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Farm Restructuring and Land Tenure in Reforming Socialist Economies logo The transition in the agricultural sector in Central and Eastern Europe is advancing in the dual tracks of land reform and farm-enterprise restructuring. Land reform in most countries takes the form of reprivatization of land and its transfer to the management of former owners or current users. Countries differ in the rate of reprivatization, but administrative mechanisms are in place throughout the region for transfer of physical control of land to individuals. Assignment of land ownership to individuals does not necessarily imply a change in production practices. Many new landowners prefer to leave their land in collective cultivation, perpetuating the existence of former farm enterprises or initiating the establishment of new cooperative structures based on voluntary principles. The distribution of land and assets to members triggers internal reorganization of the collective farm enterprise, leading to the creation of a whole spectrum of cooperative structures consisting of producer units of varying size and orientation. Land and asset distribution mechanisms are applied only in collective or cooperative farm enterprises, whereas little change is noted in the organization of state farms. The most tangible outcome of the process of transformation in the agricultural sector is the emergence of new private farmers throghout the region. The majority of private farmers are former members of cooperatives or employees of state farms, who have left the large-scale farm whith their share of land and assets or have expanded their household plot. The private farmers in all countries in the region have relatively small plots, and they are not yet fully operating as commercial producers. The private farms are basically family operations; they mainly rely on the labor of the extended family. The transition to private ownership of land and assets has not yet produced a noticeable change in efficiency: the yields achieved by private farmers are not much different from those of collective farms. Market mechanisms for creation of farms of optimal size are severely hampered by various restrictions on land transactions and by limits on size of individual holdings. The market infrastructure is still highly deficient throughout the region. Although private suppliers of inputs and private marketing channels are emerging, they provide insufficient support to the struggling private farmer. Inadequacy of market information may be a factor that restricts the growth of private entrepreneurship, and governments have an important role in providing and disseminating such information. In addition, farmers need access to credit to finance working capital and long-term investment. The banking system is another important component of market infrastructure that remains relatively undeveloped in the countries surveyed. Unavailability of long-term investment credit may jeopardize the future of emergent private farming. The access to social benefits, including free housing, has decreased substantially following privatization, dissolution of many collective structures, and elimination of traditional government support. A social security system has not yet emerged to replace the previous all-encompassing welfare arrangements. Until governments organize appropriate social security programs, the rural population feels insecure and treats privately owned land as an important store of value, although land markets remain highly undeveloped.

Publisher: World Bank

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