Europe and CentralAsia Environmentally and Socially Sustainable Development Series Ukraine Review of Farm Restructuring Experiences

A study conducted in the autumn of 1998 took stock of various farm restructuring initiatives in Ukraine, including projects managed and financed by international donors and spontaneous locallevel restructuring initiatives. The results based on a survey of managers and member-employees in large farms, supplemented by field visits and interviews with donor representatives, fail to reveal major breakthroughs in large-farm restructuring. While farm enterprises have changed their registered legal form and distributed land and asset shares to individual members, the internal farm structure largely remains that of the former collective. As a result, only limited improvements in profitability and efficiency have been achieved, and physical yields mostly remain at pre-reform levels. Despite the disappointing overall accomplishments, both workers and managers are responding positively to the attempted reforms through improved work discipline and confidence in better future performance. Buying and selling of land is virtually nonexistent in Ukraine, and yet the legal framework allows transactions in land shares among individuals and between individuals and enterprises, thus creating a mechanism for adjustment of farm sizes. Individual farms grow mainly by leasing, and the state is no longer the sole source of leased land. Contrary to earlier concerns, the individual leasing practice has not resulted in massive rural unemployment: the large individual leaseholders employ on their farms the same proportion of shareowners as the corporate farm enterprises (about one-half; the other half are pensioners and passive shareholders). Private farms established by individuals and families outside large farm enterprises report encouraging economic results. Yet at the present stage exit from former collective structures and transition to independent private farming appear to be an option only for the bravest. The majority of the rural population prefer the safety umbrella of former collectives, but for these families salaries already account for a smaller share of family income than household plot production. The major reason for limited accomplishments of agrarian reforms in Ukraine appears to be the lack of improvements in the country's overall economic and policy environment. The continuous decline in the macro economy and the stagnation of the non-agricultural components of the rural sector have further limited the scope for any meaningful achievements of farm privatization and restructuring.