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The East: Armenia And Georgia Lead Agriculture Reform

Washington, 4 June 1997 (RFE/RL) - After five years of moving toward market systems, the U.S. Agriculture Department says Armenia and Georgia stand out as the nations with the "most reformed agriculture" among the countries of the former Soviet Union.

"The two caucasus countries have seen the most thorough, rapid, and comprehensive land privatization" in the area, says the department's latest Outlook Report on "the Newly Independent States and the Baltics."

The report says Armenia and Georgia have introduced both macroeconomic reforms, such as price deregulation and the liberalization of domestic and foreign trade, and have "effectively" privatized agriculture. It says the combination of price liberalization and privatization is responsible for the "best record of growth" among these countries.

On the other hand, says the report, the agricultural economies of Uzbekistan, Turkmenistan and Belarus "stand out as the region's least reformed." It says that in these three countries, trade regimes have changed the least since Soviet times and farm lands remain mostly in state hands.

In Turkmenistan and Uzbekistan, private farms occupy less than two percent of total agricultural lands and neither even has a legal mechanism for the transformation of state and collective farms into joint stock companies.

The U.S. agriculture report says the majority of the nations of the ex-USSR lie "somewhere in the middle" between the nearly exclusively private agriculture of Armenia and Georgia and the nearly unreformed state agriculture of Uzbekistan and Turkmenistan.

It says that the macroeconomic reforms have restructured Russian, Ukrainian and Moldovan agricultural production, but that "genuine farm restructuring and land reform leading to financially viable farms has eluded these nations."

The report says the majority of former state and collective farms in Russia, Ukraine and Moldova are "loss makers and yet they are not liquidated by their creditors."

Domestic commodity market liberalization in Russia, Ukraine and Moldova has "been substantial," says the U.S. report, although not as thorough as in Estonia and the Caucasus. It says that while Russian farm commodity prices are "freely determined," federal, regional and local procurement quotas still exist for many products and national and local subsidizes, while dropping, still thwart reform.

"Farming in Moldova, Russia and Ukraine is still predominately on former state and collective farms," says the report, noting that many of the collectively owned farms are now joint stock companies in name, but in no other way commercialized.

It says that the Baltic countries have liberalized prices, eliminated consumer subsidies and liberalized domestic and foreign trade, but that land reform in these three nations "has proceeded more slowly than in Armenia and Georgia."

The report says that while land reform is a key element in its assessments, it is "not to say that improvements in agriculture cannot come without land privatization." For instance, it says, "construction of better commercial infrastructure, storage facilities, better roads, and market information systems, as well as improvements in downstream food (processing) industries, could improve agricultural performance."

However, it adds, the lack of functioning land markets in most former Soviet countries does limit their "ability to improve the productivity of resource use." For this reason, it says, "crop yields are lower than they could be, investment is low and management does not face the market pressures that it would if unpaid creditors could seize farm assets."