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Russia: The Difference Privatization Makes Three Years Later

  • Robert Lyle

Redkinskoye, Nizhny Novgorod, 29 April 1998 (RFE/RL) -- This is the third spring that the Vozrozhdeniye (Rebirth) private farm enterprise has been on its own -- broken off in one of the first farm reorganization distributions from the old Redkinskoye collective farm that sprawled across 11,400 hectares in Borsky rayon.

Thirty-Six year old manager Sergei Serov, who led the group of 190 members out of Redkinskoye in early 1996, says the group hasn't yet achieved "great progress" but everything planned has been done.

Some say he's too modest. The International Finance Corporation (IFC), which helped organize the Russian model for farm privatization says that in 1995, the old Redkinskoye collective suffered huge losses -- nearly 5,000 rubles per worker -- and the income it did collect was 2,000 rubles under what it paid out.

In its first year in 1996, Vozrozhdeniye cut its losses by half, brought gross income per worker to more than 800 rubles, and gave each one a raise of 100 rubles per month.

In 1997, its second year, Serov says the farm increased production volume two times and made sure its better paid workers never saw a late paycheck.

"The efficiency of our enterprise is 30 to 40 percent higher than the average in the oblast," he told a group of visiting international journalists gathered recently in the simple, plain room at the side of the farm's machinery repair garage that serves as the farm manager's office.

On the neighboring farm, he notes, 25 workers produced 700 tons of hay for the cattle last year. On this farm, nine workers produced 1,000 tons of hay.

"The main factor is the people," says Serov. "For the shareholders, the motivation is much higher because, besides the size of the salary, they get dividends at the end of the year."

Some 40 workers who are not owners, "work for the sake of money, so we have to provide them with money enough to reward good work," he says. A regular pay packet is not such a common thing.

The main section of the old Redkinskoye collective next door -- the much larger 9,000 hectares -- is technically a closed joint stock company, but its operations are little changed from the old days.

Farm director Gennady Pechuzhkin sighs frequently as he answers the questions of the journalists who filed into his large, wood-paneled office. He sits behind a large oak desk covered with old rotary telephones and a panel of electrical switches that no longer seem to have any function. A bust of Lenin sits at the center of a large wall of mostly empty bookshelves.

"We used to live well," says Pechuzhkin, looking tired and even older than his mid-50's age would suggest. "I think Lenin's teachings were right to some extent, yes," he says. But he says it is accepted that there's "no going back on reforms, unfortunately. I think it's ill luck."

Pechuzhkin says Redkinskoye looks worse when compared to its more enterprising neighbor because the collective's cattle were hit by tuberculosis, which wiped out three-quarters of its herd in 1996. "We have reasonable excuses for our more modest" figures, he says repeatedly

Redkinskoye's workers are usually four to six months in arrears on their salaries, which even then are only 74 percent of those paid on Vozrozhdeniye, he acknowledges.

Pechuzhkin says the larger collective farms are having a harder time adjusting to the market mechanisms, but he believes their size will eventually make them succeed. "The model farm enterprises should have about 150 people working to cover 3,000 hectares and 700 head of cattle," he says. The smaller Vozrozhdeniye may be doing better now, he says, but eventually will need more workers to handle the load.

He says there were hard feelings when the group at Vozrozhdeniye broke away. "The first stage was like a divorce in the family, very complicated because the infrastructure was inter-linked, and to create two independent enterprises out of one was rather difficult," he says. But now they are getting along fine and Redkinskoye actually hires some engineering services from its upstart neighbor.

Pechuzhkin believes that while the land was divided in equal proportion, the breakaway group got the better deal. "They are more privileged than we," he says.

Still, he says, he thinks his workers are picking up some of the spirit from next door. "There is some degree of envy in relations between us, but I think their attitude toward work motivates our workers," says Pechuzhkin. "We just look at them and are motivated."

Vozrozhdeniye's Serov says the difference in attitude is unbelievable. On the old collective farm, he says, the workers were stealing parts from the machinery, even taking crops and fertilizer to use on their own or trade for other goods. Privatizing changed all that, he says, and many of the machinery drivers began returning previously stolen parts.

The bigger problem of theft of the crops was solved by installing a corrugated steel fence between their land and the collective, and buying nine wolf dogs to guard the fields. "We may say we have thus settled the problem," chuckles Serov.

That fence also served to keep the cattle on Vozrozhdeniye from catching the disease that so devastated the neighboring herd.

But Serov denies they got any privileged division of the collective's property. Because it was forced to pay three times the market price for the cattle it got out of the collective (through the bidding at a distribution meeting), he says, they have suffered losses of five million rubles per head so far.

The rest of the farm production is profitable now, he says, and they've even been able to build a new courtyard for milking cows and performed major reconstruction, renovation and repairs on most of the buildings on the farm.

On a recent day, the garage was filled with three tractors, four harvesting machines, and five trucks in various stages of disrepair . One man was welding a broken axle on a tractor while two men used heavy hammers in reassembling a truck's engine block.

One older man, who's been a tractor driver on this farm since 1954, says he really likes the new set-up. "Here, the discipline is better and you get your salary every month," he says. Before, he didn't receive his wages for over a year.

Another man stops and tells visitors there are a lot of repairs to be done to the machinery before spring planting, but he thinks they'll make it. He said he's a shareholder and that everyone works three times harder than they did before.

Alcoholism is not the problem it once was on the farm but it was obvious to the visitors that this fellow had already tasted a few glasses of vodka by noon. What sets Vozrozhdeniye apart so much from its neighbor is that with fewer employees and stockholders, this farm is already looking ahead. It has started to sell grain to other farms, including a special mix for chicken farmers, is increasing the number of its milk cows (which produce higher milk yields), increasing the number of its pigs and reassessing the number of cattle because domestic beef prices are down. It is also a major potato grower, selling its produce through its own shop in the village and through contracts to processing plants.

One thing holding back all privatized farms in Russia is their inability to use land as collateral for loans. Without the ability to borrow money at competitive commercial rates, they must finance all expansion and improvement out of current earnings.

That's important for private enterprises like the family farm Vika in Kovringino village in nearby Gorodetskii rayon. Sergei Klementiev is the director of this farm which was first in the region to be privatized and he's well known on Russian television as a forceful voice for complete private land ownership of farms. He has also testified frequently before the Duma.

His Vika farm is a multi-faceted enterprises, with grain the main crop. In 1996, its yield was 1.8 tons per hectare, nearly 13 percent higher than the oblast average, and that with only five workers on 41 hectares. There have been no overdue wages and salaries have been upgraded to recognize good worker performance, says Klementiev.

Aside from the farm operations, Klementiev turned the old collective farm canteen into a commercial cafe -- a rare phenomenon for rural areas. The cafe sells a variety of non-food products, such as shaving supplies and cigarette lighters, in addition to serving delicious home cooked meals. The place is seldom empty.

Enjoying lunch one day, Ekaterina Makaricheva says that when the old Moshkinskoye collective broke up, four other enterprises were formed in addition to Vika. Makaricheva is one of three women who now head the enterprises, all of which -- like Vika -- are becoming successful and profitable.

Importantly, she says, this is the first time women have been able to assume leadership of farms in the region and they are willing to do "so much more" than their male predecessors.

She agrees that people should be able to buy, own, and sell land because only through the investment of complete ownership will true markets be created. "A true agricultural market will be possible only when land will be included," she says. Those who profit from the land "will never attempt to sell it," she says, and those who have the property but don't profit from it, should be able to sell.

"We're not yet on the road to the market, we are just yet on the outside," she says. oz/