The privatization in post-socialist countries and its results

1
The privatization in post-socialist countries and
its results

• PhD Adam Sadowski
• Faculty of Economic and Management
• University of Bialystok
• Poland

2
The nineties in the twentieth century were times
of violent transformations in the post socialist
countries. We can talk about restitution of the
private agriculture
3
These transformations were incredible challenge
due to the fact that the former owners or their
successors working in socialized units,
practically lost their ability to run a farm on
their own
4
Due to the introduction of agricultural policy
in different countries, accepting various
institutional solutions as well as different
internal factors, privatization proceeded in
various pace and had different effects
5
Transformations in Poland
6
A leading motive of changes, began in 1992, was
the creation of the efficient market economies in
agriculture. The result will have to be new
ownership relations, and also a new structure of
farm economy
Transformations in Poland
7
In 1990 in the eve of agricultural reforms in
Poland the private sector (individual farmers)
possesses 78,6 area of arable land, so there was
not pressure on rapid structural changes in
agriculture
Transformations in Poland
8
The process of owners transformation in
agriculture was entrusted to the Agency of Farm
Property of the Ministry of Treasury (AFPMT),
which was created from 19th October 1991.
Transformations in Poland
9
During its action the Agency took over into
Agricultural Property Stock the properties of
1666 state farms of total area 3753 thousand
hectares and 607 thousand hectares of the
National Land Fund
Transformations in Poland
10
Total, from the beginning to the end of December
2006 the Agency took over 4717,9 thousand ha
Transformations in Poland
11
After taking over and restructualization state
farms, the Agency distributed these possessions
mainly through selling and leasing and in slight
relation to another way
Transformations in Poland
12
Reaching over than 305,1 thousand contracts to
the end of 2006 the Agency leased 4526,5 thousand
hectares. Some of them were passed and in the end
of 2006 there were 134,2 thousand active leasing
contracts for 1892,1 thousand hectares.
Transformations in Poland
13
From the beginning to the end of 2006 the Agency
sold 1694,0 thousand ha (35,9 of all lands) for
about 190 thousand buyers. It contributed to form
larger individual farms (average was about 4
hectares for a contract) and create about 5
thousand farms and enterprises.
Transformations in Poland
14
State land buyers were individual persons and
legal persons. The land sold to physical persons
accounts for over 78 of the total area. The
legal person accounts less then 3 of total
buyers, however the land participation bought by
them was 22
Transformations in Poland
15
In the structure of sold land dominate properties
of small area. Nearly 48 of contracts concerned
plots to 1 hectare, almost 39 from 1 to 10
hectares, 12 contracts of land from 10 to 100
hectares and a little over 1 about area over 100
hectares.
Transformations in Poland
16
In Poland, in the first period of transformation,
state didnt get the intervention. Land market
was completely liberalized. The owner of lands
could become each Polish citizen. There was not
any limitations of area of buying lands, or
buying person (with the exception of foreigner).
Transformations in Poland
17
In 2003 it was created the legal successor of the
AFPMT - Agricultural Property Agency. It operates
in the name of the State and will still control
the market of agricultural properties and in
specific situations it intervenes through the
state pre-emption and repurchase rights to the
agricultural land.
18
The rise of land prices appeared from 2003 and
still exists and it is connected to the
integration processes
Transformations in Poland
19
Table 5. Prices of lands in 1992-2007
Transformations in Poland
Years Average price of state land Average price of state land Average price of private land Average price of private land
Years (EUR/ha) Previous year 100 (EUR/ha) Previous year 100
1992-1993 264 100,0 - -
1994 329 124,5 - -
1995 356 108,8 - -
1996 450 125,7 - -
1997 587 130,4 - -
1998 731 124,7 - -
1999 888 121,3 1098 100,0
2000 897 101,1 1197 109,0
2001 802 89,4 1299 108,6
2002 825 102,9 1261 97,0
2003 942 109,5 1438 114,1
2004 1120 119,0 1659 115,3
2005 1422 126,9 2061 124,3
2006 1816 127,7 2323 112,7
2007 2269 125,0 2992 128,8
20
In Poland still exists the process of
polarization of farms structure, because it
follows the getting bigger number of extreme
groups and getting smaller central groups. The
average size of farms in Poland in 2005 was 9,60
hectares and it shows considerable regional
variety The biggest distribution of individual
farms appears in the southern provinces (the
average area about 2 hectares) particularly the
biggest average area characterized farms in the
northern provinces (over 14 hectares).
Transformations in Poland
21
Transformations in Poland
Table 6. Numbers of farms by area groups and users
Agricultural land area in ha 1996 2002 2002 2006 2006
Agricultural land area in ha Total Total Private sector Total Private sector
Grand total 2046.8 1956,1 1954,9 1810,4 1806,4
1 5 1130.4 1146,8 1146,7 1030,1 1029,8
5 10 521.2 426,8 426,8 415,3 415,0
10 15 217.4 182,7 182,7 169,7 169,5
15 20 89.5 83,9 83,9 78,1 78,0
20 30 55.9 64,3 64,2 61,7 61,6
30 50 19.8 31,7 31,6 33,1 32,8
50 and more 12.6 19,9 19,0 22,4 19,8
22
Transformations in Poland
Table 8. Private farms by area groups in Poland
23
Transformations in Estonia
Transformations in Estonia
24
The beginning of agrarian transformations in
Estonia had taken place in 1989 before regaining
the independence, when the bill of farms was
passed. On the base of this bill farmers (every
citizen of this country could have become a
farmer) could receive some arable land.
Transformations in Estonia
25
Due to the fact that the land was used as a state
farm, there were some difficulties with the
realisation of the transformation.
Transformations in Estonia
26
Chances of restoring complete private ownership
relations appeared in Estonia at the point of
regaining independence in August 1991. The result
of this efforts to reconstruct private ownership
was the bill of agrarian reform (17th October
1991).
Transformations in Estonia
27
The works with the reprivatization proceeded
slowly because the returning rules which gave
priority to former owners were not defined before
1993. On that account, not all lands could be
returned to the former owners and thus
supplementary acts were passed.
Transformations in Estonia
28
In spite of the fact that people unwillingly
agreed to compensation payment, in 1995 the
government began process of agrarian reforms.
Owing to this situation since 1996 the real land
privatization stage started
Transformations in Estonia
29
Chaotic nature and lack of organisation of
privatization actions confirms also the fact that
until 1999 the precise rules of cadastral
measurements were not settled
Transformations in Estonia
30
Peasants farms in Estonia can be enlarged to 300
hectares of arable land, 100 hectares of forests
and 3 hectares of urban areas.
Transformations in Estonia
31
Transformations in Estonia
Table 9. Structural changes in Estonian
agriculture (in )
32
Transformations in Estonia
Table 10. Structure of the private farms in
Estonia in ha
33
The privatization actions in Estonia caused
increase of number of private farms. While on 1st
January 1997 there were 22,722 registered private
farms, this number increased to 51,081 till 1st
January 2000. Data from 2001 states that there
were about 85,300 arable farms and approximately
176,400 family farms mainly in rural areas,
which should be understood as a household because
most of them did not have any agrarian
production.
Transformations in Estonia
34
But from that moment the numbers of farms were
decreasing and in 2005 there was only 27.7
thousand of farms (over one ha). This process
leads to increase the average size of the farms
and in 2005, about 13.4 thousand of farms had an
economic size over one ESU. They use about 764
thousand ha of agricultural area and it gives
about 57 ha per farm, the remaining 14.4 thousand
family farms produce only for self consumption.
Transformations in Estonia
35
Significant fact characteristic for Estonia is
functioning a considerable number of legal person
farms (collective and national). In 2005 there
were 879 such farms and they used 44.3 of
agricultural land, with average size about 418
ha. Small farm in Estonia use mainly owns lands
but in the biggest ones 68.6 of lands were
leased. An average in all Estonia agriculture in
2005 about 58 of agricultural area was leased.
Transformations in Estonia
36
The slowness of privatization processes in
Estonia presents that till 1999 only 39.3 of
agrarian areas were privatized and about 11.9
remained were in management of individual farms
owners.
Transformations in Estonia
37
Transformations in Lithuania
38
The process of privatization in Lithuania began
similarly to Estonia in time of so called
perestroika. The act of peasants farms from
4th July 1989, specified that state-owned land
can be allotted free and formed this way size of
a farm should be within range of 10 50
hectares.
Transformations in Lithuania
39
To stimulate village people, the Lithuanian
authorities took action and on 26th July 1990 a
resolution was passed. According to this
resolution workers of agrarian enterprise and
retired people could enlarge their plots to 3
hectares, whereas other people working and living
in the countryside could obtain plots to 2
hectares.
Transformations in Lithuania
40
The interest of such way of enlarging management
state was so big that size of land occupied by
plots reached in some regions even 30 or all
arable areas.
Transformations in Lithuania
41
Actions presented above were an introduction to
the agrarian reform which started in the end of
1991. Specificity of accepted solutions in
Lithuania was an obligatory privatization of land
and productive possessions in agriculture.
Transformations in Lithuania
42
The regulations enacting matters of agrarian
reform determined the maximum limit of a family
farm area to 50 hectares of arable area, 10
hectares of forests (later raised to 25 hectares)
and 5 hectares of water body.
Transformations in Lithuania
43
The legislator appointed a short period of time
to make an application to regain the property but
it was a few times changed and thus, till 1st
January 2004, 741 thous. applications to prove
property were submitted and they referred to 4,2
mln hectares of arable areas. The former owners
or their heirs wanted to recover materially 80
of areas (3,303,000 hectares). In spite of many
years of reprivatization actions, till the end of
2004, 2500 thousand hectares were returned (about
63 of arable land).
Transformations in Lithuania
44
Transformations in Lithuania
 Table 12. Dynamics of the reforms in Lithuania
in 1992-2003 (in thousand ha)
45
Transformations in Lithuania
Table 13. Land use in Lithuania in 1997-2001
46
The structural reforms in Lithuania do not
optimistic. Practically 75 of lands became a
part of small and very small farms.
Transformations in Lithuania
47
On 1st January 2003 there were functioning
610,543 arable farms in Lithuania. In this group,
a significant part were owners of farms smaller
than 1 hectare (331,980). The next large group
were family farms 232,911 units.
Transformations in Lithuania
48
The average size of farms stabilized on the level
of 7.5 hectares. But the average size of family
farms reached only 4.7 ha. In 2005 there were
128.6 thousand farms (over than 1 ESU), the
average farm size was 18.2 ha.
Transformations in Lithuania
49
Table 14. Agricultural land used for agricultural
activities by owners and users in Lithuania in
2002
Transformations in Lithuania
50
Transformations in Latvia
51
The first changes in agricultural policy took
place in the end of eighties and their result was
passing a bill (May 1989), which determined rules
of functioning peasants farms and eliminated
restrictions concerning size of a farmland.
Activations of the actions started after the
establishment of independence on 4th May 1990 and
Latvian Republics decision dated of 13th June
1990 of agrarian reform
Transformations in Latvia
52
The basic reforms indicator assumed lands
privatization, having in mind former owners and
their successors interest, as well as real
users interests and necessity of rational lands
and resources usage.
Transformations in Latvia
53
The bills precisely determined institutions in
range of inventorying arable land, preparing a
land developing plans and carrying out suitable
privatization actions. It was stated among the
others, that selling land could occur after
accepting land developing plans corresponding to
the bills of higher importance.
Transformations in Latvia
54
In the first period (till 1st November 1996) 96
of the land were handed over to private users.
Simultaneously, the activities heading towards
full privatization (setting up ownership)
proceeded smoothly because on 1st January 1997
there were 30.8 of arable lands privatized
whereas till 1st January 2000 this number reached
58.
Transformations in Latvia
55
In Latvia, a considerable regional
differentiation of privatization processes takes
place. In attractive regions the process took
significant proportions and till 2001 about 79
85 of arable lands were privatized. In less
attractive regions only 43 59 of lands were
privatized.
Transformations in Latvia
56
Transformations in Latvia
Table 16. Dynamics of the reforms in Latvia
57
In 2005 there were functioning about 129 thousand
farms producing agricultural products, whose land
property was more then one hectare. 13 of farms
operated on less than 5 ha, 56 on 5-20 ha, 21
on 20-50 ha and 10 cultivated more than 50 ha.
There were 45 thousand agricultural holdings
(over one ESU) with average size of 29 ha (used
1302 thousand of agricultural area), family farm
was about 84 thousand (used about 400 thousand
ha) with average size of 4.8 ha.
Transformations in Latvia
58
Czech and Slovakia transformation
59
The process of transformation actions in Czech
agriculture in relation to organization forms,
was depended mainly on recreation of states
farms and collective farms into joint ventures,
which at present are the dominant form of
cultivation in agriculture. In connection to it
despite reconstruction of private ownership right
to agricultural area in 2004 about 89,3 of lands
were leased.
Transformations in Czech
60
It is noted of course some disproportion in the
lease scale. Companies of natural person lease
about 70 of using lands while companies with
legal status lease 96,7 lands. It appears also
some specific in the case of leasing lands by
companies with over 100 ha lands. In those cases
independently from the form of law leases concern
over 90 lands.
Transformations in Czech
61
The structure of using lands changed in 2005 and
it has been an effect of integration processes.
It is showed that systems of financial support
determined the great part of owners to undertake
the economic risk. Of leading economic actions on
ones own account. As a result of this the scale
of leasing in 2005 to 85,7 was shorten.
Transformations in Czech
62
Describing the agricultural Czech structure we
could say about its dualism. On the one hand the
considerable group of not large units exist,
which include about 70 of economic units and
cultivating on 2,7 of agricultural lands. The
counterbalance composes a large group of units
(over 100 ha) which composed 12 of all active
units in agriculture and they cultivate about 90
agricultural lands.
Transformations in Czech
63
Transformations in Czech
Active entities in agriculture in Czech 30 September Active entities in agriculture in Czech 30 September Active entities in agriculture in Czech 30 September Active entities in agriculture in Czech 30 September Active entities in agriculture in Czech 30 September
Indicator 2000 2003 2005 Index2005/2000
Active entities, total 54 158 54 071 42 252 78,0
Active entities by legal form        
Natural persons incorporated in the BR 33 747 34 893 29 404 87,1
Natural persons not incorporated in the BR 17 726 16 394 10 015 56,5
Legal persons, total 2 685 2 784 2 833 105,5
Business companies partnerships 1 859 2 069 2 154 115,9
Limited liability companies 1 264 1 400 1 493 118,1
Joint-stock companies 559 627 622 111,3
Cooperatives 741 631 584 78,8
Other 85 84 95 111,8
64
In the agricultural Slovak structure individual
property in 2002 was estimated for about 76.
However it should be pointed, that the problem of
ownership attribution it is unsolved, because the
process of settling ownership rights still exist
and to the considerable lands (about 20) do not
fix authorized persons.
Transformations in Slovakia
65
Transformation in Slovak agriculture influenced
coming into being two dominate groups of
agricultural companies, collective farms and a
few types of joint ventures. Collective farms are
still the dominant form of bringing into
cultivation, because in 2005 they were using
about 45 of lands. Joint ventures and in
particular limited liability company determine a
considerable element of agricultural structure.
They cultivated nearly 31 agricultural area and
it should be mentioned that this is the group
which enlarge its participation.
Transformations in Slovakia
66
The source of lands for lease are state and
mainly private lands. On 31st December 2004 SFL
leased over 591 thousand ha state lands. More
complicated is the situation of private leases,
because theres a lack of official statistic
data. Lands have been mainly leased by older
people who finished their work activity. The
second group of private leasers are persons
working outside agricultural and profits from
leasing are only the additional source.
Transformations in Slovakia
67
Conclusions
68
In relatively short period of the time the
private ownership and private farms can be
reconstructed.
69
After more than fifty years the inborn rights of
a person to private ownership was restored in the
evaluated countries.
70
The privatization process in most countries was
not completely enacted and consequently realised.
71
The main effect of established procedures is
creation of dual agrarian structures. In each
of presented countries, a big group of private
arable farms, enterprises and farming
associations were established. On the opposite,
there are many very small arable farms which are
unable to function on free market.
72
It could be seen a decreasing tendency in the
number of agricultural farms (enterprises,
co-operatives, individual farms) and at the same
time a concentration of land use as well.
73
As we see in other post socialist countries the
process of the reprivatization give the different
result and the new structures of agriculture are
different.
74
Experience of last years demonstrates, that
agricultural transformations if they are not
forced by external factors assume a character of
a slow evolutionary transformation
75
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