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Ukraine: Parliament Stalls Reforms As Agriculture Crisis Deepens

Prague, 13 November 1997 (RFE/RL) -- Potatoes are the measure of Ukraine's agricultural crisis. Ukrainians are growing more potatoes than they have in years -- and less of just about everything else.

Last year's bumper potato harvest is not a success story for the quasi-privatized cooperative farms that have emerged out of Ukraine's half-hearted agricultural reforms. To the contrary, the decline of large cooperatives means the country now produces half as much meat and grain as it did in 1990.

The real success story in Ukrainian agriculture is found in the 11 million tiny garden plots that were distributed among two-thirds of the population by presidential decree at the end of 1992. Data from the Paris-based Organization for Economic Cooperation and Development (OECD) show that although these privately-owned family plots (dachas) comprise only 14 percent of Ukraine's total farmland, they accounted last year for 95 percent of the potato crop and 82 percent of all vegetables.

Household plots also produced more than half of the country's meat and milk last year, and almost two-thirds of the country's eggs -- all of this on just 14 percent of the country's farmland.

The conclusions are clear. Not only is private farming more efficient than Ukraine's large agricultural cooperatives. But continued delays in agricultural reform also are forcing Ukrainians to survive, as many east Europeans did through the shortages of central planning, by living off of what they produce themselves. The poorly managed cooperatives simply are not able to feed the country.

Until the 1990s, Ukraine's status as a net grain exporter gave it a reputation as the breadbasket of the former Soviet Union. But today's cooperatives, stranded half-way between central planning and a market economy, are producing far less than their Soviet-era predecessors.

And the decline is continuing. Last year was the worst grain harvest since the mid-1960s. Deputy Agriculture Minister Boris Supikhanov says this year's harvest will be better. But his projection of 37 million tons (cleanweight) still would be lower than most grain harvests since 1985.

Sugar beet production last year was the lowest in 30 years. German-based commodities statistician F.O. Licht predicts this year's harvest will be even smaller. The OECD also notes declining numbers of cows, pigs, goats, sheep and poultry in Ukraine, as well as dramatic falls in milk and egg production.

Apologists for the cooperative system blame poor harvests on last year's spring and summer drought. But this fails to explain why decline has been consistent since 1993 or why garden plots are less affected by the agricultural crisis.

Britta Bjornlund, an economist with the United States Department of Agriculture, offers a more realistic assessment. She says that although the majority of Ukraine's farms have been transformed on paper into joint-stock cooperatives, few have changed their managers, production choices or methods of resource allocation.

Corruption and inefficient management practices left over from the communist era ensure that most large-scale cooperatives are unprofitable and falling deeper into debt. The failure to create a competitive market economy also means there is little money to replace aging Soviet-era equipment.

The European Bank for Reconstruction and Development (EBRD) said in its Transition Report this month that opposition from parliament is the main reason for Ukraine's failed agricultural reforms.

Acceleration of land and farm privatization is on the agenda. But a parliament dominated by former communists continues to pass piecemeal legislation to impede the creation of a market-oriented agriculture sector. There has been no restitution to former owners of property that was nationalized under communism.

Volodymyr Lanoviy, the embattled acting director of the State Property Fund, says legislators are blocking privatization in order to benefit their political and economic allies.

Indeed, reform delays are helping the former communists retain positions of power and influence -- at least for the short term. That's because many cooperative managers previously held power within their local communist party hierarchies and still maintain loyalty to former communists parliamentarians. Reforms that bring about the sacking of cooperative managers would dismantle much of the current legislature's agrarian power base.

Bjornlund sees the private garden plots as a way out of the crisis. She says household plots could be the foundation for an expanded and successful private farming sector. Most produce from these plots is kept for personal use or sold by the growers themselves through farmers' markets and trade organizations. Such channels will have to be expanded as private farming grows in importance.

Unclear legislation on privatization also must be revised with the aim of creating a class of landowners, rather than groups of farm workers who own cooperative shares but have little understanding of their rights and options.

Uncertainties about land titles must be clarified, official limitations on farm sizes must be removed and access to infrastructure like roads and irrigation systems must be provided to those who chose to farm outside of the giant collectives.

Steps must be taken to provide start up capital to those who try to launch their own private farms. A credit system also is needed to help private farmers buy seed and fertilizers for large scale planting.

Bjornlund says private farmers cannot continue to rely on unstable markets to buy supplies and sell their harvests. Competition needs to be introduced between agro-industrial firms. For years, parliament has prohibited the privatization of this critical market link by declaring that agro-industrial firms are strategically vital state interests.

Until parliament reverses policies that fetter the evolution of a market-oriented agriculture sector, it appears that most Ukrainians will have to remain content with less meat on their plates and more home-grown potatoes.