account for 75% of current farm managers. Although the same people have stayed behind, effectiveness has sharply grown. Even now, 60% of farms have one to three founders, 25% up to ten, and fewer than 25% up to 100 founders. The result is quite obvious because we have allowed the former kolhosp chairman to feel that he is now a true owner interested in his work. This trend should be further developed, and the decree will help to do so.”
“Are farm managers themselves prepared to become full- fledged owners and buy out the leased property certificates?”
“The idea of the decree was supported at the March 11 All-Ukrainian Agrarian Conference attended by 11,000 farm managers. Consultations with them showed this should be done. The managers are prepared to raise the funds, buy out those certificates and arouse interest in peasants. But both the former and the latter ask whether this is a legitimate government policy, they are afraid this can be interpreted as an unauthorized practice and will involve all kinds of inspections. But a government-approved presidential decree will openly allow all this. Following this, a farm manager will be able to make free and firm decisions and be guided by his financial potential only.”
“What incentives does the decree envisage to concentrate rural property?”
“The main thing is that we will proclaim government support for this. No special incentives are planned. Yet, it is intended to explore the possibility of lifting the VAT on sales. This question is still under study. We must remember that both the peasant and the owner stand to gain from this. As the buyout will be carried out mostly by private entrepreneurs, it is still unclear whether there will be a question of the VAT. There can be some VAT because the buyer is a farm. This is still being studied.”
“Does this mean the decree will perhaps compel parliament to make amendments to the law on the VAT?”
“Yes, this can only be decided under the law.”
“How would you, as the Presidential Administration’s chief economist, assess the new lineup of the Ukrainian parliament?”
“My first impression is this will be a more economically minded parliament. I see more experts and practical economist in it. Very many new deputies already have experience of working in the economy. Whether these people worked in government bodies or in corporate administration, they are much more experienced than their predecessors.”
