Report No. 12576-BY Belarus Agriculture and Food Sector Review November 3, 1994 Natural Resources Management Division Country Department IV Europe and Central Asia Region FOR OFFICIAL USE ONLY Document of the World Bank This document has as restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization CURRENCY EQUIVALENTS Currency unit = Belarus Ruble, abbrev. BRbl. US$1 = BRbI. 27,980 (as of July 1994) WEIGHTS AND MEASURES dl Decaliter ha Hectare Kg Kilogram Kwh Kilowatt hour 1 Liters ABBREVIATIONS Al Artificial Insemination AMDP Association of Meat and Dairy Processors BAAS Belarus Agricultural Academy of Science CEE Central and Eastern Europe CEM Country Economic Memorandum CMEA Council Cf Mutual Economic Assistance EBRD European Bank for ReconstrUCtion and Development EU European Union EU PHARE European Union Assistance Program (Central and Eastern Europe EAd Baltic Republics) EU TACIS European Union Assistance Program (Former Soviet Union) FSU Former Soviet Union FU Feed Unit GDP Gross Domestic Product IMF International Monetary Fund IPM Integrated Pest Management MinAg Ministry of Agriculture and Food MinFor Ministry of Forestry NBB National Bank of Belarus NMP Net Material Product NPK Nitrogen, Potassium, Kalium (potash) SCFP State Concern for Food Processing SCPDBP State Committee of Procurement and Distribution of Bread Products SCSP State Committee of State Property SOE State Owned Enterprise TA Technical Assistance USDA United States Department of Agriculture CONTENTS PREFACE EXECUTIVE SUMMARY ............ ........................... i PART 1: MAIN REPORT I. INTRODUCTION ....................................... 1 H. MAIN FEATURES OF THE FOOD AND AGRICULTURAL SYSTEM... 3 A. AGRICULTURALRESOURCEBASE. 3 B. AGRICULTURE PRODUCTION . . . 6 C. FORESTRY .12 D. PROCESSING .14 E. FOOD CONSUNMPON ...16 F. AGRICULTURAL CREDIT/FINANCE SYSTEM .17 G. PBUCADMINISTRATION ...18 MI. OVERALL FRAMEWORK OF REFORMS . . .21 A. MAJOR COMPONENTS OF TRANSMON .22 B. IMPLEMENTATION OF REFORMS . . .24 C. URBAN ANDRURAL SOCIAL CONCERNS .26 D. POUCY AGENDA ...27 IV. DEVELOPMENT OF A MARKET STRUCTURE ................ ... 33 A. MACROECONOMIC AND INCENTIVE FRAMEWORK ....... 33 B. FARM PRODUCT PROCESSING AND DISTRIBUTION ....... 42 C. IMPROVING RURAL FINANCIAL SERVICES .... ......... 50 D. INTERNATIONAL TRADE ...... ................... 52 V. LAND REFORM AND PRODUCTION EFFICiENCY ............. ... 57 A. EMERGENCEOF PRIVATE FARMING .... ............. 57 B. RESTRUCTURING STATE AND COLLECTIVE FARMS ...... 62 C. MEASURES TO IMROVE FARM PRODUCTION .... ...... 67 D. INVESTMENTS IN FOOD AND AGRICULTURE .... ....... 70 E. MODERNING HIGHER EDUCATION .... ............. 72 F. RESHAPING THE ROLE OF GOVERNOME .... ......... 73 VI. EXTERNAL ASSISTANCE .............. .................. 77 A. TECHCAL ASSISTANCE AND INSTITUTION BUIDING .................................. 77 B. NEW INVESTMENT ............................. 80 C. THEBANKASSISTANCEPROGRAM ..... ............. 80 PART II: SUBSECTORAL ANNEXES VII. AGRICULTURAL RESOURCES AND CROP PRODUCTION .... ....... 83 A. LAND ...................................... 83 B. CLIMATE AND SOILS ............................ 84 C. CROP PRODUCTION ............................. 86 VII. LVESTOCK SECTOR ................................... 93 A. PRESENT STATE OP INDUSTRY ..................... 93 B. CATTLE ..................................... 94 C. PIGS AND PORK PRODUCTION ............... I ..... 96 D. SHEEP ....................................... 98 E. POULTRY .................................... 98 IX. AGROPROCESSING ...................... 101 A. ROLE OF AGROPROCESSING ....................... 101 B. STRUCTURE AND ORGANIZATION ................... 102 C. OWNERSHIP AND MANAGEMENT ....... ............ 103 D. FACILITIES ................................... 104 E. PERFORMANCE ................................ 104 F. ONGOING REFORMS AND RECOMMENDED ACTIONS ...... 105 C. ISSUES ...................................... 106 X. FORESTRY SECTOR ..19.................... l A. FORESTRY IN THE ECONOMY ...................... 109 B. FORESTRY RESOURCES .......................... 110 C. FOREST RESOURCE MANAGEMENT .................. 111 D. WOOD PRODUCTION AND PROCESSING ............... 112 STATISTICAL ANNEXES ..................................... 115 BOXES: 2.1 Socialized Agriculue Sector ......................... 6 2.2 Forest Resources ................................ 13 2.3 Government Agriculuanl Organization ................... 19 3.1 Reform Agenda ................................ 22 5.1 Status of Reorganization of Collectives and State Farms .... .... 63 5.2 Nizhni-Novgorod Farm Privadzation Model ............... 64 5.3 EU TACIS Proposals ............................. 69 5.4 Current Ministry of Agriculure Organization .............. 74 7.1 Average Soil Chmacteristics ......................... 85 8.1 Feeding System of Catle ........................... 96 FIGURES: 2.1 Land Use in Belarus ...................... 4 2.2 Livestock Inventory . 9 2.3 Cropping Patterns .10 4.1 Grain and Meat Pice Ratios .37 4.2 Belarus hnports .52 4.3 Belarus Exports ...... .. . ... 53 8.1 Changes in Dairy Cow Numbers ...................... 94 TABLES: 1.1 General Indicators ................................ 2 2.1 LandResources .............................. 4 2.2 Climatic Conditions ............................... 5 2.3 Household Plots ................................. 7 2.4 Agriculture Production Development ....... .............. 7 2.5 Agriculture Production for 1993 ......... .............. 8 2.6 Livestock Product Production ........... .............. 8 2.7 Contraction of Livestock Sector ......... .............. 10 2.8 Production of Major Crop Products ....... ............. 11 2.9 Comparative Crop Yields ............ .............. 11 2.10 Processed Food Production ......................... 14 2.11 Agroprocessing Plants, 1992 . ....................... 15 2.12 MarketingChannels .............................. 16 2.13 Food Consumption .............................. 17 4.1 Current Trends in State Procurement Prices ..... .......... 34 4.2 Input Prices in Agriculture ............ .............. 36 4.3 Consumer Food Prices Before and After Deregulation .39 4.4 Retail Prices .40 4.5 Share of State Procurement in Tota Siles 41 4.6 State Procurement Share or Agricultural Output .43 4.7 Trade in Agriculture .52 4.8 Export-Import Trading in Agriculture . 53 5.1 Implementation of Land Reform .60 5.2 Independent Private Farms .61 5.3 Comparison of Livestock Productivity .67 7.1 Cropped land by Oblast .... 83 8.1 Pig Production Cycles .97 8.2 Pig Productivity .97 9.1 Principal Prodwc Processed .101 MAPS: 1. Share of Cropped Land Area (IBRD 24318) 2. Soil PFertility (IBRD 24319) PREFACE i. The purpose of the sector review is to conduct an assessment of the status and performance of food, agriculture, and forestry in the Republic of Bela-ds, and to prepare, based on this overview and the Country Economic Memorandum, a set of policy recommendations for the sector's rehabilitation and development, and proposals for a short- to medium-term assistance program to support transition. Accordingly, the audience for the report is the Govermnent of Belarus, the Bank, and the international assistance community. H. This report is based on the findings of two World Bank missions that visited Belarus in September/October, 1992 and October, 1993 and additional findings since then. The first mission was led by A. Ublig and included C. Csaki (Economist), E. Brook (Agr. Economist), P. Hopcraft (Economist), T.V. Sampath (Agronomist), T. Schillhom (Livestock Specialist), F. Wencelius (Forester), E.B. Littman (Agr. Marketing Specialist), L. Engstrand and J. Sel}schopp (Agr. Industry Specialists), and Y. Tang (Land Reform Specialist). The mission was supported in part by the EBRD. The second mission included C. Csali and Z. Lerman. The Green Cover report was completed in October/November 1993, and discussed with the Government of Belarus in April 1994. Major fidings of the report were also presented to representatives of acadeuic and business institutions. Based on the comments from the Government of Belarus and recommendations at the seminar on the report, this current study was prepared in August 1994 by a small team led by C. Csakd. The team included M. Lundell, Z. Lerman, R. Arakelov, and A. Zuschlag. B. Gardner, S.R. Jobnson, D. Gressani, and D.E. Phillips provided valuable comments. iii. Deputy Minister D. Rutskii and Chief Economist A. Drasdov of the Ministry of Agriculture and Food were the main coordinators of the mission on the Belarus side. The State Committee for Economy and Planning, Ministry of Finance, Ministry of Forestry, State Committee of Land Reform and System of Land Tenure, and the State Committee on Prcuement and Distribution of Bread Products also provided active support to the sector review. EXECUTIVE SUMMARY 1. The Government of Belarus has expressed a commitment to transforming agriculture into an efficient, dynamic sector of its economy. It aims to do so by encouraging the development of a market-based, predominantly privately-owned, and largely owner-managed agricultural productionsystem. The reform in agriculture is still at an early stage, and the adjustments required are considerable because of the legacy of distorted prices, govermnent intervention in the production system, monopolistic input and output marketing, and the built-in inefficiencies of the collective farm/state farm system. This report provides an agenda and recommendations for continuing reforms in food and agriculture. Part 1 of the report presents the major conclusions of the review; it illustrates the present conditions in Belarus agriculture, gives an assessment of reforms, and identifies options for further reforms. Part 2 provides background analysis, focusing on resource endowments, constraints, and specific sub-sector operations. The Food and Agriculture System 11. The agricultural sector accounts for about onefifth of the net materialproduct (NMP) as well as onefifth of the laborforce in Belarus (Table 1.1 presents the most important general indicators). While the sector traditionally has produced an exportable surplus of certain products, mnainly livestock, which it has delivered to the other republics of the FSU (the country produced about 6% of total livestock products in the FSU), Belarus has been, however, a net importer offood and agricuture products. III. Most agricultural production is still organized into the "socialized sector," two types of centrally-controlled large-scale farms: kolkhozes (collective farms), and sovkhozes (state fanrs). All told, the "socialized sector" covered 7.8 million ha in 1993, or 83.1 % of all agricultural land, and produced 67% of the gross agricultural product. The sovkhoztkolkhoz system has traditionally coexisted with quasi-private subsidiary household agriculture. The first private farms were established in 1991 and their number has increased relatively ,wly. The private sector's share (household and individual farms together) of agricultural land increased in 1993 to 15.7%1 and its share in total agricultural output rose to about one third. IV. Agriculture showed more or less steady growt in the 1980's. With Belarus' natural resource endowment favoring livestock rather than crop production, livestock accountedfor 60% of total agricultural production by 1989. Yet this percentage reflects a livestock sector that was expanded artificially through heavy subsidies to both producers and consumers, and organized into very large production facilities with high concentrations of animals, and highly intensive feed, energy, and transport requirements. As a result, the livestock sector created potentially high animal health risks and serious environmental hazards. In the 1990's, low productivity, input cost increases, and contraction of demand combined to force deep cuts in livestock output. By 1993, livestock production had contracted about 28% from its peak levels in 1989. In contrast, by 1993, crop production had fallen only 4% relative to 1989. Production offorage andfeedfor livestock is the principal activity in crop producton. Overall, 80% of agricultural land is used to produce feed grains, fodder crops, and as artificial and naural pasture. The main grain crop is winter rye, which accounts for 35% of the total cropped area. Other 1 1.2% of agricultura land was state owned and belonged to non-agricultural organizations. ii Executive important grains, including spring barley, oats, and wheat, are also grown for feed. The main non-grain crops are potatoes, flax, oilseeds, and sugar beets. V. Belarus' agriculture currently exhibits lower productiwty than that of Westem or Central European countries. This can only be partially explained by the country's less favorable land resource base. Agricultural development policy has been a najor factor in creating an inefficient sector characterized by high labor input and high losses in planting, harvesting, and storage. Machinery and equipment, mainly of domestic make, are designed for the needs of large-scale farming, and they are often unreliable and technologically outdated. The technology of the food processing industry is similarly outdated and its structure is not geared to a competitive market economy. VI. Belarus has very important, but still young, forest resources. Total forest lands cover about 8 million ha, or 39% of total land area. Forest wood resources are already large and will increase rapidly over the next two decades. The quality of timber is good, particularly spruce. Since Belarus has 1.6 million ha of poor sandy soils not well suited for intensive agriculture, there is scope for further extension of forest area. Overall Framework of Refonns VII. The fundamental conclusion of this renort is that the present agricultural system, even with some reforms already completed, requires further adjistment to become a working market-onented econonmy. Successful implementation of the required adjustment necessitates a comprlensive and consistent program of actions. A comprehensive overall reform strategy needs to be developed and agreed upon by the Government as soon as possible. This reform program should be based on discussions among all the major players, i.e., the Government, fam enterprises, the processing industry, and the general public. VII. There is longer-term potential for creating an efficient internationally competitive agriculture system in Belarus. Domestic endowments and traditions favor livestock production, although the crop sector also offers some opportunities with flax, potatoes, and oilseeds. However, it will never be economically efficient for the country to produce all of the food required for domestic needs. A self- sufficiency orientation is not supported by the natural endowment of the country and cannot be justified economically either. Adjustment of the livestock sector is the crtical element of recovery, since it is suffering from declining domestic, and stagnat export, demands. Structural change, improvements in stock quality, and improved management of the feed base should be the major goals of this subsector. IX. In the emerging market system the Government cannot, and should not, directly engineer the recovery and growth of the kind needed in Belarus agriculture, even if it were to have at its disposal more ample resources than are currely available. The Government should only provide an enabling environment and permit enterprise-level decision makers in the agriculture and food economy to generate growth themselves. Therefore, the key elements of a transition program in Belarus agriculture are: (a) macroeconomic stabilization; (b) enterprise reform that creates an adequate number of private or at least commercialized finrs able to react independently to market signals; (c) creation of a proper incentive framework that provides motivation for development on the basis of the right to retain sizable farm profits; (d) regulatory reforms establishing the framework for a working market in food and agriculture. Summary its Priorities X. Although it is possible to envision a number of alternative patlhs to implementing a comprehensive program of further reforms, the required reform measures are categorized according to short and medium terms without providing ready-made prescriptions for their implementation. The report intentionally lacks precision on the "how and when" of the proposed reform strategy. Details of implementation have to be elaborated by those who are fully aware of the complexity of agricultural problems in Belarus, and who will bear the political responsibility for both the success and failures of reform efforts. XI. The major prioities for agricultural policy in Belarus, both in terms of their macroeconomic implications and their impact on incentives and resource allocation, are similar to neighboring FSU republics. These include: * creating a macro-economic framework providing the right incentive and motivation for agriculture by continuing price reform and implementing substantial market liberalization; - facilitating the growth of competitive markets for agricultural inputs and support services to farms and for agricultural outputs; - continuing land reform, land market development, and support for emerging private farming; - demonopolizing and privatizing agro-processing; and - ensuring food supply and providing a mininmu safety net for the poor. XII. With the decline of export trade in agriculture and declining domestic demand, shortages of domestic food supplies are unlikely unless there is a collapse of production and distribution systems. If proper reforms have been put in place this risk would be minimized. There may be groups in society whose incomes have dropped to the point where their nutritional status is in jeopardy, and there will be more of them in the future. The Government has an obligation to protect these groups, but food subsidies, especially those attached to products like beef, for which demand is income elastic, are highly inefficient. Food stamp programs, income transfers, and subsidies linked to products with low income elasticity (such as bread products) are all preferable to untargeted subsidies of the kind in general use in Belarus. New Macroeconomic and Incentive Framework XIII. Agricultural and food pricing policy in Belarus prior to the break-up of the FSU was characterized by centralized prce determination. Producer and consumer prices were set without reference to international prices. Producer prices of individual commodities were generally established. without reference to each other (e.g., animal feed was not priced with reference to livestock prices) and producers responded to centrally determined production targets and not market signas. Furthermore, consumer prices did not necessarily cover producer prices plus the cost of processing and marketing. Despite official commitment to a market economy, extensive liberalization of agricultural pricing and marketing has yet to be attained and the basic features of the former marketing structure remain iv Executive unchanged. The Government still maintains the system of state orders in order to procure products of critical importance such as grain. Though the state order system has lost its strength to a large degree, it still has an impact on a large share of total output, and parastatals, through their monopolistic practices, have control over most marketing, processing, and distribution. Extensive use of state orders to direct the flows of products between buyers and sellers still ties input deliveries to state output obligations and is, in effect, a costly system of explicit and implicit subsidies and taxes. Consumers receive explicit and implicit subsidies to maintain food prices at "reasonable" levels. Producers receive explicit subsidies on some inputs and outputs, but most farmgate prices exhibit implict taxation (measured against border price levels). XIV. Belamus officials characterize their agriculture prices as "free" and "liberalized" in the sense that, contrary to the traditional approach of the command economy, wholesale prices are no longer fixed and consumer prices no longer receive pervasive budget subsidies. Consumer price subsidies from the budget continue to apply ordy to two major products: bread and milk. Agriculture andfood prices, wth the exception of fruits and vegetables, however, are not free or liberalized in the Western sense, where "price liberalization" generally means that prices are allowed to be formed by competitive forces. "Recommended' or "indicadve' farm-gate prices are periodically announced by the Government, based on current and anticipated increases of farm input prices. In theory, the indicative prices are not binding, but in practice the entire system follows the Govermnent recommendations. Thus, prices are no longer fixed, but their periodic adjustment is prescribed by government calculations, and not by market forces. While some inefficient farms are protected in this system by cost-based pricing, most are hurt by it since the indicative prices are constantly eroded by inflation and are primarily intended to limit the growth of food processor's costs and of retail food prices. Thus, the main inmpaa of the indicative price system is to implictly tax farm enterprises heavily and to extend implicit subsidies to food consumers. Consumers are further subsidized by regulated food processing and retail trade margins. XV. The system of indicative prices based on the cost of production is inappropriate in a stable environment and harmful under inflationary circumstances. Cost based pricing fornulas do not take into account changes in demand or world prices. Moreover, under rapid inflation, cost based pricing depresses agricultural product prices, since costs incurred several months prior to harvest are generally not adjusted to reflect real costs of inputs at the time of harvest. If cost based indicative pricing is discontinued and trade is liberalized, the resulting pricing structure would reflect border price levels. Products that can be sold on the hard currency markets would tend toward the domestic equivalent of world market prices. Products sold primarily within the FSU would move toward Russian prices. XVI. Continuing the practice of previous years, farms have received explicit financial support via several channels. These budgetary and credit subsidies granted to farms have been substantial but not large enough to offset the large implicit taxes imposed by the indicative price system. In 1993 and 1994, agriculture has received a substantial amount of input subsidies to compensate for input price increases and output subsidies to prevent further produaion declines. According to our estimation, the sum of explicit subsidies to agricultural producers (including credit subsidies) will be at least 700 billion rubles in 1994, or about 5% of GDP. Though incomplete infonnation makes it difficult to precisely quantify all of the subsidies, it appears that the sum of input, output, and credit subsidies alloted to most agricultural products is offset by the implicit taxes imposed by price repression under the indicative price system. - v XVI. Conswners have been accorded signficantfood subsidies through budget subsidies for bread and dairy products in addition to the imnplicit subsidies accorded consumers by the indicative price system and through food processing ad retailing margin restrictions. Still, the Belarus Government has been maing an effort to limit consumer subsidies. In the last quarter of 1992, retail prices of meat and butter were doubled, and the prices of sugar and edible oil were made comparable to border prices (at an exchange rate of Rbl. 550 / US$). In 1993 there was continuous adjustment of indicative prices and the conswner prices changed accordingly. However, there are still general, open-ended subsidies on bread ad dairy products. The IMF estimates that budget subsidies on meat, dairy. and bread products cost roughly 11% of GDP in 1992. In 1993, they totaled 330 billion rubles, or roughly 9% of GDp2. XVIII. These budget subsidy levels are clearly not sustaimble. Moreover, implicit consumer subsidies come at the expense of farm income. There is a clear need for a significant further increase of consumer prices to reduce the budgetary burden and allow fannr-ate prices to rise. In January 1994, retail dairy product prices were increased to cover roughly one-third of production costs. Since March 1994, white bread prices have been deregulated and are no longer fixed. Brown bread prices are still regulated, keeping in place a 75% consumer subsidy for brown l-ead. The Government is reluctant to increase prices further. But in the end the consumer bears the cost - either directly when buying consumer goods or because the fnancing of subsidies comes from direc ta wes or an ind.rect inflation tax. XIX. The establishment of a market-oriented agriculture will require the completion ofthe pnrce reform andsubsidy reductionprocess. Prces received by producers should be allowed to adjust to reflect border prices by: (a) abolishing the indicative price system; (b) removmg remaining delivery obligations and restrictions on domestic trade; (c) phasing out the remaining price controls, producer subsidies, and consumer food subsidies, including the system of fixed profit nargins for processing and trade; together with (d) creating competition both in input supply and in output marketing. In order to ensure that agrcutural enterprises respond to changed price signals, it will be necessary to create a hard budget constraint by stopping the practice of covering their losses through budgetary subsidies or credit at subsidized interest rates and by phasing out producer subsidies. This should be part of a well defined program aimed at the completion of price liberalization by removing restrictions on margins and trade and by promoting private marketing operations in domestic and international trade. Fostering a Competitive System of Processing and Distribution of Farm Products, and Input Supply XX. Competitive markets should be developed to encompass the entire agro-industry subsector, and paticularly those parts of most direct importance to farmers, such as product marketing and processing, trapt, services, and input supply. Demonopoliztion and privatization leading to increased competiton would produce more efficient services, more amned to the needs of farmers and thus encourage the emergence of private farming. This will require action on the organizational, instiutional, legal, and reguatoryframeworr which proide the enabling envwronment. The development of a market oriented processing distbution and input supply system in food and agriculture will remp,re implementation of a strategy involving: 2 By 1993 meat ssidies had been p ouL vi Executive * the continuous updating and implementation of the state program and timetable for the division (demonopolization/comnmercialization) and privatization of the large state enterprises and trade monopolies that now do.ninate processing, input supply, and wholesale trade; * the rapid privatization of retail food outlets by auction, tender, or buyout; * steps to authorize and facilitate private sector entry including key components of state programs for developing entrepreneurship; * establishment of a supporting legal and regulatory framework to encompass anti-monopoly regulations, competition policies, and personal and property law, and contract enforcement; and, * provision of essential supporting services, notably price and market information, technical assistance and training services, financial services to assist in establishing new businesses and meeting priority investment requirements, and food inspection and sanitary standards. XXI. One of the key measures needed in demonopolization is the breaking down of large "agrokombinats" and all other monopolies and monopsonies into smaller units to promote competition. This should not be confned to regional level restructuring, but should apply to the organization of production activities of each enterprise as well. The conglomerates should be divided into privatized profit centers able to operate independently. XXII. A private-based commercial system is the most suitable way for supplying inputs and machinery services. For the short term, the existing structure and the new types of cooperatives providing machinery services can be the major institutions of supply. A network of farm supply shops could be created by privatizing the exisdng supply network and by promoting the establishment of new firms. As a first step, existing supply organizations could be demonopolized by having regional units operate as independent businesses without any territorial constraints on sales. New cooperatives emerging from the reorganization of the kolkhoz/sovkhoz sector can also become specialized input suppliers. Over the longer term, private firms, including some foreign ones, will become more involved if appropriate measures are taken to liberalize domestic and foreign trade. lilproving Rural Finanial Services XxI. In the short rnm, directed credit programs will have to continue to serve as the basis for financing agriculture, at least until farms are able to borrow against their property. However, several important changes should be made to the present programs. Directed credits should be restriaed to agriculture and to small-scale processing activities that take place within farms. Enterprises dealing with agricultural inputs, such as fertilizers, like other enterprises in the egro-industrial complex, should seek financing directly from commercial banks. Directed credits to agricultre should be reduced gradually over time, as borrowings on a commercial basis take over an increasing part of the financing of agriculture. XXIV. Credits should have clear-cut terms, even if they are concessional, and authorities should enforce those terms as a means of instilling financial discipline. The National Bank of Belarus (NBB) should raise interest rates on loans to agriculture to the levels prevailing in the rest of the economy. Subsidies would be more effecdve and cheape if they were conveoed directly linkbd to the objectives that the Goverment wants to achieve. These subsidies should bem transparent pas of the budget and should not erode the banking system. XXV. The Govenment should encourage establishment of a market-orleNe4 cowmp ve ftnanwal sector, in which intermediaries decide to whom, how much, and on what temr they knd. Recet banking laws, which created a two-ter banking system, have laid a foundation for ineenden of the banking system from the Governmnt. The present rural lendig system based on the Idagr prombank network, should become put of a compeutive banking system that provides a fil range of banking services, including deposit mobilization, trust and investment business, capial maet opadons, and provision of legal status and enforement of infomal financial contcts. nternatIona Trade in Agricultual Products XXVI. The prospects for Belarus' agricultural exports depend on trends in domestic producton and consumption as well as on the demand on international markets. Although domestic production is not likely to grow in the near future, shrinking domestic demand makes agriculal products available for export. Potental markets exist inside the FSU, especially in Russia, where Bdarus has established trade relations. RDeais lkyto rema ompeve in the Russian marketformeat nd daiproduc because of relatvely higher efficency of production and lower traot ca than other potential suppliers. The export of Belanrs ' agricutralproducts to areas other than the FSU seems to have lmited potent in the short term. XXVII. The initial task of reforming the trade and instutiona system in Belarus is to allow the develome of commercial and private sector trading institudons and agencies, financial and payms arrangemens, and tade sad exchange contol policies and systems that facilitate trading transactions and encourage the integration of domestic and exten mad*t. The ate forein trade monopoly has already been elimnated. The rmaing quitative restrictions and the cmberome license system on agricultural exports should also be phased out and replaced by a trapa system. A new foreign marketing structure, including competve private trading houses and dire sales by producers, should take shae rlatively soon. Steps toward liberlization of foreign cur regulations are also crucid to the development of viable agricultural trade. Laud Reform XXVI. Legislation in 1991-92 acmnowledged the principle of private land ownership in BdeaUs, however, it mntained state land ownership as the dominant form of tenure and unrstricted private land ownership has not been legally established. The Land Law of 1993 is a sigifcat step forward. However, it fails to establish the land ownership famework required by a mrket system because: * it confines unrestricted private ownership of agricultural land to such a nmrw portion of that land that it has more importance as a basis for subsistence faming as a social safety net rather than as an economic factor in the agriculural sector; viii Executive * it severely restricts the use of state owned land because lease rights cannot be transferred or marketed; and * it fails to include details on the administration and implementation of the law and leaves implementation for local governments. XXIX. Furtherlegislativeactions j*ereforeareneeded beyond the land law of June 1993. There is a call for a land tenure system that offers secure and tradable land rights, not necessarily ownership beyond the limits of recent legislation. This requires three inseparable characteristics: alienation, valuation, and marketability. To make land rights tradable or marketable, they must first be alienated (legally separated) from collective or communal blocks; they should be valued or priced; and a functioning land market must be in place with necessary legal structures to handle the sale and transfer of land. Emergence of Private Farning XXX. 7"> development ofan indepedent pivatefanning sector is at an early stage. Despite the fact that establishment of independent private farms is supported by subsidized credit, requests for land have been limited. As of October 1993, only about 2,700 independent private farms had been established, operating about 54,000 ha. Further specific actions would have to be taken in order to promote the creation of viable independent private farms. This would include: * establishment of an advisory and extension system in combination with financial restrcturing facilities for meeting the immediate needs; 3 development of a sustainable rural fimancing system to meet the traditional credit needs of agriculture; * decontrol of input and commodity markets and development of free and competidve markets; and * strengthening infastructure and transportation systems for the rural sector. Restructuring Coflective and State Farms XX. The restrutrng of the colectve and statefarm (kolkhozlsovkhoz) sector is closely interrelated with the establishment of indivial private farms and priva on in the sector. Vanous forms of reorganization have been chosen by Belarus collective farms. Creation of so called joint stock enterprises based on vaguely defined, nontransparent ownership strucures, is the most common mode of reorganization. While these joint stock enterprises are preferable to the present structure, they will prove to be inefficient in the long term because they lack the feel of real ownership and do not reduce the temptation for "free riding." This form of ownership also does not impose any major organizational changes and should remain a strictly transitory form towards the breakdown of the collective farms or towards a stock holding company with transparent forms of ownership. In a small number of collective farms, internal cooperatives are based on the distribution of physical assets and land shares. These cooperatives operate as independent legal entities which provide various services within the shell of the Swnmary Lx fonner collective fanrs. The results of restructuring are rather nmodest so far. In mid 1993, a total of 704 collective and state farms showed signs of reorganization. This is only 26.2% of the large-scale farms, while the comparable indicators in Russia and Ukraine are 70-72%. XXI!. While immediate changes are needed to adjust farming operations to the emerging nmrket economy, experience in Central and Eastern Europe also indicates that the large-scalefarm restructuring cannot befully implemented immediately and thatfull completion requires time and careful management. Although the completion of the restructuring process should be targeted for 3 to 5 years, some of the changes should be implemented within the next 2 years. The restructuring of collectives and state farms should be guided by three major principles: * distribution of land or land use rights and of other productive assets to the collective and state farm members in actual physical form and not as anonymous shares; * freedom of decision by members about the management system and future organization of production after the distribution of land use rights and assets; and e separation of production activities from social and municipal functions supported by a secure tax base for emerging local governments. XXXIII. It is not possible to predict what structure of agriculture will emerge and what the mix of larger and smaller enterprises will be, nor is this the key issue. In all probability, there will be a mixture of smaller, fanmly farms, large corporate-typefarnung, and variations of cooperatves and looser associatons emerging out of the exisng kolhoz/sovkhoz structure. If at all, family farming will probably emerge only slowly and the farming structure will remain rather heterogenous for quite a long time. However, in all cases, the key to creating an efficient structure is the clarity of the definition of ownership and land use rights, the lack of restrictions on use (except for environmental regulation), and the transferability of titles or leases to the most efficient farmers. XXIV. Privatization and the transition to a market economy will affect the existing rural social safety net and the provision of rural social services in the rural communities. Traditionally, the bulk of rural social services have been provided by the collective and state farms, and the large scale farms provide substantial additional benefits to their members and pensioners. In principle, the transfer of their services to outside agencies would allow for more efficient management of both farms and social services. In Belarus, however, the reforms to create a new municipal structure capable of running and financing the new services are at a rather early stage. There is neither the rural institutional framework nor a financial structure to replace the collective and state farms' social services. It is not surprising that the fear of losing vital social services has an impact on farmers' decisions to stay with the collective farming system to a great extent, and strenghens the argument of those who advocate against the dismanting of the large-scale farming system. Thus a range of options should be explored to create a more efficient management of necessary social services. This could include: (a) privatization of social services; (b) co- operative ownership of service providers by workers; (c) integrating social services into local municipal services (combined perhaps with TA to facilitate a transfer of skills to local municipalities); or (d) continued subsidization by the privatized enterprise. XXXV. The three most critical needs in the village communities are: ka) developing an enabling enviromnent to stimulate increased off-farm employment in the villages; (b) safeguarding an acceptable x _ Ec5tve level of nrual so evices during the period of restructring and privatizinS large scale farms; and (c) enhancing local ability to respond to socW and denogrphic change by providing communities with greater financial control. Except for appropriae steps to ensure acceptable stadards of health, nutriton, and unitation and to improve the general quality of life in rural areas, attmpts at direct state intervention do not seem desirable because of lingering local suspicion of government motives and the lack of cost-effective policy instrumnts. A coherent and integrated strategy should be developed to facilitate rural community development through devolving responsibility for these activities to the local communities themselves. One of the most effective ways to address this requirement is to provide commuties with greater control over their own budgets and, hence, their future. Investng n, and Improving, Farm Productivity and Efficien XXXVI. Changes in the structure of consuner and producer prices, and consequendy, of conumption patterns and feed costs, will require a major adjustment in the livestock sector. Livestock production costs, as well as output prices, will be much higher under free market conditions and domestic consunption will be considerably lower. Export prospects outside the FSU are not bright. The size of the sector should be allowed (and assisted) to adjust downward. Efforts would concentrate on measures to improve the efficincy of the livestockl subsector, but any future attempts to maintain or restore the size of the sector through subsidization should be ruled out. Yet livestock products are likely to remain Belarus' main agricultural exports. Restructuring land use to better reflect agro-ecological conditions might also result in the removal of some areas from intensive cultivation. Cropping patterns will change to reflect market forces and significant changes in production patterns are expected. The composition of Crop species and varieties would be based on mainly profitability and market prospects. XXXVII. Based on the review of the current situation and the major tasks of transition, invesnet prorides can be listed as follows: Public investment should focus on: * encouraging environmentally friendly and energy saving production and marketing practices; and * development of education and research potendals. Private investment should focus on: * recapitalization of farming in the emerging new corporate and individual fims; and * reconstruction and major modernization of support services along decentralized private and/or cooperative lines (industries such as seed industry, machinery maitnance, etc.). Both public investment and private investment must address the: i development of the'physical facilities (wholesaling centers, farmers' markets, etc.) to support the maket for agricultural products and inputs for agriculture. Summary xi XXXVIII. The private sector should play a decisive role in future investment in agriculture as privatization proceeds. Public investment needs to be directed at improving human and physical infrastructure, and to be linked to the implementation of a program of further reforms which set clear priorities. Education, Research, and Extension XXXIX. Agricultural universities, research institutes and the yet to be created farm extension services, i.e., the agricultural information knowledge system, will be of strategic importance. Preparing the next generation of agricultural professionals is vital. As the full effects of economic reforms play out, it will be important to be able to identify, adapt, adopt, and/or develop technical innovations to increase factor productivity and underpin competitiveness. The educational, research, and extension services must transform themselves to meet the needs of the market-based agriculture. Role of Government XL. The Government's role should be to establish the general rules and facilitate the conditions for smooth operation of markets and independent business organizations. This role is not less important than the previous one; however, it requires a different philosophy, as well as different means and institutions. The Govermnent's fnctions should be reguion, provision of supporting services, and analysis. It needs to make a commitment to changing the stucture and scope of public institution activity to be consistent with this new role. The overall principles driving this change should be: (a) establishing clearly defined and effective lines of responsibility; (b) dismantling of the current "agro-industrial complex" governmental management structure; and (c) simplification of the structure of govermmental organizations corresponding to the reduced role of the public sector responsibilities in agriculture. Extenal Assstae XLI. The long isolation from, and unfamiliarity with, the workings of market economies, the shortage of foreign exchange, and the limited availability of modern and efficient capital goods in the domestic market are constraints in the transition to a market economy. According to our analysis, external assistance in agriculture would be most needed for: (a) balance of payment support for critical inputs to prevent a collapse of domestic production systems; (b) technical assistance for the development of a comprehensive and consistent agricultural policy framework and restructuring of technical and financial agricultural services, as well as the public administraton of agriculture in accordance with the needs of a market oriented agricultural sector; (c) technical assistance for the implementation of the land tenure and enterprise reform; and (d) capital investments for restructuring of the agricultural input and output marketing system; rehabilitation and quality improvement in food processing; and recapitalization of reforning farming enterprises. PART I: MAIN REPORT CHAPTER 1 INTRODUCTION 1.1 The Republic of Belarus covers 207,595 square kIlometers and has a population of 10.3 million. Belarus shares borders with Lithuania and Latvia to the North, Poland to the West, Russia on the East, and Ukaine to the South. Belarus' natural resource base is limited and there are few indigenous sources of primary energy or raw materals for industrial processing. Its agriculturat resources are reltively weak; soils tend to be of low fertility, and light or marshy. Yet, the country's per capita income is estimated to have been US $2,920 in 1992,' one of the highest in the former Soviet Union (FSU). Its economy was built on its strong human resource base - a healthy, literate, and well-trained labor force with excellent scientific capacity. Within the Soviet Union, Belarus' comparative advantage lay in industry (machinery, trucks and metal industries). Industrial production remained the leading economic sector after independence and in 1992 accounted for about half of the NMP2 and 47. 1% of the GDP. The industrial sector in Belams accounted for nearly 8% of Soviet output in 1990, although the population of Belams was only 3% of the FSU, thus maing it one of the most industrialized economies of the Union. However, agriculture, based largely on livestock production as well as grain and forage inputs for animal husbandry, plays an important complementary role, providing substantial employment, income and export earnings, despite Belarus's traditional status as a net importer offood and agricultureproducts. In 1992, food and agriculture and forestry comprised 24% of the Belarus NMP (18% of GDP) and employed about 20.7% of the labor force in February 1993. It also has been a significant contributor to external trade (8.5% of total exports and 13% of imports in 1992). 1.2 The FSU Republics had been the main suppliers of energy and raw materials for Belarus' industrial products as well as serving as the main customers. The rest of the FSU was the major market for livestock products from Belarus and provided vital inputs, first of all grain, for Belarus agriculture. The Bekaw economy has been badly damaged by the break up of the Soviet Union and the deterioration of the economies of its former member Republics. The depenence on the rest of the FSU has not changed significantly after independence. In 1992, 87.5% of agricultural exports went to other FSU republics while 56.6% of agricultural imports originated from those countries. 1.3 The past performance of Belarus agriculture reflects trends in the FSU as a whole. Agriculture showed more or less steady growth in the 1980's. In the beginning of the 1990's, output declined substantially, reflecdng the deterioration in the overall economic situation of the FSU. High inflation, worsening terms of trade for agriculture, reduced availability of vital inputs, falling real wages and domestic demand, and the collapse of inter-regional trade, all contributed to decline in output. Declnes in agriculturat producton between 1989 and 1993 in Belarus (17.6%), however, have been somewhat less than those in most other FSU republics. 1.4 The country now faces the complex and difficult task of economic transformation, in which agricultre should play an importan role. Agriculture needs be made more efficient, new markets I World Bank estmate, Septer 1993 2 NMP = Net Meil Product was the main macroeconomic account used by the Soviet Union and other centally planned economies. GDP vautions are only available from 1992. 2 Caupter I have to be developed, and the living stdards of both its workers and its domestic customers need to be upheld and improved. The instional franework for food and agricuure still reflects the needs and pracices of a command economy, closely integrated with the odter economies of the FSU. The farming system is dominated by large-scale, socialized enterprises which continue to aim at maximizing physical output. Agricultural output and inputs are still largely allocated by various administrative medunisms - indirect state orders and price controls, and by centralized and monopolized trading. 1.5 Belarus' agriculture currently exhibits much lower productivity an that of Western or Cnral European couries. This can only partially be explained by the country's less favorable land resource base. Agricultural development policy has been a major factor in creating an inefficient sector characterized by high labor input and high losses in planting, harvesting, and storage. Machinery and equipment, mainly of domestic make, are designed for the needs of large-scale farming, and they are often unreliable and technologically outdated. The teclmology of the food processing industry is similarly outdated and its stucture is not geared to a competitive market economy. 1.6 The Govermnent of Belarus has expressed its commidtntr to transforning agriculure into an efficent, dynanmc sector by encouraging the development of a market-based, predominaly privately-owned, and owner-managed production system. The reform in agriculture is at an early stage, and the adjustment needed is considerable because of the legacy of distorted prices, administrative intervention in the production system, monopolistic input and output marketing, and the built-in inefficiencies of the collective and state farm system. The Government has moved cautiously on economic reform, while attempting to protect living standards. It has started defining the legal framework for reforms, made partal improvements in the incentive system and started restructuring the agricultural adiniaon. 1.7 Frthier coordiated and wel designed acdons are needed tc translate the Goverment's commitment to the transformation of the economy into a market-based system into specific programs for industry, trade and marketing, and agriculture. This report descnbes and analyzes the stat of the agricultural economy and outlines an agenda and recommendations for fiuther reforms in food and agriculture. Part 1 of the report presents the major conclusions of the review; it illustrates the present conditions in Belarus agricre and gives an assessment of reforms and identifies options for continung reforms. Part 2 provides background analysis, focusing on resource endowments and constraints and specific sub-sector operations. TABLE 1.1: Gen"l hdaters 1980 1985 1992 1993 Agricultural Land (VWt- ha) 9.728 9.650 9.330 9,391 Agiulural Lan (ha per capia) 1.01 0.97 0.91 0.90 Total Populadon ('000) 9.592 9.929 10,233 10,345 - of whib. Rural 44% 39% 32% 32% TotWl Eloyuin (W0) 4.9S9 5,112 4,887 4,760 - of which. Agriula 1,305 1,208 1,012 0.965 Poice of Total Emplymn 26% 24% 21% 20.3% Share of Food, Agiture. and Forestry in NW 18.4% 30.2% 23.9% 17.5% Gross Agrkcultral Ptoduct (consunt 1983 mbIes) 9.480 12,008 10,308 10.693 3ourco: WoiRI DM 3tUiC Handbook - states of tMe ioiner U33R. Belaas MmiSly of Agriculture and Food CHAPTER 2 MAIN FEATURES OF THE FOOD AND AGRICULTURE SYSTEM A. THE AGRICULTURAL RESOURCE BASE 2.1 The Belarus agricultural sector accounts for nearly a quarter of the NMP and employs about 20% of the laborforce in Belarur. The sector taditionally produced an exportable surplus of ma8ily livestock products delivered to the other Republics of the FSU (the country produced about six percent of total livestock products in the PSU). On the whole, however, Belarus has been a net importer offood and agricultre produs. Labor Force 2.2 The total populaton of Belarus was about 10.3 million in 1993, roughly 3.5% of FSU popuation. The country's territory covers 208,000 km2, or 0.9% of the area of the FSU. Population density was just under 50 per kim2. About 6.1 million people, 60% of the total population, were of woring age. Of these, 4.9 million people were employed, with 1 million, or about 21% of the worldng populton, employed in the food and agriculture sector.' Employment in agricultural production has been declining from some 1.3 million (13 workers per 100 ha of agricultural land) in 1980 to some 1 million (11 workers per 100 ha) in 1993. 2.3 Belarus' popuion growth has been very slow, only about 0.5% per year since 1970. The ural population has declined from 5.1 million in 1970 to 3.3 million in 1993, largely as a result of migration from rural to urban areas.' Most of the migrants were younger males, leaving a rural popuaion of which nearly a third was 60 years of age or older and 54% was female. Women provide most of the labor on household plots. They are also well represented in the livestock industries, research and social faities, as well as in enterprise administrations, while men tend to dominate larger-scale crop production enterprises. Fmle representation in enterprise management is significant, but nmch smaller than their share of the rual population. land and climate 2.4 The landscape of Belarus is similar to that of northeastern Europe, with extensive plains, low undulating hills, forests, and lakes. In the aggregte, about 45% of the total territory of Belarus, I Such fues are dependent on definidons, and estimates of the share of dhe labor force actually engaged in agriu varies from the low twentes to nearly thiry percn depending on whether mputed labor on household plots is included. 2 Rura inrasuure is insufficiet for die acur levels of populaon. Forty percent of Xt populaton does not have access to tmdcl services in their local villages, more than half the populadon has no acoess to cultural facilities and 70% of local toads are unpaved. These condiions, togeher wih lack of emploment oppommities, have contnlted to migradon to urban areas. 4 OCwpter 2 or 9.4 million ha out of 20.8 million ha, is ckassifted as agricultural land (Table 2.1). Of Land Use In Belarus (1993) this, 6.0 mi1lion ha is in annual crops, 1.3 million ha is in meadow, and 1.8 million ha is in natural pasture; orchards occupy as litle as 130,000 hectares (Figure 2.1). Since 1970, there has Pasture been a dec}ine of 4.1 % in agricultural land 19% because of a reclassification of marginal lands as forest and in some instances as urban or indutrial lands. Because a significant share of the land currently used agriculturaly is of margital quality, more agricultural land may go to non- Hay agricultural uses in the future. 14% 2.5 Belarus has a temperate Orchards Crops coninentl climate, transitional between maritime 2% and continental regimes. Winters are relatively mild due to the influence of sea winds from the Baldtic. Nevertheless, Belarus is generally F%" 2-1 covered by snow from November to April. Average annual precipitation is 641 mm. Three agro-clinmatic zones can be disdnguished according to values for general anal precipitation, evtranspiaion and thermal resource availability for crop growth (Table 2.2). -bwe 2.1: Land Resources (thosand ha) 197 1993 % Chong Agricultr Land 9,795 9,391 -4.1% Arable IAnd 6,378 6.261 -1.8% Pasous 1.611 1.819 +12.9% Meadows 1.806 1.311 -27.4% Fors 7.497 7.415 -1.1% Odher land and water 10,693 11.369 +3.7% AgricutualLand per capita (ha) 1.09 0.91 16.5% 'Arable lan is the sm of cropped land, fallow. owuhars and vineyards. Soure Ian Mmeny of Ariue and Food 2.6 Soils arepredominantlypodzolic, i.e., relatively infertile soils typically found in foress. They are mostly sandy loam (49%) or clay-loam (27%). Generally, soils have good structure but are acidic (pH 5.6), require continuous liming, and fairly advanced nutrients and crop mnagement methods. In short, the prevalence of light soils put Belarus at a disadvantage compared to other countries of Easte Europe, especially Ukraie. Main Features of the Food and Agriculture System 5 Tabb 2.2 Climat Conditions In BDeau Zono Precipitation Evapo-tnrintilon ermal Resource Northem 750 mm 570-600 mm 42 kcal /cm2 Centa 700 nun 570-590 mm 43-45 kcalcOm2 Southeem 620 mm 540-570 mm 46 kcal/cm2 Srce: Belarus Mu"stry of Agriculture and FooI Environmental status 2.7 Moderate to severe erosion caused by wind and water has occurred over wide areas (up to 12% of the agrcultural land). Water holding capacity of eroded soils is very low, and crops are more prone to moistre stress when rainfall is low. In dry years, during the 1992 drought for instance, crop production on these soils suffers greatly. While managers and agronomists of large farms are aware of erosion problems and the appropriate conservation practices, heavy machines contimue to be used to plant large areas quickly because there is no altemative machinery and no low tillage equipment available. This limits the adoption of contour strip conservation practices and efficient land management techniques that could control erosion. 2.8 Heavy concentraton of animal populations in relatively small areas results in high levels of nitrates from animal wastes in both soils and water. Manure removal systems for most large scale cattle and pig complexes are based on an Italian design developed in the 1970's. The design is satisfactory, but due to poor workmanship during constmction, improper adjustments, poor maintenamce, and conceated distribution of solid and liquid end products, the cocetration of nitrates and other elements may be fairly high in soils and water around these complexes (up to 250 mg/L compared to a standard of less than 45 mg/L). 2.9 The fragile sandy soils pose a specific problem of groundwater contamination. The Government monitors nitrate levels in drimking water, as well as in various food items. The nitrate levels of vegetables sold on a given day are posted in shops and markets. In 1989, the Goverment initiated a 5-year program to address the soil and water contamination problem to improve manure removal and control of fiuther deterioration of groundwater quality. However, the economic downturn has badly slowed implemenation. Solving the nitrate contamination problem will require that water for human settlements be obtained from sources far from livestock complexes, and improving or re-equipping the manure removal systems. 2.10 Although the Chernobyl reactor was located in Ukraine, 75 percent of the radioactive fallout was deposited in Belarus because of the reactor's proximity to the border and the prevailing winds. The Chernobyf acddent affected Belarus agricudture in two ways: first,. 1ioactive contamination has reduced the area available for crops (about 261 thousand ha were taken out of cultivation and some, mainly minor, restrictions on agricultural cultivation were introduced on about 1.5 million ha, about 16% of total land), livestock, and forestry production; second, contamination of plants and animals, although 6 Ohapter 2 declining, continues to limnit domestic utilization and export of agricultural output.3 B. AGRICULTURAL PRODUCTION Land Tenure and Enterprise Structures 2.11 Most agricultural production is still organized into the "socalized sector, With The Socfaied AUu Swo two centrally-controlled types of large scale b 19; fanns: kolkhozes, collective farms in which TOtai r 2,52E- output and assets are jointly owned by the Ft - 65F:; members, and sovkhozes, state fams in which Colecde Farms &A :; output and all assets, including land, are owned m : -;-::ises by the state, and the laborers are state ; employees. The kolkhozfsovkhoz system is A :Z i a - .() augmented by "interfarm enterprises", or ;: i:i mehkhozes, that produce agricultural services or . = (:; :-.0? process agricultural products and are owned jointly by several farms. Box 2.1 presents the l at i.t faI!I2I major indicators of the sociaized sector in l4X3 ) agriculture in 1993. All told, the "socialized sector" accounted for 7.8 million ha in 1993, or gntefarms 3d12O4 83% of all agricultural land, and produced 67% of the gross agricultural product. The eix2.1 kolkhoztsovkhoz structure also provided a comprehensive range of social and municipal services (kindergartes, schools, medical care, housing, cllubs, sports facilities). 2.12 Both sovkhozes and kolkhozes are generally diversfed, med, anize large-scale enterprses. Only a few farms are narrowly specialized. The scope of their operation frequently integrates upstream and downstream activities into the core businesses, such as agroprocessing (daitry, meat, or sugar processing) or the provision of inputs (machinery and construction services). However, livestock production is the dominant orientation of agriculture and much of the crop production is focsed on providing the inputs for the livestock industry. The large-scale farms accounted for 72% of livestock production and practically all the grain produced in Belarus. 2.13 The sovkhoz/kolkhoz system has traditionally coexisted with quasi-prvate subslary household agriculture. Household farming is based on plots ranging in size from 0.1 to 0.5 ha which are used by members of state and collective farms and by urban workers who cltivate garden plots. Historically, the large-scale farms and household plots of their members have coperated closely. Because of their small size, subsidiary household farms mainly concente on livestock, which creates an impression of high land use intensity. All together, 1.4 million families used about 650,000 heces, or 7% of the total agricultural land, to produce more than a quarter of total agricultural output in the 3 For a discussion of the impact of the Chemobyl accident on Bdelarus agriulr, see Belanus Enviroawemal Revkw. World Ban, 1993. Main Features of the Food and Agriculture System 7 second half of the 1980's. Independent privatefarning has started to emerge recently. The first private fanns were established in 1991. Their number has increased relatively slowly. In October 1993, there were about 2,700 private farms in Belarus on 54,000 hectares (about 20 ha per farm), which is 0.6% of total agricultural land. The private sector's share (household and individual farms together) of agricultural land increased in 1993 to 15.9% and its share in total agricultural output rose to abnost 40% (Table 2.3). Table 23: Contr -titlon of Household Plots and Private Farms (%), 1980-93 Year 1980 1985 199 1990 1992 1993 Share of Privately Used land in Total 6.7 6.9 7.5 8.5 15.3 15.9 Agricultura Land Share of Toal Agricultual Producon 33.6 30.3 25.3 24.5 32.7 38.6 in Crop production 34.1 30.5 28.8 28.5 39.0 47.8 In Livestock production 33.3 30.2 22.7 22.1 27.7 29.7 Source: Belarus Ministry of Agriculte and Food Setucture and Growth 2.14 The production of crops in Belarus has accounted for 40 to 45% of gross agricultural product since 1975. In 1993 however, it rose to almost 50%. Tabl2.e Development of Agricultural Livestock production accordingly Productio an conut rubI of 19183 % conuributed between 55% and 60% to total TOW C Lvestock Shar. of agricuural production, with a tendency Producton Uveck toward the lower limit in recent years. Agriculture showed more or less steady 1989 100.0 100.0 100.0 57.9 growuh in the 1980's. Agricultural 1990 91.3 80.2 99.4 63.0 prodution declines in Belarus in the 1990's 1991 86.8 85.2 88.0 ss.7 have been less than those in most other FSU republics (Table 2.4). In 1991, output 1992 79.4 84.9 75A 55.0 declined by 4.9% compared to an average 1993 82.4 96.3 72.3 so.s 10.6% for the FSU as a whole. In 1992, soMrce: woMaME Belarus agricultural output declined by a further 10% compared to the 16% FSU decline. The share of the livestock sector however declined by 13.3%, and was only 50.8% in 1993. Belanis agricultural output in 1992 and 1993 would have been lower without the relatvely good agricuual performane of the private sector, which moved toward crop production and adjusted quickly to changing relative prices. Output on the large scale farms declined by 17% in 1992. Production results for 1993 (Table 2.5) indicate that overall agcultural production exceeded the 1992 level by 4%, mainly due to a better harvest in the major crops, yet it stiUl remains an average 20% below the 1989 levels. At the same time, livestock pkoduction continued to decline by 4.2% from !92 to 1993. 8 Ohapter 2 Uvestock Production 2.15 Development of the livestock sector in Belarus was given Tabe 2.5: Agriculurl Product fi 1993 high priority in the Soviet period, (tusad tOus) which was reflected in high levels of AgrVlculw Pmduw 1993 1993 to 1992 investment in large scale mechanized ( production units and in generous subsidies. By the end of the 1980's, Gain - cleanweight 6900 95 over 70% of total agricultural poatoa 11644 130 investment and operational subsidies were going to the livestock sector and P (fie) 56.8 94 80% food price subsidies were for Suprbee 1568 140 livestock products. Belamus, with 1.7% of the agricultural land of the Vegetbls 1048 125 FSU, produced about 6% of the meat, Fruit and Berries 807 168 7% of the milk, and over 4% of the eggs for the USSR. filk (millions of tns) 5584 95 lAvesmoc mid LIveWeidu 1242 86 2.16 Dairy production Is Pog 128 the mainstay of the livestock sector. CaCUS 765 86 (Table 2.6) In the late 1980's, about 30% of dairy products produced were Eggs (lon) 3547 101 delivered to Russia. Beef production is complementary to the dairy soaue: Mnshy of Agricf e and Food industry: most fattening operations use non-castrated male dairy calves. Pork is the meat most favored by Belarus citzens, but poury has been the fastest-growing livestock subsector and now accounts for 14% of meat consumption. Table 2d6: EPoduesd of Major livstack cPoducts 1970 1975 1980 1985 1990 1992 1993 Milk ('000 ton) 5264 6109 6105 6759 7457 5885 5584 Meatw (000 ton 999 1259 1309 1655 1761 1268 1198 Gve Weight) Eggs (minions) 1669 2631 3035 3363 3657 3502 3S47 Wool (ton) 1222 1040 1122 1223 958 682 583 E including puR meat Soume: Bdanms Ministy of Agniutr and Food 2.17 Milk and meat production conthued growing until 1990, with the livestock subsector registeig impressive increases in productivity bemteen 1985 and 1990: the quantity of milk per cow fain Features of the Food and Agdcultre System 9 increased47% between 1970 and l990(its peak year). Beefproductionhas been increasing more rapidly dtan cattle numbers since 1970, indicating efficiency gains (younger slaughter age and more rapid weight gains). The number of eggs per hen increased 25% between 1970 and 1990, subsequently dropping by 7% by 1993. After 1990. increasIg prices and gtms Uvesto *cymy decreasing per capita incones drove _a consumption down and forced a Id downward adjustment of livestock * = - _ lc production: from 1990 to 1993, milk a - and meat production decined by 25% 4 m m _ and 32%, respectively, while the i number of cows dropped only 7% and 3 w m the cattle herd contractd by about 13% 2 (Figure 22). The relatively slow L adjustment of the herd size after 1990 o* has had a negative effect on livestock 199 t9W productivity: milk yields, for Instance, declined by 17%. 2.18 Altugh Belarus' naural resource endowmen indeed favors livestock rather than crop production, the lvestock industy in its present form appears to be oversl4 in amciet, and environmen nble. The industry was epanded arficaly by heavy subsidies to both producers and consumers. Organion of the industry into very large producon modules with high geographical conceio of animals is often associated with diseconomies of scale and high ener and transport i, as well as creatng problems for animal health and serious enl hazards. Moreover, the industry does not rely on natural pastre: all of domestically produced grain is currently used for animal feed, whic must be supplemented with sutal quities of imorted feed. 2.19 Despite incrse in productivity in the 1980's, de lives seowr In Beus has neu been fflient by Western stdar. Average dady weight gin per animal in beef production reached nearly 500 grams per day by the end of 1980Ws, compared to about 800-1000 g/day in Western Eupe. The large pig complexes. although highly mchanized and iabor extensive, reached conversion rates of oly 4 kg feed per kilo weight gain compared to a 3:1 ratio in modem pork production system in the West. This is lardy attributle to cdronic shortages of protein feed, minerals, ad vitamis. 2.20 The profabiity of lvesock erauions has faUen drastcay fter 1990 beas of incrsing costs resuldting from reduced subsidies on inputs, decling sales on domestic markets as a result of rising conumer prices and falling real incomes, and because of collapsing marets for exports to the newly inepene republics of the FSU. The livestock industry, and cattle production In particular, now faces a difficult adjustment. The present size of the industy canot be minid, contraction of the sector has been much less than in the Baltics or other PSU RepubLcs (TabI 2.7). A change to a less concenred livestock prouction system based on greater use of grzn lad awnd abor could increase profitability and would be environmentally more friendly. 10 Owpter 2 Crop roduton 2.21 Because of the importance T" 2.Cn o hwesat*M of livstock in Belarus agriculture, - Dedbe I Uvok hpveqy prodction offorage andfeedfor ivestock Catd Pip Shaup nd FoPmy s the prncipalactivty In crop produion. o In all, 80% of crop land is used to produce sejp 13 12 1o 2 faed grains and fdder crops (Figure 2.3). Themaingrain copiswinterrye, which a 28 75 33 7S accountsfor35%ofthetotalcmppedarea. Azeuijn 11 67 11 22 Oter important as including Vrig KmIdISWA 3 21 s barley, oats, and wheat, are also gown for feed. The man non-gain crops are Moltov 13 27 1 32 potatoes, fla, and sugar beets (see Table R1 IJ 21 16 13 Ukzun 6 19 20 16 2.22 Beelus-' grainprodctis S :AO' , PKaRe mainy used for unlal feed; food grain requIrement are met by imports. In 1992, for example, domestic production of grains was 7.2 mIllin tons. Supplem by imports of 2.4 million tons, supply totaled 9.6 million tons. Of this amon, 7 million tons, 85% of domestic production, was conwsmed by animals and 1.2 miitons wes to buman cosI An additonal 440,000 tons used in production of spirits, beer, and starch. Seed use (0.8 mion tons), losses m storage and processing (0.5 million tons), and about 300,000 tons decrease in carry over stocks, accounted for the remainder. 2.23 Production of grins rose Cropping Pattems in Belams (1992) substantily, from 4.1 million tons in 1980 to a peak of 7.8 million tons in 1987 (clean wei). Te post-Independnce yew (1991- Potato/veg. 1992), are not duaracterized by a signfca 14% dro n Srin proon, and the decline observed in 1991 actually reversed itself in 1992. A somewhat worse harvest wvas completed in 1993 according to preiminary Grain results (6.9 million tons). This is stil, 45% bower, a relatively good achievement in view of tie drough in 1992 and flooding in 1993, as wdl as the reported shortages of F / critical inputs, including pesticides, Feed Crops phosphatic fertlizers, and farm mhinery. 38% In 1993 however, crop production increased indust Crps by 13A% compared to 1992, mainly due to 3% an o crop of potoes, vegetables, and sugarbeets Crble 2.3). r 2.3 Main Features of the Food and Agriculture System 1 2.24 Other major crops in Belarus are pataoes, vegetables, Table 2.8: haducdon of M*r Crop Poducs (thousad t) sugarbeets. rape, and 1980 198 1989 1990 1991 1992 1993 flax. Fruit production is relatvely undeveloped, Grai 4108 5790 7384 7035 6296 7230 6900 and Belarus is a distant sixth among the fiRfee Po 9333 10553 11097 8590 8958 8984 1164 FSU Republics, Vegetables 733 828 894 749 918 838 1048 producing about one third of te fruit harvest ofthe sths 1122 1568 1810 1479 1147 11 168 much sma}ler Moldova. Flax 61 85 87 52 76 61 57 Belarus' sandy soils are particularly well suited to Souroe: Belarus Minisay of Agricultre and Food production of potatoes, which account for 35-40% of the gross value of crop products. Belarus is the FSU's leading potato exporter, with over 300,00 tons annually. Potatoes are grown on about 780,000 ha. Flax is another crop in which Belarus has a significant export potential (Belarus is the third largest flax producer in the FSU after Ulraine and Russia). Flax production, however, fell from 127000 tons in 1987 to J7,000 tons in 1993 and the yields are lower than in Ukraine. Sugarbeets are grown on about 50,000 ha. Grain yields more than doubled from 1.3 tons per ha in 1980 to 2.9 tons per ha in 1987 (clean weight). Since then they have remained around 3 tons per ha (although 1993 yields were only 2.54 t/ha). Increased grain yields reflect a rise of 175 % in ferdlizer application per ha between 1980 and 1990, a substantial increase in m nion (from 5.8 to 10.5 tractors per 1000 ha), and large scale land improvement Programs involving draiage and liming. Crop yields, although on the whole good or average by FSU stndards, are somewhat lower than in neighboring European countries (Table 2.9) and far below the EU levels (grain yields in westen Europe were 4.7 t/ha in 1990 and 6.33 t/ha in 1991). Table 2.9 Coapamtive Yilds .1 Major Crop Pducts (tUla 1986 1990 1992 1993 Betuas Poland CEE3 BDes Poland CEU Detau Poland CNE Debams Grain 2.52 3.04 3.73 3.11 3.28 356 2.95 2.90 3.49 2.54 Potoes 19.2 18.5 13414 13.5 19.8 11.1 11.5 16.8 9.0 15.5 Sgarbes 30.2 33.7 NA 32.0 38.0 NA 22.0 31.6 NA 28.3 Fax 0.48 0.61 0.62 0.35 0.61 0.58 0.49 NA NA 0.59 'CL cenuat ads masm nurop Source: Belus Mintry of Agriculture and Food. USDA coomic Resarch Svice. Agriultuwad Iputs 2.25 In the 1980's Consumption of mineraffertilizer had been about 1.9 million tons of NPK nutrients anually: 0.6 million tons of nitrogen ferrdlizer, 0.4 million tons of P20,, and 0.8 million tons K2O. On average, annua application of NPK nutrients is 261 kg/ha. Consumption of mineal feridlizer was lower than the West European average. Application of fertdlizer has declined contiuously in the 12 apter 2 1990's. Only 1.2 million tons were applied in 1993 (about 440,000 tons of nitrogen, 190,000 tons of P20s, and 567,000 tons of K20). There has been no shortage of N and K fertilizers in Belarus, but phosphatic fertilizer is less readily available. As a result, mineral fertilizers are not applied in the recommended balance: instead of 1 N: 0.9 P: 0.6 K, they are applied in the balance 0.75 N: 0.5 P: 1 K. About 70 million tons of organic manure are used annually in production of food grains, root crops, and fodder. 2.26 Belarus' agriculture requires about 0.9 million tons of seed grain annually in addition to 2.5 milion tons of seed potato. There are 46 seed plantadons in the country with a total annual capacity of 130,000 tons of foundation seed. Amnal foundation seed requirements are estimated at about 29,000 tons for grains, oilseeds and fodder cros, some 40,000 tons for potatoes, and 600 tons for sugar beets. The genetic potential of the available seeds is considered modest and germination levels relatively low. 2.27 Belarus agriculture used about 16,300 tons of pesticide in 1990 on an area of 5.4 million ha, or 2.9 kg/ha. Integrated Pest Management (IPM) technology is not widely used and there is a heavy dependence on imported pesticides. In 1993 only 7,200 tons of pesticide were applied, an average of 1.7kg/ha. This represents an almost 70% reduction from 1987 peak levels. This reduction might have serious consequences for agricultural production since these inputs account for about 50% of yields under Belarus conditions. Mchanizaion 2.28 Belars was a major producer of agriculural equipment in the FSU. The country nufactured more than 100,000 tators and 12,000 forage harvesters annally. About 85% of production was exported to FSU republics; the rest was allocated to large state and collective fims in Belarus according to centrally established priorities. Agriculture, particularly crop production, is fully mechanized. There are 123,000 tractors (somewhat more than one per 100 ha of agricultura land), 25,560 cereal combines, 9,907 fodder harvesters, 8,436 potato barvesters and 1,799 sugar beet harvesters (1993 data), which reflects some excess capacity, considering the high efficiency of machinery use in large scale farming, and the soil charactescs. 2.29 Most Belarusfann maddnery desagnedfor use on largefarms; most farms do not have small or medium size tractors. Machiery suitable to the much smaller emerging private farms is not manuactured in Belas. Farm machinery has deteriorated since 1987, when the replacement rate began to fall due to the weakened financial position of the farms and declining Government investment in agriclture. Most machines, especially planters and fertilizer applicators, have outlived their normal useful lives and, although rugged, are not particularly efficient. Precision spraying equipment is not avaDlable. C. FORESTRY 2.30 BeMarus has very inyornt, but sill young, forest resources. Forestry, including wood processing, is an important source of income, employing 175,000 people. Industrial logging and wood processing represd over 5% of industrial output and 6% of industrial employment in 1990. Total forest lands cover about 8 million ha, with actual forest cover of 7.4 million ha (see Box 2.2). About Main Features of the Food and Agriaste System 13 4.3 million ha of forest lands are managed for production and 2.3 million ha are forests managed . Fra or (1992 for protective and recreaional purposes. Forests (t a are fairly evenly spread over the country's 2-,760 provinces. They consist mostly of conifers, especily pine (58%) and spruce (11%), but they - Fund also contain some broad-leaved species: "soft' W -:. - 6,739 species, including birch, alder and poplar KOIkhOz 6 S;ovhz -2Q represent 27%, and *hard' species such as oak, Mp'd' ; -- ..- National PEb ~~~~~~'42 ash and maple comprise 4%. . - Total''05 2.31 The average age of the forests is - ft6a lI;area -39: about 40 years, but about 50% of the stands are under 40 years old and only 13% are over 60. This is the resut of forest destuction during :: =7 , World War U, heavy use of old stands for %Ac -F.st -:*i 59% rebuilding after the War, and the tremendous reforestation and afforestation program in the post-War years. .>.?M~~Iets~ 2.32 Under USSR forestry legislation, which is still in force in Belaus, forest Iauis are _ _ _ _ _ _ _ the propeny of the state. Most forest lands are Box 2.2 under the jurisdiction of state entities. The MintrY of Forestry (Minor) adminiSte 84% of the total forest area; the Mntry of Defese, 4%; other state entties, including National Pars, 6 %. Collective and state famIS combined have unobstucted rights to 6% of the forest area. Field activities in Minor-controlled forests are the responsibility of 86 forest enterprises. comparable to state farms in the agriculture sector. Each enterprise manages on average 80,000 ha. The forest eterprises have a total of about 30.000 employees, wbich is low considering that in addition to reular forest management activities, they are involved in logging and sawmii. 2.33 Forests wderlMnForjurisdicuon appear to be wedl managedfor sustined ield of wood and non-wood products and protection of the environment. Mangement plans are prepared according to high scientfic and tecical standards. The technical qalifications of the MinFor staff is good, but technical assistance could help overcome the limited experience of the staff in dealing with economic and sector adjustment problems. New management plans are being developed for forests affeced by radioactive conination in the Chernobyl area 2.34 Continuity and dedication of the forestry adnis ion hasprotetedandepadedforest resources. Since the end of World War II, 1.8 million ha have been regenered and 300,000 ba of new forest have been created by afforestion of abandoned agricultural land. Minpor has developed efficient seed supply facilities and adopted mechanzed nursery and plantation techniques to support this re/afforesion effort. However, conservative silvicultural methods, insufficient financial resources, and a narrow market for small logs bave resulted in stands that are too dense, hamering fiuure yield and increasing risks for forests' health. Not much is known about acta management of forests under the jurisdiction of entities other than MinFor, such as kolkhozes, sovkhozes and the Minisatry of Defense; 14 COapter 2 but there is strong evidence that these entities are less efficient than MinFor. 2.35 Forest wood resources are already large and will increase rapidly over the net two decades. Total standing stock is now one billion e3, or about 135 m3/ha, and is growing at a rate of about 3.6 m3/ha. These resources should allow for exploitation of 15 million m3/ year now, and 25 million m3/year at full development, compared with 10 to 12 million m3/year since the 1960's. The quality of timber is good, particularly spruce. Since Belarus has 1.6 million ha of poor, sandy soils unsuitable for sustained agriculture, there is scope for further extension of forest area. D. PROCESSING AND M1ARKETING OF AGRICULTURAL PRODUCTS 2.36 In 1992, thefoodprocessing dusty produced 13% of all industrial output by valu4 and 8% f total gross owput. The gross value of food processing output was around 45% of the value of primary gross agricultural production. The agroprocessing industries employ approximately 150,000 persons, compared to about 1 million employed in primary agriculture. The decline of agricultura production is reflected in a corresponding reduction of outputs in processing, as can be seen in Table 2.10. Tabl 2.10: Producton of Major Processd Food Producbs tnits 1991 1992 1993 1993:1991 Meg dhou tons 791.6 676.3 499.8 63.1 5ausage thou tons 209.7 220.4 192.3 91.7 Butter OiH thou tWn 137.0 98.5 87.1 63.6 Fatty Cheeses dhou tons 57.3 39.4 35.0 61.1 Milk Products dhou tons 1652 1448 1383.4 83.7 Magarine Poducts thou tons 71.5 36.5 35.6 49.8 Granumated Sugar dthou tons 334.8 208.1 149.7 44.7 Vegetable Oil dtou tons 24.9 8.0 3.8 15.3 Confectionery Products dhou tons 159.8 113.2 105.9 66.3 Macaroni Products dtou tons 64.7 66.7 54.7 84.5 Non-acoholic Bveaages nil. decalitors 26.2 14.2 9.3 35.5 Beer mni. deaiters 33.9 27.4 21.4 63.1 Camnned Poducts, Totd mun standard 728 625.4 561.1 77.1 cam ourcBeHius MmnsUy of Agrzcuir and rood 2.37 The processig of agnicuural products is organized into six major branches: grain, potatoes, sugar, vegetables andfris, meat, and dairy products. Table 2.11 gives an overview of the main component of the food processing industry, the stcre of which reflects FSU regional specializion policies. The technology of thefoodprocessing industry is outdated and inuffd entfor Main Features of the Food and Agriculture System 15 current needs. Most of the machinery and equipment came from former Council for Mutual Economic Assistance (CMEA) countries, whose Table 2.11: Agp _wel MAnts,2% technology lagged behind that of Western countries. With the collapse of trade with former Pln Capaci CMEA countries, it is difficult to acquire spare parts for the existing equipment inventory. Lte Substantial investments would be needed to Processng streanline production, as well as to modernize Total no. of 48 and restructure the existing agro-industry. plams Beef, pork & la 2.38 Marketng of commodities is dominated by mb monopolistic or nearly-monopolistic state Mea 23 1521 enterprises. In 1993, state enterprises marketed more than half of the total domestic trade in saussages 291 potatoes, fruit, and vegetables, 80-90% of Canmeries 3 185 livestock products and virtually all milk (Table 2.12). These marketing enterprises view their Poultry 22 508 role as taking whatever is produced by farmers and facilitating its transfer to consumers. They Milk are largely concerned with logistics, not Process economics. Price, quality, profits and responsiveness to consumer preferences are not of Tal no. of 109 great concern. The result is that marketing is inefficient, with large transport, storage, Milk plants 31 3017 processing and marketing losses, while consumer B plalnts 43 337 choices are limited. Table 2.12 clearly illustrates the small share accorded private marketing aCs plants 16 70 channels, which for most products is less than Powdered milk 19 17 10% of total marketed output. Though "cooperative channels' account frr a substantial share of marketed output for potatoes, fruits, and ° vegetables, these channels are almost as rigid and M1ar,m 110 unresponsive to price as state channels. The Belanis Consumer Union, which accounts for the Veebl 33 404 bulk of output marketed through cooperative channels, is mn as a Government ministry, being Sugar 4 1o overly centralized and grantming insufficient Vqgfable Oil 4 n.a. autonomy to its regional level affiliates. The Consumer Union acts as a monopolist supplier of Bakeiesm 24 10s Lact is in tons per shif unless otewse DOted a number of food products (as well as some non- apaciy is gi: in to per day food consumier goods) in rural areas, and a is giveis in 6ousands of torn per day consequendy rarely competes with State marketing channels. 16 Ohapter 2 Table 2.12: MrketIng Chanes For ArIulural Ptodu: pu e Shares Of Maketed Output By Type Of Channer I 1991 1992 1993 I PRODUCT STATE COOP CFW & STATE COOP CF & SrATE COOP CFW & OTHER OTIMER OTHER PRIVATE PRIVATE PRIVATE GRAIN 68.0 0.2 31.8 73.2 0.0 26.8 NA NA NA POTATOES 56.7 26.8 16.5 60.9 12.3 26.8 51.0 22.0 27.0 VEGETABLES 62.2 26.0 11.8 61.2 19.8 19.0 60.0 25.0 15.0 FRUITS 51.5 18.4 31.1 66.3 13.0 20.7 67.0 17.0 16.0 CATTLE 88.5 3.4 8.1 88.2 4.6 7.2 86.0 6.0 8.0 PORK 87.5 5.3 7.2 86.4 5.7 7.9 82.0 8.0 10.0 POULTRY 95.0 1.2 3.8 91.8 0.8 7.4 90.0 5.0 5.0 MILK 99.8 0.0 0.2 99.8 0.0 0.2 99.8 0.0 0.2 EGGS 77.8 12.8 9.4 77.3 10.4 11.9 77.0 10.0 13.0 FM dhat ofrkesd ouput ve gt by produc bCity Famers Marets Source: Ministry of Agiulture and Food E. FOOD CONSUMPTION 2.39 Per capita food consumption in Belarus incresed between 1970 and 1990 for all major foods except potatoes and cereal products. In all FSU Republics, the per capita consumption of livestock products increased since 1970. Dietary shifts from cereals and potatoes to meat, fat, and wgar usually accomy economic growth and migation to urban areas. The shift was furter stimulated by price -policy and administered direction of trade. 2.40 mo on of fivestock products In Belaus, at its peak in 1990, was around the level of high-income indust countries (75 kg meat and 425 kg of dairy products per capita). Sugar (48 kg per capita per year) and bread per capita conumption in Belarus were, and remain higher than in western countries. Per capita consumption of meat products declined by some 17% from 1990 to 1993 and can be expected to dedine futher in the medium term. The relatively high level of dairy product consumption reflects stll exsting conmer subsidies. The decline in per capita consmpton of bread, cereals, and potatoes experienced over the last 20 years will probably come to a halt in the short tern, and reverse in the medium term before reumig its declining trend with increasing consumer incomes. Consumption offts and vegetabkes should increase in the long term, but since these products have been, and will condnue to be, produced on small private plots, the pace will depend on the process of small farms and private marketing development (Table 2.13). Main Features of the Food and Agriculture System 17 Table 2.13: Food Consumpdion In Bekarus - Kilogpams Per Capita 1970 1980 198S 1990 1992 1993 93as % 92 as % of 90 of US 92 MNe and Meg Products 49 61 70 75 66 70 93 58 Milk and Daity Products 371 369 399 425 380 380 89 144 Eggs (Units per capita) 170 294 315 323 305 306 95 133 Cerea Products 144 140 131 126 119 122 97 119 Poatoes 245 200 185 170 169 175 103 74 Sugar 35 43 45 49 42 31 63 150 Vegetables 70 77 81 78 70 79 101 60 Source: Delas Ministry of Agriculture and Food 2.41 Given Belarus citizens' current high caloric and protein consumption, the exected change in the food consumption pattern is not likely to result in a substantial deterioration in the general level of nutrition. However, sharp consumer price increases and lower real incomes have reduced the consumer demand. Shifts in the composition of consumption toward products with low icome elasticities, such as food, can be observed. As a result, the share of food expenditure (including alcoholic drinks) in total income of the population has increased, from about 45% in 1990 to over 50% in mid 1992 while, at the same time, the aggregate food demand declined. 2.42 Further adjustments in consumption will not generally derive from a shortage of supply but from decisions by consumers as income, prices and availability of other goods change. The Government of Belarus has made significant efforts to preserve the real income of the population, and at least protect the poor. Apart from control of retail prices on some food items, wages are indexed with a lag, based on a minimum consumption basket. As a result, the buying power of the population has been somewhat stabilized and the increase in the share of food products in consumer expenditres has been stopped. The expected increase in prices of energy and i rf igriculturad inputs will probably generate further substantial general and food price increases and will challenge present government financial policies. F. T1E AGRICULTURAL CREDIT/FINANCE SYSTEM 2.43 The Belarus financial system consists of the central bank (the National Bank of Belarus) and 25 commercial banks, of wich 4 are theformer specialized banks and 21 are new banks. Insurance operations are no longer the monopoly of the stte-owned insurance company. The specialized banks include the Belarus Agricultural Bank (Belagroprombank), the Industry and Construction Bank (Belpromstroibanc), the Foreign Trade Bank (Belvneshekonombank), and the Savings Bank (Sberbank). These four specialized banks account for 50% of the capital base of Belarus commercial banking. While only the Savings Bank is stricdy state-owned, the state has a stake ranging from one-third to two-thirds in the capital of all major banks, which are registered as joint stock companies. The state's participation in the Agricultural Bank is 36.7% of capital. 18 Chapter 2 2.44 Belagroprombanl was created in 1988 to take over all lending to agriculture. It rank sixth by capital among the 25 conunercial banks. Belagroprombank has 125 branches and is under the control of the MinAg. Its activities are focused mainly on large-scale famis and state-owned organizations. The Bank's loan portfolio is about 60% in short term loans and about 40% in medium and long term loans. However, much of the long term portfolio is short term loans that were rescheduled to medium and long term. About 15% of the amount falling due is in arreas of more than 90 days; in addition, about 25% of the loan portfolio is rescheduled loans. The Bank's liabilities comprise deposits of agricultural enterprises, government deposits, and credit from other banks, mainly NBB. Its loans are provided at interest rates which range between one and 30% per anmum. The main source of funds for lending is rediscounting of operations with National Bank of Belams at a discount rate of 7%. 2.45 The Savings Bank is the only other bank with an extensive natonal network of branch offices: it has more than 150 branches and a much greter mnber of sub-branches throughout the country. This bank, however, specializes in household deposits and also act as a fiscal agent for the collection of taxes, rents, and other charges. It has neither personal nor business lending facilities. 2.46 The Belarus banking system has serious shortcomings. It is being decapitalized because nominal interest rates are well below the rate of inflation while real financial savings are shrinking. Its loan portfolio is in dubious condition since lending is guided by government decisions to finance ceta activities, regardless of their financial and economic returns or the credit worthiness of the borrowers. T'he accounting system does not provide a clear picture of the financial position of potential clients, nor, for that matter, of the banks themselves. Prudential regulations specify capital and liquidity ratios and limits on credits to a single borrower; however, they do not require provision against doubtful loans nor do they clearly define the rules of disclosure of financial information. The accounting principles and financial reporting have been inherited from the Soviet system and are inadequate for market-orented banking operations. G. PUBLIC ADMINISTRATION, EDUCATION, RESEARCH, AND ETENSION 2.47 Government management of agriadture andforestry is comprehnsive and complex, sill reflecting the characteristic features of the centrally planed economies. Sectoral management and control is imIemented through a three-tiered pyramidal system: the central government at the apex, six oblasts, or provinces, at the next level, and 118 rayons, or districts, at the base. Cental government4 has been represented by the Ministry of Agriculture and Food (MinAg) and the Minsty of Forestry (MinPor), as well as other ministerial level organizations working in parallel with the MinAg (see Box 2.3). The State Committee for Economy and Planning, the Ministry of Finance, and the State Committee of State Property play rather important roles in decisions related to the macroeconomic framework for agriclture and privatization in processing and distibution. The oblasts and the rayons have their own Departments of Agriculture and Food, which are responsible to the provincial and district government and are organizationally independent of MinAg. Their programs are funded out of the provincial development budget and by the local enterprises. MinFor, on the other hand, is represented on the oblast level by a network of so-called "Forest Production Associations," which are directly subordinate to the Ministry. 4 MinFor was incorporated kwo the Miniety of Agrice and Food in July 1994. Main Features of the Food and Agriculture System 19 2.48 Higher agricultural education in Belarus is divided into three levels: (a) Goveru t Oranztio Managin the Bedis universities and institutes; (b) agricultural Arculal Compbx (194) technical schools; and (c) rural professional . inist of Agriculture and Food schools. There are five institutions at the highest . State Comnittee of Land Reform ar System of level. Two of these are general agricultural Land Tenure. universities, and the other three are specialized in , Ministry of Bread Producs engineering, veterinary medicine, and economics. --v-.- v The second level consists of 26 agricultural Stte Cmmo for in onav and r,am4 technical schools which train mid-level specialists . Ministry of Trade in a three year program. The third level is a wide network rural professional schools aimed at Box -3 training skilled labor for large scale farms. These schools recently began providing training for private farmers as well. 2.49 The current university student population includes 3100 daytime and 3200 corresponding students. Student intake per year has decreased from 800 in 1980 to 500 in 1992. The curricula for higher education are designed to meet the needs of large farms. Science courses and related agricultural technology courses provide more or less up to date knowledge, but management and business education and training in agricultural economics are weak. University professors are less involved in research than in Western countries because research is mostly conducted outside the universities. The lack of communication with the rest of the world and the lack of mobility of university professors and young scientists has negatively affected the quality of higher education. 2.50 Forestry training in Belarus has very high scientific and technical standards. University level training in forestry and wood processing is provided by the Belarus S.M. Kirov Technological Institute in Minsk, which had been a center of excellence for the whole USSR. The Institute has about 1,500 employees including 500 teaching professionals and about 400 researchers. It has fauldties in forestry, wood technology and processing, construction and chemistry, and related areas, and a forest enterprise that serves as a training center. Curricula are organized according to Soviet standards, but are -.being brought closer to Western models. With its service area reduced to Belarus, the nstitute is facing financial difficulties that could affect training quality. 2.51 The organization of agnculrural research in Belarus is similar to that in the other republics of the FSU. Research is conducted in independent institutions, while the main role of universities and colleges is teaching and education. The research system has only recendy been become independent of the FSU's Academy of Agricultural Sciences. This reorganization is still not complete nor completely understood by the various affected institutes. In general, the model of the Academy of Agricultural Sciences has been maintained. The Belarus Academy of Agricultural Sciences, which receives most of its funding from the Government, administers 20 research institutes. 2.52 The level of basic research meets international standards in most areas, although due to budget cuts and inflation, the critical minimum of resources needed for meaningful research is now not available. On the positive side, the-re has been an increase in the amount of contract research funded by large-scale fanrs. Nevertheless, the current budget crisis has led to a situation where little more than salaries (severely depreciated in real terms) of scientists can be covered. International travel has virtually 20 Chapter 2 ceased. Repair and maintenance of equipment and buildings are put off. Another consequence is that scientists are forced to look for other ways to earn their living; some were reported to be actively looking for international employment opportnities. To the degree that domestic consulting revenue is accessible, this search for outside enployment may help the institutes become more commercially oriented and re focus their research on problems of interest to enterprises. 2.53 The least developed sector in research Is the socud sciences: agricultural economics and farm management research are parochial and far from the international mainstream. Research in agricultural marketing, policy analysis, etc., is just developing. The research agenda does not fully reflect the present problems in the sector. A large portion of research activities still concentrate on technologies. The research system combines the provision of services (diagnostic services, breeding services etc.) with the mandate of carrying out adaptive or pure research. Although this combination has disadvantages, it may be helpful if it fosters a closer linkage between research and farm problems. 2.54 While forest research in Belarus was among the best in the FSU, research on wood technology was weak, since it was developed in other Republics of the FSU, according to priorities decided at the Union level. Forestry research is under the control of MinFor which selects, plans, and monitors research programs through its Scientific and Technical Council, chaired by the Minister, with representation of the scientific community and end users. Research programs have been very efficient, wi a strong operational focus. However, they are being deened by increasing budgetary constraints. 2.55 Agriadwral extension, as kmown and understood in the West, does not exist in Belarus, largely because the expertise normally provided by extension systems in small scale agriculture was directy employed by the large agricultral enteprises in the form of resident crop and livestock specialists. There are no arrangements (and little expertise) to deal with the problems of small scale farmers or recenty restruured farm. Apart from attitudinal and financial constrains, the lack of experience of the farm popuation and the sector ad on in legal, organiztional and technical aspects of enterprise restructuring is the most important limitation to adjustng to a market oriented farming system. It is therefore of utmost importance that an advisory or transition service is established under the initiative of the Government, but with extensive partiipation of the private sector. CHAPTER 3 OVERALL FRAMEWORK OF REFORMS 3.1 A range of policy options are available to Belarus for directing the future course of agricultural development in the country. In discussing ongoing refonns and future strategies for agriculture, it is clear that the government of Belarus is committed to transforming the overall economy of the country, including its food and agriculture sectors, to a market-based system. The changes that have already been implemented in the country seem to be consistent with this conmmitment. There have been substantial changes in pricing policy and in the macroeconomic environment; land reform processes are under way, and state owned farm enterprises have begun restructuring. The program of enterprise privatization has been approved and preparations are being made to begin privatizing food processing and marketing, as well as input supplies for agriculture.' 3.2 The fundamental conclusion of this report, however, is that the present agricultural marketing system andfarming structure, even with refonms already completed, requiresfurther adjustment before it can become a worlkng market economy. Leaving the agricultural system basically unchanged would create less difficulty both socially and politically in the near term, but it would have a large negative impact on the macroeconomy, and the growing subsidy burden would fuel further inflation. In the longer term, the legal and institutional framework as well as the respective roles of the public and private sector would remain blurred, the efficiency in agriculture would continue to be low and the sector would not play the role in the development of the country which it could, given the country's resource endowment. 3.3 Belarus is faced with a number of problems that mrake the required adjustment difficult. These include: - overall macroeconomic imbalance, especialy high inflation; - deteriorating financial situation at the farm level due to declining terms of trade for agriculture, and especially for livestock products; - decline in domestic demand fox food due to decrease of personal income; - trade difficulties with traditional partners, especially Russia and other countries of the FSU; and - continued existence of monopolized structures in food processing and marketing and in input supply for agriculture. 3.4 Successful implementation of the required adjustment necessitates a comprehensive and consistent program of actions. At this time, a detailed agricultural strategy for Belarus does not exist, reforms that have been implemented do not constitute a consistent package, and the different components of the reform process sometimes contradict one another. Therefore a comprehensive overall reform strategy should be developed and agreed upon by the Government as soon as possible. This reform I A detailed account of these refrmis is given in Chapers 4 and S. 22 Chapter 3 program should be based on a consensus among all the major players, including the Government, farm enterprises, the processing industry, and the general public. 3.5 Box 3.1 suggests some major elements of a Reform Agenda comprehensive agricultural reform An agenda for food and agriculture reform should include the program for sectoral transition following as a set of actions: reflecting inteaional experiences. The process of arriving at such a (a) macroeconomic stabilization, liberalization of comprebensive reform strategy needs domestic markets and decontrol of prices, freeing of to be credible and participatory to be external trade and phasing out of producer and politically acceptable and sustainable. consumer subsidies: The strategy must be consistent and (b) protecting living standards of vulnerable groups in coordinated with the overall program society from the effects of rising food prices; of stabilization and privatization. (C) land reform encouraging the development of a sector of viable farm management units by establishing the institutional basis for division and privatization of large farms and for acquisition and use of state lands; A. MAJOR COMPONENTS OF A TRANSITION PROGRAM (d) demonopolization, privatizing and encouraging ent.y into production, processing, import and marketing of 3.6 There is longer tenn agricultural inputs and output: potential for creating an efficient (e) establishing a framework of financial services, agriculture system in Belarus. education, extension, information services and Domestic endowments and traditions regulation consistent with a market economy; favor livestock production, though (f) building a system of physical infrastructure consistent the crop sector also offers some with the needs of a market-oriented production, opporunities such as flax, potatoes, processing and distribution system; and, and oilseeds. However, it will never be economically efficient for the ) rationalizing and restrueturing government institutions country to produce all the food in a manner consistent with their new roles. required for domestic needs. Box 3.1 Adjustment of the livestock sector is the critcal element of recovery, since it is suffering from declining domestic demand and stagnant export demand. Strctral change and improvements in stock quality should be the major goals of this subsector, and improved management of the feed base is a major precondition of success . 3.7 In the short-term, crop products that can be marketed even on Western markets with little processing (flax, oilseeds) or substitute for hard currency imports (grains), offer the greatest economic advantage for the country. Changes in prices at the farm level should be allowed to reflect this advantage so that producers can respond. The FSU republics, mainly Russia, will remain the major market for livestock products. Export of livestock products to the West will be limited by the low level of efficiency and by the condition of the current capital stock in food procurement and processing. The physical design of the Belarus meat processing industry disqualifies most products from entry into the markets of Western Europe and North America. In the short term, tht 'entral and East European countries might offer opportunities for the export of limited quantities. Efficiency problems suggest that it may be difficult to regain past levels of livestock product exports. Overall Framework of Reforms 23 3.8 The livestock sector's contraction has been quite deep, with recovery of FSU demand, there will be a basis for some Belarus livestock product exports and output levels to recover. A supportive environment needs to be created for quality enhancing investments both in the livestock and related food processing industry. Ptices of livestock products need to reflect the higher prices of feed, but these prices will not exceed the prices in Russia or other FSU republics to which Belarus exports. Securing markets inside and outside the PSU must be an important objective in trade negotiations. 3.9 In the emerging market system the government cannot and should not directly engineer the recovery and growth of the kind needed in Belarus agriculture, even if it were to have at its disposal more ample resources than are currently available. The government should only provide an enabling environment and pernmt enterprise-level decision makers in the agriculture and food economy to generate growth themselves. Therefore, the key elements of a transition program in Belarus agriculture are: (a) macroeconomic stabilization; (b) enterprise reform that creates an adequate number of private or at least commercialized firms able to react independently to market signals; (c) regulatory reforms establishing the framework for a working market in food and agriculture. Mauroeconomic Stabilizadon 3.10 The impact of macroeconomic policy in agriculture through inflation and related uncertainties of relative prices, exchange rates, and interest rates, is important. Macroeconomic instability inhibits agricultural adjustments in several ways. In an environmert of inflation and rapid devaluation of the currency, governments are reluctant to release domestic price controls and allow agricultural producer prices to reach border levels, since this implies constantly rising domestic nominal prices of food. Agricultural enterprises have been among the most successful lobbyists for subsidies to compensate for depressed output prices. When enterprises are shielded from new relative prices by subsidies, or when they can cover higher costs through grants disguised as cheap credit, they have little ncentive to chae intermal structures or behavior to become more competitive. Input and credit subsidies do not fully compensate for the effect of depressed output prices and lack of stable currency. Inflation, subsidized credit. and an unstable currency thus prolong the inherited farm structure and relatively low productivity of the past. The price distortons furthermore make it uneconomic for producers to adopt improved technology with higher productivity. Finally, instability erodes the climate needed for private investment. A credible stabilization program that spreads adjustments across sectors and does not exempt agriculture will stimulate meaningful restructuring, and create an economic environment conducive to private investment and the new faming structure2. Enterpise Re£orm 3.11 The major objective of enterprise reform is to create opportunities for economic agents through programs of privatization, land reform, andfarm restructunng. Producers more responsive to price signals and more willing to utilize and preserve the natural wealth of the soil are best created through implementation of land reform and restructuring of the traditional collective farm. Competitive 2 Macroeconomic stabilization is discussed in a separate report and is not part of the agricultural sector review. See Belarns Country Economic Memorandum, World Bank 1993. 24 Chapter 3 processors seeking to produce attractive products of high quality will only emerge through privatization, new entry into the processing industry, and freedom from regulated price margins. Commercial importers and exporters motivated by economic gain must be able to operate free from excessive taxation. Financial intermediaries willing to take savings, carefully screen potential borrowers, and re-lend savings at interest rates that protect the capital of savers must be permitted to function. The details of a proposed enterprise reform in Belarus food and agriculture are discussed in Chapters 4 and S. Creating a Market Environment 3.12 Above all, the replacement of a centrally planned system by a market control mechanism requires a new regulatoiy framework based on liberalized price and trade policies, to provide a stable economic enviromnent for the economic agents on an equal basis. A competitive market for agriculture inputs and outputs as well as for services is also essential, otherwise an efficient pricing structure cannot develop and farms will largely be dependent on local authorities. Dismantling of state monopolies as well as the monopolistic structure of processing, marketing, and input supply are essential steps toward the creation of a competitive environment. This will also require die development of a new institutional structure demanded by the market system. These issues are covered in Chapter 4. B. IMPLEM3NTATION OF REFORMS 3.13 The political and economic conditions in Belarus do not appear sutablefora 'big bang' approach to transformaton of agricuture. The Government has been following a very cautious approach to change and reform, which has brought some positive results. Food supply for the population has been secured, the decline in production has not been as dramatic as in some other countries of the FSU, and the disruption of production systems has been kept under control. There is a tradeoff between the speed of reform and sectoral stability, and delaying reform in order to avoid major sectoral changes will be very costly to the economy in the long run. In general, while accepting the appropriateness of gradualism in the Belarus strategy for agriculture, we would like to diaw attention to two factors: - speedy development of an agreed overall reform agenda with proper sequencing of reform actions is essential for efficient implementation of the adjustment process; - the minumum conditions for a working market should be established as quickly as possible, including legislation, demonopolization, and the beginning of privatization of processing and marketing industries. Completion of this transition however, will remain a task for the medium term. 3.14 Although it is possible to envision a number of alternative paths to implementing a comprehensive program of further refonrs, the required reform measures are categorized according to short and medium terms without providing ready-made prescriptions for their implementation. The report intentionally lacks precision on the "how and when" of the proposed reform strategy. Details of imnplementation have to be elaborated by those who are fully aware of the complexity of agricultural problems in Belarus, and who will bear the political responsibility for both the success and failures of reform efforts. Overall Framework of Reforms 25 3.15 The major short-term priorities for agricultural policy, both in terms of their macroeconomic implications and their impact on incentives and resource allocation would be: * creating a macro framework providing the right incentives and motivation for private agriculture by continuing price reform and market liberalization, * creating a working market for agricultural inputs and outputs and a competitive and efficient support service system for farms; * contination of land reform and supporting emerging private farming; * demonopolizing and privaizing agro-processing; and * ensuring food supply and providing a minimum safety net for the poor. 3.16 Key medium-term objectives should include: * expedited completion of the transition to a market-based system for food production, processing, and marketing, including privatization; * changed role of Government to provide research, education, extension, and market information rather than directly manage availability of inputs and collect and distribute production; - improved efficiency of production, processing, and distrbution of food and agricultural products; - improved competitiveness of Belarus agricultural products in international markets. Iwvestment and Institation Bilding 3.17 Successful transition requires not only policy actions, but also support by investments in physical capial, measures to increase the efficiency of producton, and the building of institudons for market-based agriculture. The pace of investment will be limited by fiscal constraits, but priorites can be established relatively soon, and potential sources of funding, both foreign and/or domestic, as well as potential foreign investment areas, can be identified. Livestock and crop production have to adjust to new conditdons, especially in the form of improvements in production efficiency, if a competitive economic environment is to be created. Institution-building requires appropriate legislation, followed by revision of exising organizatonal structures, staffing, and training, and this process can be strted quickly by working with existing institutions where possible. 26 Chapter 3 C. URBAN AND RURAL SOCIAL CONCERNS 3.18 Social concerns are often raised as an argument against change. It is true that transition to a market-based economy might cause hardship to a large portion of the population and is especially painful for the low-income groups. The real incomes of most of the agricultural population have declined, and the initial disruptive effects of agricultural reforms will inevitably lead to more unemployment or underemployment in the near term. As far as the rural population is concerned, the existence of subsidiary family lots and available housing will provide a safety net which ensures, as a mrn , a subsistence standard of living. An acceptable level of rural soaal serices needs to be maintained during the critical first period of transition. The process of outward migration from agriculture to alternate employment should also be assisted. Trade and services needed for a market based farming system will generate substantial additional employment in nural areas. Many urban people will need either income supplements or some sort of food supplement to maintain adequate diets. 3.19 The phasing out of consumer and producer subsidies should be accompanied by improved targeting of income and consumption support programs. Measures are needed to protect the most vulnerable groups from serious hardship, especially to ensure minimum consumption levels for the poorest, as prices adjust in the coming years. Because fiscal constraints are tight, politically difficult trade-offs and compromises seem to be inevitable. In the very difficult period of transition the Government should, as a high priority, try to fully compensate the poorest groups for the negative income impacts of food price changes. In realizing this objective, the setting of a poverty line is a crucial issue. 3.20 There are five major options to ensure adequate food supply and protect the poor: - contlnuing the subsidization of prices of a few basic commodities with low or negative income elasticities; 3 providing quantity-denominated food coupons to selected poor households; D providing direct, in-kind assistance to poor households; * organizing work for food programs for unemployed; and * providing cash compensation to the poor. 3.21 All the above methods have advantages and disadvantages. Price subsidies are the least compatible with a market economy. Using the cash benefit system seems to be the most desirable solution. Coupon or food stamp systems and work for food programs may also be workable, especially under the conditions of high inflation. Cash benefits are less effective than quantity-denominated coupons in providing social protection when prices are rising rapidly. 3.22 Privatization and the transiton to a market economy will affect the existing rural social safety net and the provision of social services in the rural communities. Traditionally, the bulk of rual social services are provided by the collective and state farms, and the large scale farms provide substantial additional benefits to their members and pensioners. In principle the transfer of their services to the local municipalities should be encouraged. In Belarus, however, the reforms to create a new municipal structre capable of running and financing the new services are at a rather early stage. There is neither OveraU Framework of Reorms 27 the rual institutional framework nor a financial structure to replace the collective and state farms' social services. Therefore alternative options such as privatization, cooperative organization, or even continued voluntary provision of services by farms, should be explored. It is not surprising that the fear of losing vital social services has an impact on farmers' decisions to stay with the collective farming system to a grMat extent, and strengthen the argument of those who advocate against the dismantling of large scale fanning system. 3.23 The three most critical needs n the village communities are: (a) developing an enabling environment to stimulate increased off-farm employment in the vilages; (b) safeguarding access to an acceptable level of rural social services during the period of restructuring and privatizing large scale farms; and (c) enhancing local ability to respond to social and demographic change by providing communities with greater financial control. Except for appropriate steps to ensure acceptable standards of health, nutrition, and sanitation and to improve the general quality of life in rural areas, atmpts at direct state intervention do not seem desirable because of lingering local suspicion of government motives and the lack of cost-effective policy instruments. A coherent and integrated strategy should be developed to facilitate rural community development dtrough devolving responsibility for these activities to the local communities themselves. One of the most effective ways to address this requirement is to provide communities with greater control over their own budgets and, hence, their fiuture. D. POLICY AGENDA FoR THE TRANsmoN OF AGRicuLTuRE3 ISuS RECOMEDATIONS ULTIMTE ODJCiVS Macroeconomic Issues Agricultual Trade and 0 Remove administtative restrictions * Foreigp market development Markeng on exports and imports and rationalize export and import taxation - Competitive markets 0 Proceed with demonopolization, corporazation and phased 0 Market tansparency privaization of imemal and external trding enteprises * Cost-effective export and import tamsactions Agriculural Prices and o De-link provision of inputs from * Microeconomic incentive Subsidies compliance with indicative pricing framework reflecting real and production targets factor and product costs 3 ne macroeconomic issues listed below hiclude only those of immediate importance for agricultural production development. In additon, the developnwt of the sectr requires the establishment and mahnenc of a stable macroeconomic framework and the implementation of a stucaual reform program conducive to efficient allocation of resources. A detailed program is under preparation in the context of the Rehabilitaion Lon. 28 chapter 3 ISSUES RECO&MENDArIONS ULTIMATE OIJCTIVES * Eliminate the system of costased * Encourage both producers indicative prices and consumers to respond to market prices * Move as rapidly as possible to liberalize prices, unify markets, avoid price dualism * Phase out subsidies to producers and * Distortion-free marketing and trading agencies, including credit incentive system subsidies * Avoid soft budget constraint on 0 Enterprise adjustment to real agricultural and marketig factor and product prices enteprises * Replace consumer price subsidies * Fiscal stability with an adequate 'socia safety net of subsidies targeted to low iOcomt and vulnerable consumers A.ricultural Sctor Issues Land Tenure and * Further legislation on land to * Secure and transferable land Enterprise System broaden private ownersip of use rights conducive to agricultural land promote long term investment, access to * Make leasing rights feely finanac markets, and transferable and marketable enhanced land mobili = Formalize clear rights to own and * Open land and labor markets transact (rent, sell, mortgage, that will allow these sharecrop) land and other assets, resources to move into their remove limitations on land most producdve uses transactions and on the employment of labor * Eliinate administrave restrictions Appropriate local, municipal. on the size of individually owned or or private structres, with managed enterprises and on the adequate fiscal powers, to eligibility of non-famig popuatn take over responsility for including foreigners to own and/or social semrices from operate agricultutal enerprises agricultural enwrprises * Develop and implement a land regisration, information and cadastre system to provide security of tenure, full information on land transactions, and a basis for land taxation * Privatze or transfer non-farm enterprses and rural housing of collecdve and state arms * Rearrange provision and responsibility for social servicss in nWal areas and guaratee the condnued existence of rural social services after transfer Overall Framework of Reforns 29 ISsues RlECOMMENDATIONS ULTIMAlT OuBzClNS Development of Reformed * Establish non-discriminatory * An efficient and competitive Agricultural Enterprises conditions for the various emerging agriculul production enterprise forms (privatized system individual farms, joint stockholding farms, cooperatives, tenant/leased farms, etc.) * Establish a fmancial incentive system consistent with the real relative factor and product prices * Improve agricultural enterpnse management by reducing in scope and size the excessively large and integrated ago-industrial complexes through privatizing the non- agricultural activities * Transfer rcsponsibility for land amelioration and liming from the state to the enterprises * Provide technical assistance to private and reforming agricultural enterprises re. legal and organizational issues, accounting, farm management, production technology, marketng, etc * Design and implement a land tax system which would facilite agricltunal investments and the appropriate utilization of agriculural land Private Farming * Guarantee fair conditions for those 0 Individual private farming who wish to start individual farming becoming a major component of the agrial sector * Establish competitive land mortgage and credit system * Help to organize local and regional service cooperatives * Provide technical assistance to farmers during retrutring to achieve optmimu production mix and efficiency 30 Chapter 3 iUES RECOMMENDATIONS ULTBMTE OBIETIVES Working Financial System * Use fiscal means rather than 0 Efficient allocation of credit for Agriculture financial institutions to fmance loss- to profitable activities making enterprises that are deemed undertaken by clients willing worthy of support to repay loans * Promote the emergence of 0 Viable financial institutions competitive insurance services for serving the agricultural sector agriculture efficiently * Introduce interest rate policies 0 Well functioning baning system within a proper * Introduce measures to enhance loan banking regulatory recovery framework * Implement generaly accepted accounting principles l Implement external at its, publication of releva.,. information and adequate prudeWial regulation and supervision by appropriate government agencies Agricultual Input Supply, * Implement program of 0 Facilitate the emergence of Otpuut Marketing and demonopolizadon, corporatization, new and restuctred firms, Agroprocessing and privatization of the centralized and the growth of agricultural input supply, output compedtiveness and maretng and agro-processing efficiency in both input and enterprises output markets and in agroprocessing * De-link the marketing of farm inputs * Timely and adequate and outputs from the system of state provision of agricultural orders, price controls and subsidies inputs * Phase out the state order system * Efficient product marketing and marcet development * Establish feasible and reasonable * Improve product quality, and quality and safety standards for penetration of both domestic agricultural imports and exports and foreign markets * Provide technical assistance and traiing for enterprise management e Promote 3oint ventures to tap foreign expertise, technology and capital, and to provide access to foreip markets * Promote research and development of new products and markets OveraU Framework of Reforms 31 LWIUES RECOMMMATIONS ULTMATE OUCTVzES Agriculture Production * Review and analyze agricultural * Improved technology. Technology and Fam research requirements from the point managerial pracdces, and Management Practices of view of agriculture's current efficiency in agriculture problems and its long term prospects * Determine reseac priorities, and * Improved product quality to the appropriate structure and meet the demands of organization for the research system, domestic and foreign makts including the respective role of the public and private sector in financing and operaing the system * Strhen farm management and agricultural economic professions * Strengthen the reorganized research system * Strengffien the agricultural education system to prepare both adults and the younger generation for the challenges of the transition to a private market oriented enterprise system * Develop a private sector farm mangement and technical advisory service * Establish publicly-funded, agricultural extension services. Public Agricultural * Adjust public agricultural * Efficient and effective public Administration administration to the needs of a sector admnstraton and market economy support for commerci and private agrculture * De-link the Government from * Improvement in the qualit of agricultural production planning and policy formultion and the management analysis of emerging constraints * Strengthen the capacity for market- oriented agricultural policy analysis * Promote establishment of a system * Accelerate the agricultal to provide for technical and fimancial reform process and minimi assistance for enterprise cost of transition restructuring CHAPTER 4 DEVELOPMENT OF A MARKET STRUCTURE FOR AGRICULTURE 4.1 Belarus has taken substantial steps towards reforming its economy and laying the foundations for a market-based system. These steps include the legalization of private market activity, including foreign trade, and the passage of other legislation aimed at creating market institutions and privatizing economic activity once in the hands of the State. These steps have been taken in a time when the country has had to adjust to a disruptive slump in foreign demand for its exports and a deterioration in the terms of trade for its imports. 4.2 The continuation of price and market liberalization and the development of a market structure is essential for food and agricultural. This chapter presents proposals for further action in developing a new incentive and marketframeworkforfood and agriculture. As the agricultural sector was one of the most subsidized in the past, the necessary adjustments in relative prices in this sector are large, and given the large share of food in domestic consumption, have severe repercussions for the population's standard of living. Understandably, the full implementation of these adjustments will be difficult and should be done carefilly to minimize the impact on the poorest segments of the population. Nevertheless, the long-term well-being of the agricultural and food sectors depends on the implementation of reforms associated with macro-economic stabilization, domestic price policy, creation of a comprehensive market environment, and foreign trade promotion. A. THE MACROECONOMIC AND INCENTIVE FRAMEWORK Macroeconomic Stabilization 4.3 The most important thing the Government can do to help agriculture in the short run is to stabilize inflation and deregulate the economy. Control of agricultural producer prices coupled with inflation is normally a ruinous combination for farming profitability and reform. To make farming viable, it is essential to remove such a threat. This will require policy reforms in three areas: (a) reduction in inflation; (b) liberalization of prices; and (c) trade liberalization. Reduction in inflation rates would reduce uncertainty about current and future relative prices and real interest rates and permit on- farm investments to be less costly and risky. Price liberalization would elinminate implicit taxation of farmers arising from the setting of indicative farm-gate prices by the Govenmment that in essence favor urban consumption. It would also result in reduced distortions in relative prices of commodities, permitting farmers to use resources more efficiently. Finally, trade liberalization would allow domestic farm prices to be linked more closely with world prices, expand markets for agricultural commodities, and reduce transactions costs for inputs while increasing their availability. 4.4 Macroeconomic stabilization and structural reform programs must be carried out simultaneously. Stabilization is a prerequisite for successful implementation of structural reforms; structural reforms in the productive and social sectors are needed to ensure an adequate supply response. The basic strategy for macroeconomic stabilization should include prudent fiscal policy focused on restraining expenditures, because of the already high level of taxes (reaching almost 40% of GDP, including contributions to various extra-budgetary funds) and trade policy supported by exchange rate flexibility and abandonment of self-sufficiency goals. 34 Chapter 4 4.5 Implementation of reforns in agiculture will considerably support overall stabiliaton efforts. Recovery of production would decrease import expenses, and provide additional goods for export. Reduction of subsidies and a price structure reflecting border prices would ease the burden created by agriculture on the budget. Reformed agriculture would generate additional employment mainly in service and markeding areas as well as by increased tax payment to local municipalities. This would contribute to the improvement of rural social services and to rural development in general. Tble 4.1: Curren Trads In State Procureenwt Prices Farmgae price (current Rblkon) aek e Border Price increase mmoiy Average Jul/Aug 1993 1993 1991 to 1991 Jan 1992 uluy 1992 Jul/Aug 1993 Price in $US Price in $US Jul/Aug 93 Chrin 448 1,658 10,446 105,577 $54 $104 23,466% Potatoes 790 1,790 8,000 40,000 $20 $76 4,963% Sugar beet 195 1,000 5,700 57.000 $29 $25 29.743% Poultry 3.807 20,160 22,011 420,280 $214 $613 10,940% pigs 5,557 26200 120,764 731,690 $374 $840 13,067% Cattle 5,668 25,700 73,913 334,880 $171 $583 5,808% Mflk 692 3,300 10,669 57,857 $30 $71 8,261% Source: Belaus Mbiisty of Agrictle and Food JulAug 1993 exchange rme = 1956 Betaus rubles per $US Agricultural and Food Prices and Subsidies' 4.6 Agricultural and food pricing policy in Belarus prior to the break-up of the FSU was characterized by centrazed price detemunation. Producer and consumer prices were set without reference to international prices. Producer prices of individual commodities were generally established without reference to each other (e.g., animal feed was not priced with reference to livestock prices) and producers responded to centrally determined production targets and not market signals. Furthermore, consumer prices did not necessarily cover producer prices plus the cost of processing and marketing. Despite official commitment to a market economy, extensive liberalization of agricultural pricing and marketing has yet to be attained and the basic features of the former marketing structure remain unchanged. Government still maintains the system of state orders in order to procure products of critical importance such as grain. Though the state order system has lost its strength to a large degree, it still has an impact on a large share of total output, and parastatals, through their monopolistic practices, have control over most marketing, processing, and distribution. Extensive use of state orders to direct the flows of products between buyers and sellers still ties input deliveries to state output obligations and is, in effect, a costly system of explicit and implicit subsidies and taxes. Consumers receive explicit and implicit subsidies to maintain food prices at "reasonable" levels. Producers receive explicit subsidies on some inputs and outputs, but most farmgate prices exhibit implict taxation (measured against border price levels). I All 1992 and 1993 value fures in this repon are in URbK., unless odheise iicated. Development of a Market Structure for Agriculture 3S 4.7 Belarus officials characterize their agriculture prices as "free" and "liberalized" in the sense that, contrary to the traditional approach of the command economy, wholesale prices are no longer fixed and the consumer prices are no longer receive pervasive budget subsidies. Consumer price subsidies from the budget continue to apply only to two major products: bread and milk. Agriculture and food prices, with the exception of fruits and vegetables, however, are not free or liberalized in the Western sense, where "price liberalization" generally means that prices are allowed to be formed by competitive forces. "Recommended" or "indicative" farm-gate prices are periodically announced by the Government based on current and anticipated increases of farm input prices. In theory, the indicative prices are not binding, but in practice the entire system follows the Govermnent recommendations. Thus, prices are no longer fixed, but their periodic adjustment is prescribed by government calculations, and not by market forces. While some inefficient farms are protected in this system by cost-based pricing, most are hurt since the indicative prices are constantly eroded by inflation and are primarily intended to limit the growth of food processors costs and of retail food prices. 7hus, the main impact of the indicative price system is to implicitly tax farm enterpnses heavily and to extend implicit subsidies to food consumers. Consumers are further subsidized by regulated food processing and retail trade margins. 4.8 Processing and trade margin limits are important components of the cost-based pricing mechanism that allow firms to realize profits regardless of their inefficiency or market performance. As a result of cost-based pricing, prices of food products may vary regionally depending on the efficiency (cost structure) of the local processors, although the farmers receive the same price for their products. All profits in excess of the allowed mrngins are extracted to the goverrnent budget (and until 1994 they were accumulated in a Price Regulation Fund). This effecdvely implies a 100% tax rate on profits in excess of allowed margins, limiting downstream (wAholesale and retail) prices by administrative means. On the other hand, sanctioned margins mask basic inefficiencies and make the need for enterprise restructuring less obvious, while providing indirect subsidies for high cost producers. While inefficient producers are "protected" in this system by cost-based pricing, consumers are "protected" by regulated processing and trade margins. Farm Prices and Subsddes 4.9 With the break-up of the FSU and the end of inter-republic trade at prices well below world market prices, the prices of imported inputs to Belarus agriculture have risen sharply. As indicated by Table 4.1 and Table 4.2, input prices increased 7-8 times faster between 1991-1993 (and reached border price levels) than procurement prices of agricultural outputs, since the indicative price system repressed farm-gate prices to usually only 30-50% of border prices.2 Average farm-gate prices for the first quarter of 1993 were 365% higher than those of the first quarter of 1992, while agricultural input prices rose 1545% during the same time. This amounted to a 70% deterioration in agriculture's commodity terms of trade. Over the same period, wholesale price inflation was 950% and industrial sector prices jumped 1120%. The repression of farm-gate prices contributed substantially to holding down wholesale prices. Meanwhile, retail food prices rose 825% from March 1992 to March 1993 (more than total retail inflation of 725%), indicating that food processing and retailing margins have risen. This is a positive development in so far as these margins were highly compressed in the past, to the point where these enterprises depended heavily on the central budget for investments. 2 Iniially. input pries were one-third to one-half of border price levels, while farm outptW prices were on average about equal to border price levels. 36 Chapter 4 Table 4.2: loput Prike in Agriculture (Curmt Rbllton) Items 1991 1992 Oct. 1993 1993 Price 1993 as % 1993 as % inSUS of 1991 of 1992 Agricutual Madcinery: (rubles) Trctor MIZ-82 9,000 990,000 13 million $4333 144444.4 1313.1 Tractor K1700 23,300 S million 40 million $13333 171673.8 800.0 Combine DON-ISM0 80,000 2.5 million 80 million $26667 100000.0 3200.0 Fuel (nible/ton): Petrol 195 38,000 1.3 million $433 641025.6 3289.5 Diesel Puel 68 33,000 1.1 million $367 1588235.2 3272.7 Ferlizers (rubles/ton) Nitogen 112 7700 880.000 $293 785714.3 11428.6 Potassium 48 3580 126,000 $42 262500.0 3519.6 Phosphate 276 22,800 350,000 $117 126811.6 1535.1 Source: Belarus Ministry of Agdicture and Food October 1993 Exchange re = 3000 Belarus mbles per $US 4.10 The PSU price system was strongly biased in favor of livestock production. For example, in the late 1980's, the ruble prices of grain and vegetables were generally set 20 - 30% below border prices, while those for milk and meat products were set 30 - 40%3 above border prices. Since 1991, relativeproducerprices have changed infavor of grain (Fgure 4.1) in Belarus. Prevailing grain prices in mid 1993 (at the prevailing exchange rate) were about 50% of world prices, while livestock prices were 30-45% of border prices. This significant shift in livestock prices relative to grain prices has been brought about by a reduction in producer subsidies for livestock and demand shifts away from livestock products (the latter have been induced by reductions in real income and in consumer price subsidies of livestock products). 4.11 In view of agriculture's deteriorating terms of trade, caused largely by elimination of input and some output subsidies, the Government has channeled subsidies to agriculture in vanous forms to atempt to partially copens for this deterioration. In 1993, agricultural enterprises received three types of explicit subsidies: subsidies to defray input cost increases, output price supplements, and bonuses for increased levels of production. Based on a decree of the Council of Ministers issued in February 1993, agricultural enterprises received a subsidy of up to 50% of the cost of fertilizers and chemicals, and up to 30% of the cost of fuel, seeds and breeding animals used in production. A total of 82 billion rubles was allocated for this purpose. Output price supplements were paid on the basis of a fixed amount 3 USDA estimatn Development of a MarkSe Structure for Agiculture 37 ton of deliveries to the state production of milk and meat. The total spent on these Evolution of Grain/Meat and GrainlMilk Price Ratios output price supplements was 146 billion rubles in 1993. In addition, a 50% bonus 1.8 ; * Gt---------! was paid on product deliveries to state 1.6' -.-.--' .. procurement enterprises above the 1991- . .. . Gt.in/M..k .. 1992 level of deliveries. These bonuses 1 t4 Grain/Milk - France totaled 58 billion rubles in 1993. On a per / ton basis, the price supplements and bonuses I - - - -' Grain/Moat- France. for livestock and dairy product procurenents 0.8 {........................................... amounted to roughly an additional 50% of 0.6 -------------- _s. the indicative prices paid for these products. 0.4 Even with these pnce supplements and bonuses, the totals of the indicaive prices 0.2 ----- plus theper ton supplemew and bonusesfor 0 meat and dairy products amounted to only t985 1988 1990 1991 1992 1993 63% and 45%, respectively, of borderprices Source: EU TACIS for these products. Figre 4.1 4.12 An implicit subsidy to Belarus agricultural enterprises was also granted via preferendal credit. A 30% advance was provided for delivery contracts signed with state procurement enterprises, and credit was allocated to the Belagroprombank for lending for agricultural operations, at a nominal interest rate of not more than 20%. Due to the fact that the major items of subsidies were set in nominl terms in early 1993, the high rate of inflation eroded much of value of the subsidization by autumn 1993. Though incomplete information makes it difficult to precisely quantify all of the subsidies, the total of explicit subsidy payments and credit subsidies appears to have exceeded 300 billion rubles in 199X, reaching roughly 8% of GDP. in addition, Belarms agricultural producers benefitted from about 220 billion rubles in government expenditure for capital investments in agriculture and liming of acid soils. Nevertheless, given the repression of agricultural producer prices in 1993 to 30 - 50% of border price levels (see Table 4.1), implicit taxes appear to have exceeded 300 billion rubles in the livestock and dairy secrors and over 150 billion rubles in the grain sector. Thus, the sum of the subsies to agrinaura producers is less than the impli taes imposed by price repression. These subsidies would be rended unnecessary if the Government were to promote the movement of producer prices to border price levels by reducing the transactions costs and restrictions on imternational trade. 4.13 In 1994, budgeted output subsidies to agrifultural producers were increased to 200 bilhiou rubles: they are being directed to livestock and seed production. Input subsidies and output bonuses were abolished, as the Government shifted to using credit subsidies as its main subsidy instrument. A 1 trillion ruble credit was granted to finance spring sowing at a highly preferential raw of 6.5%. If paid back in full by December 1994, the credit will contain a subsidy of about 500 billion rubles (auming amnnu inflation in 1994 of 350%). The sum of explicit and implicit subsidies to agricultural producers should therefore be at least 700 billion rubles, or about 5% of GNP. However, there are no signs that implicit taxation of the agricultural sector through the repression of firm-gate prices has decreased. The net balance of subsidies and taxes will likely be against the agricultural sector again in 1994. 38 Chapter 4 Consumer Prices and Subsidies 4.14 In the last decades of the Soviet period, Belarus consumers received substantial food subsidies since the prices of meat, dairy, and bread products were fixed over the 1960's-1980's while production costs grew substantially. Consumer prices in 1990 covered one half or less of the goods' production costs. Ceilings on most retail food prices were phased out over 1992 and 1993, but the prices of bread and nilk products are sdlified by the Government. Despite sharp increases in food prices since 1991, consumer prices, even those charged by the free market, are still low compared with those paid by consumers in Europe or Russia. 4.15 Since state retail food stores sell bread and milk products at prices fixed by the Govermment, bakeries and dairies receive payments from the state to cover the difference between their costs and the revenue passed back to them by the stores. In 1993, consumer subsidies for dairy products reached 145 billion rubles and bread subsidies totaled 183 billion. In the first quarter of 1994, 188 billion rubles of dairy subsidies and 232 billion of bread subsidies were paid out: these disbursements exceeded the amounts budgeted for 1994 as a whole.' Either subsidies must be reduced or the budgetary allocations increased to overcome the current imbalance. In addition to these large explicit subsidies (330 billion rubles in 1993), consumers receive implicit subsidies on other foods as well by repressed farm-gate prices which hold down food processors costs. Retail food prices are furhr repressed since food processors are allowed profit markups (gross margins) which do not exceed 10-15% (depending on the type of good), wholesale trade profit margins are limited to 3%, and retail trade profit margins are limited to 8%. Producers and traders are forced to roll back their prices if they exceed the profitability limits and pay a penalty tax. These state imerventions are an impediment to a market price formation and adversely affects producers' incentive to increase output and traders' incentive to become more efficient. 4.16 In 1993. the consumer subsidy component for milk was about 85% of production cost and the subsidy for bread was roughly 75% of cost. A rough calcuation of marketing costs and marins indicates that if subsidies were eliminaied, retail prices of bread would have to be raised 2.5 times to cover processing and marketing costs and to pay the official price of wheat. Even so, the price would be about 40% of that in Western Europe. The cost of bread subsidies is partly financed by using foreign exchange obtained through a forced surrender requirement of exports at a below-market exchange rate to import wheat. This amounts to a tax on exports. 4.17 Controlled prices are only available at state shops. In 1993, prices in free markets, which account for an increa-.ag, but still small share of the market averaged only 25-50% higher than prices in state stores for the same foods (compared to being twice as large for fruits and vegetables and 7-10 times higher for livestock products in December 1991). This indicates that the degree of indirect subsidization to consumers of livestock products was reduced from 1991 to 1992 (Table 4.3). The remaiing high level of consumer subsidization is reflected in a comparison of Russian retail prices for similar goods (Table 4.4). In September 1993, with the exception of sugar and flour (both largely imported), Belancs conswnerpnces amounted to ony 40- 50% of conparable Russian prices using the actual market exchange rate. The difference is particularly large in livestock product prices. It will require considerable price adjustments before Belarus consumer prices reflect market prices. 4 in addtion1 to budgetay revenue, the Price Regan fmanced about twothr of daiy subsidies m 199-93: this Fund was abolished in early 1994. Development of a Market Structure for Agriculture 39 Table 4.3: Comer Fwod Prices BDeoe & After Ina Dega December 1991 Decembe 1992 Product Sae Stoes Fee City Ratio State Stoes Free City Ratio Markets Markets Poao 2.3 5.5 2.39 23 28 1.22 Cabbage 2.2 3.0 1.36 35 40 1.14 onion 4.8 9.0 1.88 33 36 1.09 Beef 8.4 45 5.36 110 320 2.91 Butter 10.5 70 6.67 250 385 1.54 Eggs 2A 22 9.17 90 128 1.42 Soure: CIS Stsical Conmittee. MonAhy Staical Bulln. April 1992 - Mrch 1993. 4.18 In swnnuay, conswners have been accorded significa food subsidies since budget subsidies for bread and dairy products have been granted in addition to the implicit subsidies accorded consumers by the indicative price system and rough food processing and retail margin restictions. Still, the Belarus Governent has been making an effort to limit consumer subsidies. in the last quarter of 1992, retail prices of meat and buter were doubled, and the prices of sugar and edible oil were made comparable to border prices (at an exchange rate of Rbl. 550 / US$). In 1993 there was continuous adjustment of indicative prices and consumer prices changed accordingly. However, there are still geneal, open-ended subsidies on bread and dairy products. The IMP estimates that budget subsidies o!. meat, dairy, and bread products cost roughly 11% of GDP in 1992. In 1993, they totaled 330 billion rubles, or roughly 9% of GDP. 4.19 These orders of magnitude are clearly not sustanble. Moreover, implicit consumer subsidies come at the expense of farm income. There is a clear need for a signficant further increase of consumer prices to reduce the budgetuy burden and allow farm-gate prices to rise. In January 1994, retail dairy product prices were increased to cover roughly one-third of production costs. Since March 1994, white bread prices have been deregulated and are no longer fixed. Brown bread prices are still reglated, keeping in place a 75% consumer subsidy for brown bread. The Government is reluctant to increase prices further. But in the end the consumer bears the cost - either directly when buying conmer goods or because the financing of subsidies comes from higher taxes or an indirect inflation tax. 40 Chapter 4 Table 4.4: Food Reta P}rce In Sbte Shops In Bdlws and Rusda as of Sept. 1 1993 Belarus Russia Belarus Price as % of Russian Product in local currency per kg in rublesA per kg in rubles per kg Price Meat (Beef) 1223.61 611.81 1486.00 41.2 Milk and Milk Producs 86.90 43.45 122.00 35.6 Buter Oil 1838.00 919.00 1540.00 59.7 Vegetable Oil 621A1 310.71 584.00 53.2 Eggs 261.38 130.69 275.00 47.5 Sugar 1217.58 608.79 584.00 104.2 Bread 110.18 55.09 74.00 74.4 Flour 344.98 172.49 126.00 136.9 Potatoes 126.00 63.00 167.00 37.7 Vegetables 302.61 151.31 294.00 51.5 Fruits and Berries (Apples) 503.84 251.92 517.00 48.7 -/ing I Rbl =2 BBbI exchag rate Source: Belarus Miistry of Agriculture and Food Weaknmees of Cumrrent Pice and Subidy Policy 4.20 Belarus' agricutural prices currently reflect a wide range of interventions, subsidies, taxes and controls, generaly designed to assist or protect the finances of state and collective enterprises, or to shore up consumer purchasing power. They usually hurt farm income and provide virtually no rational incenives to guide production decisions or longer term investment and resource allocation decisions. This system delays necessary downward adjustment in the livestock sector and supports the survival of a distorted production structure. The current system does not provide iaries or Government with a good indication of the production, storage, processing, transport and marketing costs of particular goods, a notion of the value of such goods in alternative markets, or an idea of which commodities or factors of production are in short supply. 4.21 The problem is not subsidy per se; virtually all countries subsidize producers or consumers (or both) of agricultural products in some way. However, it is essental that subsidies distort producerandconsumerpricesas litleaspossibleandnotresultinserioua resourcemisallocation. Policy makers must know how much subsidies cost, in both financial and economic terms, and who are the beneficiaries. It is also important that consumer subsidies not come at the expense of enterprises nor impede private sector entry in marketing, storage and transport. In general, budgetary subsidies are more likely to meet these criteria than subsidies hidden in exchange rates, administered or indicative prices, or dircted credit at below-market interest rates. In addition, producer subsidies are more likely to cause resource misallocation than well designed consumer subsidies. Narrowly focused programs for consumers (such as food stamps, income supplements, or subsidy of a few products most likely to consumed by the poor) are likely to have more positive impact per unit of cost. Development of a Market Snure for Agricature 41 Completion of Price and Subsidy Reforms 4.22 The establishment of a market-oriented agricuitu will rere e compo of te process ofpnce refiortn. Prices received by producers should be allowed to adjust by: (a) abolishing the indicative price system; (b) removing remaining delivery obligatin d restricto on domestic trade; (c) phasing out remain price controls and consumer food subsidies, ncuding the system of fixed profit margins for processing and trade; together with (d) crtg compedtion bothi input wupply aid in output marketing. In order to ensure that agricultural entprises rpond to chogd price signals, it will be necessary to stop the practice of covering their losses through budgetary subsidies or credit at subsidized interest rates that, in most cases, will not be repaid. 4.23 Producers are subject to a variety of regulations that cause substantial Tsbb 4.- Sbmr it Sbt. P _m t Fardme distortion i-d the production process and reduce I Told Saw Inhiwit of (%) their incentives to produce. This includes 5 indicative prices, the state order (quota) system for production, and the linking of supply of 73.2 inputs at government reuated prices and of paao.s' 60.9 other transfer payments to fulfillment of the production quotas. As a result, most of the 61.2 products are still delivered to state procum Fruits and beries' 66.4 and processing agencies as indicated in Table c-- W7.1 4.5. The Govermment should cease ins interference with the market price mechanism i8p4.2 through the establishment of cost based POulby 90.6 indiicatve prices or profit margins. It should Muk 99.8 stop linking supply of inputs at controlled prices to fulfillment of production targets. Egp .1 Government should not intfere in wage ,m setting, beyond the established guidelines for sms: DWm Iiuy of Food ad Aplads minimum wages. 4.24 The system of state orders negates maket-based resource flows. There is a direct linbkge between state orders, govemment procurement monopolies and price controls. The argumet for price controls is that the Government buys most of the products. Price lbrizbao withut the elmination of state orders and competitive marketing will not achieve much. Theref, the phasing out of this system is almost a precondition for the emergence of any real muket. However, there is not very much of a functioning market in Belarus at the moment; there are very few pivate traders and proceo, and most of the input supplies are state-owned. In ths errornaa the rqeacme ofthe stAte ordersystem by market relations cannot be done in one step. The role of stae ordes has alredy been decraused. Now, the government commitment to the ful elimination of state orders should be made cear and implemented as soon as possible. 4.25 The system of indicative prices based on the cost of producon is inapproprat in a stable environment and harmful under inflationary . Co basedpricngformas do not tae Into account changes in dmand or world prices. Moreover, under rapid ,iaton, cost based prcing depresses agricultural product prices, since costs incurred several months prior to huvest are generay not adjusted to reflect read costs of inpt at the time of barvest. If cost based indicative pring is 42 Chapter 4 disontined and trade is liberalized, the resulting pricing structure would reflect border prices. Products that can be sold on the hard currency markets would tend toward the domestic equivalent of world market prices. Products sold primarily within the FSU would move toward Russian prices. 4.26 Since independence, the cost of inputs has increased faster than prices of agricultural products (Table 4.1 and Table 4.2), because the state continues to control agricultural output prices, while it is unable to control the prices of imported inputs. Prices of inputs now approach border price levels. The Goverment, however, continues to control and regulate agricultur-a output and trade, and tries to mitigate the deteriorating terms of trade with continuous adjustment of indicative farm-gate prices and the channeling of explicit producer subsidies to farms, This underscores the need for liberalization of agricultural prices. With price liberalization, farm inputs will have to be used more efficiently. 4.27 Producer subsidies should be phased out as part of a well defined program aimed at promoting private marketing operations domestically and through international trade, demonopolizing agricultural input supply and agroprocessing, and assisting farms to upgrade their equipment and on-farm infEastructe and shed redundant labor. The savings on foregone producer subsidies could be better used as unemployment benefits and for job retraining. Income subsidies to producers should be abolished as early as possible. Real restucturing can only be expected in the kolkhoz/sovkhoz sector if hard budget constraints are imposed on these organizations. However, emerging private agriculture should be supported, mainly in the form of preferential credit availability. 4.28 The overall budgeting and management of the central public exenditure for the ariculture andfood sector should be established. The creation of a consolidated agriculture and food budget, involving all agencies working in these sectors, is strongly recommended in order to consolidate agriculal budget and credit programs. Only in this way can a real dialogue on spending priorities and trade-offs emerge, and budget discline be strengthened. B. FOSTERING A COMPETIiWE SYSTEM OF PROCESSING AND )ISTRIBUTION OF FARM PRODUCTS, AND INPUT SUPPLY 4.29 Competitive markets should be developed to encompass the entire agro-industry subsector, and particularly those parts of most direct importance to farmers, such as product marketing and processing, transport, services, and input supply. Demonopolizaion and pnrvaiaon leading to increased competition would produce more efficient services, more attuned to the needs of farmers and thus encourage the emergence of private farming. In order to ensure efficient anzation of agricltural production enterprises, the entire input supply and output marketing sector must be made competitive. This will require action on the organizational, institional, legal, and regulatoryfronts in aition to the elimndon of cost-basedpricing and the system offLxed profit margins. The development of a market oriented processing distribution and input supply system in food and agriculture will require formultion of a strategy involving: * the continuous updating of the state program and timetable for the division (demonopolition and commercialization) and privatization of the large state enterprises and trade monopolies that now dominate processing, input supply, and wholesale trade; * the rapid privatization of small scale retail food outlets by auction, tender, or buyout; Development of a Market atructure for Agriculture 43 * steps to authorize and facilitate private sector entry including key components of the state program for developing entrepreneurship; * establishment of a supporting legal and regulatory framework to encompass anti-monopoly regulations, competition policies, and personal and property law, and contract enforcement; and, * provision of essential supporting services, notably price and market information, technical assistance and training services, financial services to assist in establishing new businesses and, meeting priority investment requirements, and food inspection and sanitary standards. Demonopolizaton - Commercialization 4.30 Most of Belarus officials do not view their food processing and distribution system as monopolized. They describe it as a large system of many business-oriented processors and procurement organizations which are not accountable to any central authorities, except for general-level strategic coordinadon. Yet in practice, primary producers are linked to processors in their region and automaticaly deliver their output to the local processing or procurement enterprise (shares of state procurement m agricultural output are presented in Table 4.6). The processors thus act as effective monopolistic organizations (cartels) vis-a-vis the producers in their region. Producers do not "shop around" for the best prices among the large number of processors or wholesaling organizations operating in the country: they receive the government "recommended" prices for their products from the local enterprises, which is the same among all processors or prowurement organizations throughout Belarus. Producers have some price flexibility with storable products, such as meat or grain. Here they sometimes delay deliveries and simply wait for the next announcement of the "recoended" prices by the government: they thus get a better price than for immediate delivery. This maneuver, of course, assumes the existence of sufficient on-farm storage capacity. Ta 4..: Stae Procureame as Shames of Agrwlhal Outputs ), 1985-92 1985 1990 1991 1992 1993 Poatoes 20 16 14 8 6 Fruit 19 28 17 20 17 Vegetbles 52 S0 33 20 IS Meat 84 93 91 86 81 Milk 72 83 80 69 66 Sugarbeet 89 89 92 80 89 Grain 31 IS 15 21 - Eggs St S0 S0 S0 49 Source: Belams Ministry of Agriu and Food 4.31 Actual demonopoliaution has proceeded slowly in Belarus, apart from basic legislation passed in 1992 which set up the state anti-monopoly committee (AMC) and defined policy. Under the current definition of monopoly, 250 state enterprse are classified as such, with Govemment retaining 44 Chapter 4 control of prices and profits. However, some of the most entrenched situations involve torg organizations (groups of traders), rather than single large-scale units. A pilot project to demonopolize a Gomel trading torg was initated under the Rehabilitation Loan of the World Bank and has been modified more recendy to introduce management incentives to demonopolize and privatize others as well. 4.32 Demonpolization and commercialization of the monopolistic state processing and trade organizations are essential first steps toward a competitive market and for privatization together with eliminatin product specialization of trade wholesale operations. Large "agrokombinats" and all other monopolies and monopsonies should be broken down into smaller concerns to promote competition. The steps made in Belarus in demonopolizing and commercializing of the processing and trading structures were mainly related to products (fruits, vegetables, beverages, etc.) not under government control. The bulk of the system, the grain, meat, sugar, vegetable oil sectors have remained as monopolized before independence. The Government is currely attempting to demonopolize one amalgamated company (Obl Soyuztong) in the Gomel region. 4.33 As a result of demonopolization and commercialization the existng components should be divided into profit centers capable of, and allowed to, operate independently. This requires a number of admnutravesteps to increase the autonomy of the state owned enterpnses (SOE) and to improve their performance. including: - separating the state's ownership and company management functions through creation of corporate entities, i.e. joint stock companies; * cchaging procedures for the selection of boards of directors and SOE managers under corporate legisltion; e revising labor legislation to improve flexibility in the employment of staff and compensation; - providig trainmg for SOE directors and managers; 3 valuing enterprise assets for purposes of improved accountin and preparation for privatization; * creating hard budget constraints for the state sector and access to commercially termed finance; and, * developing a corporate legislative business framework. 4.34 Providing more autonomyfor operaion of SOEs means ending Government's practice of siphoning off profits from successful firms and underwriting unprofitable units within the same conglomerate (or set of firms under a given Ministry's purview). This would make it easier to identifl and liquidate non-viable enterprises. It would also promote profitable firms' interest in separating themselves off from the other vertically or horizontally integrated units in their conglomerate. In turn, these profitable firms will pursue expansion of profitable lines of activity and establish new connections to suppliers and customers via the market. 4.35 In order to accurately measure profitability, a system of moden accounting and auditing needs to be adopted. Public enterprises not yet privatized nor subject to immediate privatization should be made to apply this new system as soon as possible. Private enterprises should also be obliged to Development of a Market Structure for Agricukure 45 conform to the new system because their tax liability should be determined on the basis of standard accounting practices goveniing all enterprises. The application of standard accounting practices and asset revaluation procedures will increase firms' awareness of the magnitude of their assets' depreciation in current prices and reduce taxes on profits. It will also facilitate a market oriented production system and product development which will increase net profits at the firms' disposal and bolster their reliance on the market. Privatization 4.36 The entire agrobusiness subsector, and particularly those parts of it most important to the fanners, such as product marketing and processing, transport, services, and input supply, should be privatized. There are many ways to approach the complex issue of privatization in processing, distribution and input supply. There are however, certain objectives that shom govern privanzation: * improvement of enterprise efficiencies by creating an active market and avoiding economic concentration; * implementing the process as rapidly as possible since present inefficiencies result in higher prices to consumers and low prices at the farm level, and/or state subsidies from the budget via direct or indirect channels; * making the process equitable and transparent by stipulating that if shares are transferred without payment they should be given equally to all citizens, or that if shares are sold, buyers should pay market prices; and, * providing new owners with transparent owiership (e.g., tradeable shares). 4.37 The passage of privatization legislation in 1993 has been an important step in the reform of food and agriculture. Such legislation is essential for the development of competitive markets for agricultural inputs and output and for the restructurn of existing agricultural enterprises and the development of new ones. The character of the legislaion will determine, to a large extent, the pace of reform and the organization, governance, and management of the newly emerging marketing and agroprocessing enterprises. 4.38 To date, Belams has made progress in formulatng a privatization program. The State Comiittee of State Property (SCSP) was created in January 1991 and given the responsibility for design and management of the privatization law. Privatization started under provisional regulation, mainly through worker buyouts of state-owned enterprises, before enactmen of privatization legislation. But in November, 1992, the Government suspended the process in anticipation of approval of definitive legislation. 4.39 The Privatization of State Property Law and the State Program for Privatization were approved in early 1993. The Privatization Program specifies a list of enterprises to be privatized and sets time-bound targets. After the passage of this legislation, the SCSP began to seil enterprises by public auction and tender. Nevertheless, privatization through buyout of previously leased enterprises by worker associations continued to be the most prevalent means of privadzation in 1993. (Through September, three-quarters of the privatizations in 1993 were via worker buyouts.) The Law on Privatization Vouchers was approved in July 1993. It stipulates that for all enterprises privatized, privatization 46 Chapter 4 vouchers distributed to the population at large should be used for payments of at least 50% of the appraised value. Unlike many other FSU republics5, Belarus intends to privatize food processing industries much like it is privatizing other industries. The SCSP was to issue implementing regulations for this law by the end of 1993, including provisions for the issuance of privatization vouchers, their use in purchasing shares in enterprises, and their resale. The distribution of vouchers to the population is to be completed by mid-1994. The deliberate pace of enactment of legislation and formulation of regulations reflects fear of destabilization of the economy and a desire to avoid costly mistakes, given the lack of experience in design, implementation, and performance of such programs. Current Privatization Modes and Alternative Methods 4.40 A number of privatization methods are pernitted by the three pieces of privatization legislation passed in 1993: public and private sale of shares; reorganization and/or division of enterprises into component finrs; liquidation of assets by sale; management and/or employee buyouts; and a variety of lease and management contracts. Apparently, preference is given to worker buyouts since workers' collectives can buy their enterprise at a 20% discount although this has not proven to be a great incentive. Legislation also provides for the establishment of joint stock companies sold only to workers and managers with 40% of the shares remaining in state hands. The preference for worker buyouts reflects the desire to preserve the status quo at the enterprise level and the lack of information about other methods. Worker buyouts, per se, are not a problem, the problem is the lack of definition of the legal status of collectives and their organization and governance. 4.41 A popular interim practice among food processors is to lease the plantfrom the local authorites under the provisions of the Belarus Law of Leasing, which is apparently more flexible than the privatization law. The workers' collective signs a long-term lease agreement for the current balance-sheet value of plant assets with or without a right to buy at some date in the future. The ownership and management relations between the enterprise and the local authorites are thereby terminated: the previous appointed manager formally ceases to be the manager of the leased enterprise. The collective then elects the manager and the management team for the leased enterprise (in most cases, these are the same people as before, but now they are elected by the workers). The value of the leased plant is fixed in the lease agreement and is indexed to the general price level which is revalued periodically. This fixed indexed value (less accmulated depreciation) is what the workers' team will have to pay if they decide to buy out the plant from the local authorities in the future. Meanwhile, all new investments and retentions in the leased plant are treatd as a separate comnponent, which is the property of the workers' collective. 4.42 The procedures for privadzation state property on the republic level, as currently envisioned, will probably result in a slow pace of privatization. Valuation and approval procedures are complex and time consuming because of extensive SCSP involvement. Moreover, valuation will rely on information from accounts, rather than being market determined. Experience of privatization programs in other countries shows that appraisal values are not good indicators of actual market value. They fail to reflect willingness to pay, divert attention from primary objectives of privatization, and lead to time consuming challenges and reappraisals, complicated by asset revaluation during times of high inflation. In many PSU republics, raw matrial suppliers (fanns) are scheduled to receive a substantal share of ownersh in h iod processing idustry. Development of a Market Structure for Agriculture 47 4.43 It would be better to develop a program that is more transparent and focuses on developing a marketfor shares of privatized enterprises. The shares purchased with vouchers should be tradeable on the open market though their unrestricted trading may result in some problems. Officially sanctioned trading companies will be authorized to accept the public's vouchers and pool them in buying blocks of stock in enterprises. These vouchers would in effect be redeemed for shares in mutual funds. This limits transactions costs, minimizes information search costs, and reduces risk for individual voucher redeemers by allowing them to avoid having to place all their vouchers with just a few enterprises. Once the market for enterprise shares becomes developed, foreign buyers should be allowed to participate in stock purchases since they represent the largest source of investable funds. Existing regulations should be strengthened to allow "fast track' privatization of small enterprises, such as state-owned retail shops or workshops, and to permit transfer of small properties to district or local governments for privatization by auction. Related Measures to Facilitate Privatization 4.44 Enterprises should eventualy be relieved of their socialfumncions. Social security, such as medical coverage, insurance, pensions, etc., are best provided by the community or national institutions, and not as an adjunct to an employment contract, unless the employer chooses to continue providing services. Similarly, housing should not be a consequence of an employment contract. Dwellings, therefore, should be separated from the enterprise' assets portfolio and be distributed in full ownership to their occupants either free or on very favorable terms. This would increase worker support of privatization of their enterprises. 4.45 Criteria for appraising investment proposals should be developed to ensure that public sector enterprises targeted for privatization do not continue to claim public resources unless they demonstrate their ability to use them efficiently. Access to financial resources either private or public, other than self-financing, should be subjected to strict controls by the financial intermediary institutions, and by the Ministry of Finance. 4.46 In many cases, enterprises will need to be restructured prior to privatization. Enterprises should be categorized according to their market potential, technical problems and economicfinancid issues. Enterprises with good market potential and without serious technical or economic/financial problems are good candidates for immediate privatization. Enterprises without market potential should become candidates for liquidation. Enterprises with good market potential but severe economic/financial problems should be restructured, because in their present condition it is unlikely that anyone would wish to assume ownership or leasing rights. Restructuring could involve Government assuming or writing off debt, converting the debt to equity. In some cases the restrucrtuing may involve partial liquidation of the enterprise involving separaton of remunerative from non-remunerative divisions and delineating their debt prior to privatization. Role of Foreign Investors 4.47 Belarus has adopted a rather liberal legislation on foreign investment and joint ventes providing substantda tax preferences as well. The impact of these laws has not been sizable as far as food and agriculture are considered. There are only a handful of joint venures in the sector, mainly in the area of least control by the government, such as beverages, etc. Apart from the progressive law, die 48 Chapter 4 conducve framework forforeign investment in the mainstream of Belarus food and agriculture does not seem to exist: (a) overall policy and the economic environment is still not encouraging enough; (b) grain, meat and livestock sectors remain under direct and indirect government control; (c) procedures for foreign participation in the privatization of processing and distribution are not elaborated and present practices do not favor foreign buyers; and (d) domestic markets are not attractive enough. 4.48 Experience in Central and East European countries indicates that foreign participation in privatization of food processing and distribution could substantially speed up the creation of a competitive sector. However, foreign investors in general require majority ownership or at least a decisive role in the management of operations and much more freedom in marketing and currency transactions than those which Belarus can offer at present. Efforts should be made to remove those obstacles, because the quick rehabilitation of processing and marketing cannot be envisaged without massive participation of foreign private partners. Encouraging Competitive Marketing and Building Market 4.49 Currently, a rapid transition is taking place in some marketing activities. The share of the private sector in food retailing is expanding. However, marketing offood and agriculturalproducts is still very much controlld by the ste owned, monopolistic organizations. Increased private sector influence at the retail stage will place strong pressure on the wholesale sector to respond. Ideed, some private companies are staing wholesaling. There appears to be some brokering and primary wholesaling in the first stage of marketing from farmers to the state processing enterprises. Some private trade companies have begun operating in both import and export markets. By facilitating greater contact with international markets, the Government can place pressure on domestic monopolists to match foreign competition's prices. More efficient international marketing for Belarus agriculture should be supported by private export marketing associations. 4.50 In retailing, wholesaling and prodct assembly, some actions can be initiated without waiung forformal announcement of the guidelines. Privatization and entry into food retailing could be promoted by: * acceleration of auctions and tender instruments; * encouragement of leasing of enterprises; * the quick lease or sale of state and municipally owned food shops to the present managers and workers, without restriction on resale or sub-letting to interested third parties; and * provision of finance to small private food retailers for working capital and improvement of facilities (within the limits of national credit policy). 4.51 Efficent wholesale mareing also will require construction of a network of easily accessible points of delivery; improving the grading of agricultural products; defining efficient stndardized marketing rules (with settlement procedures in case of dispute, agreement of inspections, etc.) between professionals (traders, cooperatives, procesig industries); facilitating access to forward and fuure trading; improving access to international market information (long term agreement with Development of a Market Structure for Agriculture 49 intermational companies would provide access to international market information and to electronic trading of agricultural conunodities); and training executives in agricultural and food marketing. 4.52 Emergence of wholesale marketing could be accelerated by suviding state-owned mking enterprises, the Belaras Consumer Union, and processing monopolies. Private farmers' markets currently provide very limited oppotunities for marketing. Government assistance and promotion are critical for creating a wholesaling network aimed at strengthening links to private and personal plot farming. In the medium-term, the market infrastructure must be expanded to include auction halls, regional cooperative packing and grading facilites, and transportation equipment rental outlets. 4.53 One of the importan vehicles to foster trade and stinulate production in a market economy is the commodty exchange. The first conmmodity exchanges are already operating in Belarus. However, such markets need rles and regulations and supervision. This icludes clearing procedures to ensure contract enforcement (delivery and payment), and the regulations which deal with the potential manipulation of the market. Government should provide assistance to marketing professionals to develop these rules and make infrastcture and physical equipment available for expansion of commodity exchanges. 4.54 A pnvate-based commercial system is the most suitable way for supplying inputs and mtacinery services. For the short term, the existing struture and the new type of cooperatives can be the major institutions of supply. A network of farm supply shops could be created by privatizing the existing network and by promoting the establishment of new firms. As a first step, existing supply organizations could be demonopolized by having each regional units operate as independent businesses without any territorial constraints on sales. New cooperatives emerging from the reorganization of the kolkhoz/sovkhoz sector can also become specialized input suppliers. Over the longer term, private firms, including some foreign ones, will become more involved if approprate measures are taken to liberalize domestic and foreign trade. Ineasing AvilabDiat and Quality of Market Inforation 4.55 Accurate information is essential to efficient operation of markets. The public sector can play an important role in collecting and disseminating data that describe the fumdamental factors influencing markets (e.g., areas, yield, imports, exports, etc.) and key market indicators (i.e., prices, volumes and quantities). Timely and accurate information is also necessary for policy formulation. Although some nrdimentary market information is available, the quality and reliability of information for business and policy decisions is inadequate. A price reporing and market information system must include accurate product descnptions (to allow standardization of quotes and comparisons), price quotation conventions and data dissemination. An investment in a market information program may result m subs benefits at little cost, both from in terms of improved quality of government decision-making, and frtom the dissmination of information to the private sector. 4.56 Market information is particularly inportnfor exports. In the past, export sectors were centraly selected and markets were assured through the CMEA system. Today, export markets must be developed by individual firms, often facing an uncertin and, in some areas, restrictive trade policy environments. The organization of an export development service could meet the needs of tradig enterprises by: (a) collatig information on the markets for the major commodity and proessed product SO Chapter 4 sectors; (b) assembling export market intelligence that allows traders to assess opporunities on the basis of market data and relevant trade regulatory information (import restrictions, phytosanitary and veteridnary requirements); and, (c) providing specific export trade assistance that helps develop the capability of individuals and organizations concerned with export marketing. C. IMPROVING RURAL FINANCIAL SERVICES 4.57 Belarus is not unique in providing subsidized credit to agriculture. In most countries. including developed market economies, specialized public institutions and programs provide and subsidize credit to agriculture and rural areas. In large part, this is due to farmers' political clout, but economic reasons also justify these programs, for example, the need to compensate for distortions in the international price of agricultural commodities due to trade restrictions and subsidies; the need to assure access to credit to remote areas; as a means to achieve food security. 4.58 What makes Govermment intervention stand out in Belarus is: (a) the extent of the directed credit programs ( almost all credit to agriculture and many related activities is provided through these programs); and, (b) the degree of explicit or implicit subsidization that converts these credits to implicit grants (in addition to the extremely low interest rates, both borrowers and lenders expect that most loans will eventually be forgiven). In all developed countries and in most developing countries, government programs play only a marginal role in the overall financing of agriculture, and the grant component in these programs represents only a fraction of the present value of credits. 4.59 As a result of overall macroecononuc instability, severalfactors complicate any attenpt to reduce Governmen activities in financing agriculture: * The creditworthiness of most of the farmers is questionable. Agricultural land cannot yet be used as collateral to secure loans. The only exception is some 1.0 million ha already allocated to individuals. Furthermore, a lot of farms can't borrow or demonstrate profitability under commercial terms. * Financing centralized state procurement and marketing of agricultural products needs to be done through directed credit programs, because the agencies in charge are too big relative to the banking system. * There is a lack of rural banking infrastructre. In most rural areas there is no bankdng presence, except for Scherbank which until recently was not involved in lending. Also, most farms do not have the Mskills" needed to seek cormmercial loans since they deal with Belagroprombank, whose requiremets for granting a loan are those of a government agency. * Continued uncertainty in agricultural policies, in particular prices and restictions on trade, which complicate the creditworthiness evaluation of farms. * Farmers' attitudes toward credit. Under central planming, credits to farms were seen as government transfers and were often forgiven. This has created expectations that will be difficult to change for private farmers, and almost impossible to change for state and collective farms. Development of a Market Structure for Agriculture 51 4.60 In the short run, directed credit prograns will have to continue to serve as the basis for financing agriculture, at least until farms are able to borrow against their property. Furthermore, it is likely that most state and collective farms (given their debt service record as well as their uncertain future and the low profitability of the livestock sector) could not be financed by profit-oriented commercial banks for a relatively long time. 4.61 However, several important changes should be made to the present programs. Directed credits should be restricted to agriculture and to small scale processing activities that take place within farms or in adjacent farm communities. Eterprises dealing with agricultural inputs, such as fertilizers, like other enterprises in the agro-industrial complex, should finance themselves directly from commercial banks. Directed credits to agriculture should be reduced gradually over time, as commercial banks and cap.tal markets take over an increasing part of the financing of agriculture. 4.62 Credits should have clear-t terms, even if they are concessional and authorites should enforce those terms as a means of instilling fiacial discipline. Preferably, the NBB should raise interest rates on loans to agriculture to the levels prevailing in the rest of the economy. Subsidies would be more effective and cheaper if they are conveyed directly linked to the objectives that the Govermment wants to subsidize. 4.63 The Government should encourage establishment of a market-oriented, competive financial sector, in which intermediaries decide to whom, how much, and on what terms they lend. Recent banking law, which created a two-tier banking system, has laid a foundation for idependence of baning system from the Govermment. The present rural lending system based on the Belagrombank network, should become part of a competitive banking system that provides a full range of banking services, including deposit mobilization, trust and investment business, capital market operations, and provision of legal status and enforcement of informal financial contracts. The newly emerging rural banking institutions need to be complemented with a competitve insurance system providing risk protection for agricultural enterprises including private farmers. 4.64 The emergence of new grassroots financial institutions such as post office banks, credit unions, and possibly credit cooperatives should be encouraged by providing the legal, reguatory, and superisory underpinnings, as well as technical assistance. Farms should also be supported by technical assistance enabling them to prepare credible restructuring, project and financial plans, and loan applications. 4.65 It will take several years until a competitive rural financial system will become operational. Its efficient operation will also depend on substantial stabilization of the monetary system. Because the restuctuing of agricultural, agro-processing and marketing enterprises cannot be deferred unmil such a system becomes operational, temporary targeted public sector dependent financing systems may have to be used at least to initiate the restructring process. 52 Chapter 4 D. INTERNATIONAL TRADE IN AGRICULTURAL PRODUCTS Agricultural Sector Trade 4.66 Belarus exports of agricultural andfoodproducts (including lumber) have accountedfor only 10-15% of total Belarus exports in the early 1990's (see Table 4.7). however it was surprisingly high, 18.1%, in 1993. Over 95% of Belarus exports were shipped to other FSU republics prior to the USSR's break-up. In 1992, the share of agricultural and food exports going to non-FSU countries increased to almost 15%, albeit of a much reduced export level (Figure 4.2). A large share of agricultural and food exports is made up of meat and milk products and potatoes. Tabl 4.7: Bdarus - Trade in AVguturie Food, and Wood prdwt (in maillm of Rubos) 1989 1990 1991 1992 1993 Agrcultural & Food exports 2402 1753 4762 40693 206430 percent of total exports 11.7% 9.1% 15.2% 8.5% 18.1% Share to FSU 94.3% 93.3% 97.3% 87.5% NA Share to ROW' 5.7% 6.7% 2.7% 12.5% NA Agrcultural and food nports 3073 3004 S887 54253 164428 percent of totl inports 14.5% 14.0% 23.0% 13.0% 11.5% Share to FSU 72.8% 73.2% 52.8% 56.6% NA Share to ROW' 27.2% 27.2% 47.2% 43.4% NA Agricultu and food - -671 -1251 -1125 -13560 42002 trade balance 'ROW = Ries of World Source: World Bank. Statistical Handbook 1993 - States of the FSU; IMF Econmmic Reviews: Belarus 1993; and Belarus Ministy of Economics. 4.67 Over the past several years, Belarus agricultural and food imports accounted for 15-20% of total imports (Figure 4.3), but the share of agricultural imports was only 8u s 1892 11.5% in 1993. These imports have exceeded exports of the agnculture and food sector and Belarus has traditionally been Uo% a net importer of food and agricutural products. Geographically, Belarus is reladvely less dependent than other FSU republics for food and agricultural imports: other FSU republics account for 55-65% of these imports, which consist _ * o of grains, fruits and vegetables, vegetable oil, sugar, and 32% 679 processed food products. 4.68 In 1993, agricultural and food exports included Oth Ag. & 99,300 tons of meat, 339,000 tons of milk products, and is 37,900 tons of potatoes (Table 4.8). Belarus' largest 4 Development of a Mw Stncture forAgrfcukare 53 agricultural imports were grain (1.15 million tons) and sugar (156.5 million tons, which together accounted for over half the vBns ExpoU. 1992 value of agricutural imports. Agricultural inputs and farm machineiy were also an important portion of Belams' trade FSU Ag. & Food with other republics: Belarus was the largest exporter of 8% tractors in the FSU (the second largest producer after Russia) and accounted for 40% of FSU tractor trade. In addition, the ,,it Other Non.Ag. country produced a substantial surplus of potassium and ' 39% nitrogen fertilizer, exporting only 20% less than Russia. In 1993, Belarus based on its deposits, exported 1.6 million tons of potasium and 245,000 tons of nitrogen fertilizer (made by FSU Non-A\. using imuported oil and energy from Russia). 47% Other Ag. & Food 4.69 The volume and the real value of Belarus' I agricultural and food trade plummeted in 1992, following the F*ure 43 break-up -of the FSU. According to statistics, the levels of imports and exports in 1992 were below their 1990 levels. Most exports declined about 40%, milk and milk product exports by about an additional 80% C(able 4.8) from 1991 to 1992. The only increase was Table 4.8: Export-Import Trading in Agriculture and Food Products Ers Wits 1991 1992 1993 Imports Ws 1991 1992 1993 Tractors thousands 16.0 12.1 5.8 Graina million 1.75 1.63 1.15 of ns Potassium milliom 1.9 2.3 1.6 Sugar thousands 245.6 206.6 156.5 of tons of tons Nitroen thusands 257.0 400.0 244.7 Coffee thou3ands 0.8 0.2 0.3 of toWs of tons Mea & Meat tousands 165.9 116.3 99.3 C thousands 1.1 0.2 0.9 Products of tn of to Milk & Milk tousans 1307.2 271.5 339.0 Wool dousands 7.7 0.6 11.3 Products of tons of tm Poes thousands 341.9 36.5 37.9 Vegeables thousands 87.2 44.4 26.8 of ons of Wm Vegetables d _uands 7.7 ... 4.8 Fruits & dousands 37.7 20.7 23.6 of tons Berries of tons Canned milio of 55.2 57.4 56.9 Fish thousands 73.8 55.6 14.2 Frus & cans of tns Vegeuabs Canned Fish millions 83.0 79.8 70.8 of cns Canned Fris millions 109.6 78.5 65.8 & Vegetles of cans vAithout barter Uw--e Source: BDelarus Miiy of Agiul and Food 54 Ch*apter 4 in potassium and nitrogen fertilizer. Declines in inmports were somewhat less dramatic. Grain imports declined by 8%, sugar imports by about 20%. An increasing share of foreign trade is carried out as inter-enterprise barter: in 1992, over half of agricultural exports was done via barter. In 1993, inter- Republic agreements relating to prices, payments, and clearing between Belarus and a number of FSU Republics, including Russia, have led to some recovery in inter-Republican trade. Total agricultural exports increased as exports of milk products recovered from the sharp drop in 1992. Agricultral imports as a whole dropped by about 25% in 1993, with grain and sugar imports down by over 25%. As a result, Belarus appears to have been a net exporter of agricultural products in 1993. Curent Trade Regime 4.70 Current trade policies, institutional structures, regulations and payments arrangements reflect those of the FSU, and are dominated by quantitative restrictions and discretionary controls. These were established to promote self-sufficiency within the FSU and to prevent the export of items that were continually in short supply on domestic markets. Moreover, since the breakup of the FSU, trade which used to be considered internal is now considered foreign, subject to all the licensing restrictions that formerly applied to trade outside the FSU. Problems of arranging such trade have been exacerbated by the collapse of the inter-Republican payments clearance system that used to be managed by Gosbank. 4.71 Inter-Republican trade consists largely of sales under inter-governmental agreements. These agreements generally cover commodities that governments regard as critical in some way, and typically where subsidies or price controis still remain. Frequently, transactions under these agreements have been conducted at prices substantially below world market prices. Given the widespread regulation and subsidy of food prices, agricultural exports are dominated by the state foreign trade organization, AgrolnTorg, which executes state orders to fulfill the export targets under inter-governmental agreements. 4.72 Since independence, some improvements in the trade regime have been made, such as the introduction of clearly codified taxes on imports and exports.' Physical or legal persons with Belarus residence can obtain a license for foreign trading from the State Committee on Foreign Economic Relations. In mid-1992 there were 1,300 license holders, mostly enterprises producing the commodity or a state trading company. Barter trade outside the state sector is prevalent as well. Traders and other intermediaries have commonly been from outside the country. Local agents and businessmen of this sort still face a mmber of tax and other disincentives. Some of Belarus' firms are able to put together complicated barter deals (mainly with other FSU republics, Poland, and Hungary) that allow them to obtain vital inputs and products such as tropical fruits and high quality processed food that can be sold in Belarus at high profit margins. Though many collective and state farms are registered as foreign trade participants and have opened hard currency accounts, their trading activity is still rather limited. 4.73 The regulation of agricultural trade in Belarus through specific measures is highly variable across types of products and different transactions. Animal product exports are subject to license, granted from the Ministry of Foreign Economic Relations and approved by the Ministry of Agriculture and Food. Since April, 1994, written permission from the Minister of Agriculture is also required. There are no specific export quotas which limits animal product exports, but the ministerial approval procedures are actually quite restrictive. Some plant products are subject to export quotas, especia}ly wheat, and 6 wOn de Establsbmet of xpo and Impont Tax Rates for Foreign Trade Transactions,* Decree No. 202 of the Council of Minbers, Republic of Belams, April 10, 1992, Minsk. Development of a Market Strure for Agriculture 55 sunflower seeds; rapseseed and linsed are not subject to quantitative restrictions, nor is vegetable oil. For a munber of plant products there are export tariffs but no quotas; the most important ones are on oilseed meal (10%), sugarbeet (15%), and sugar (60 ECU/ton). As of April, 1993, exports to Russia are not subject to either export quotas or tariffs. 4.74 In addition to tariff and quota restrictions on exports, the receipt and disposal of foreign exchange is done in a way that discourages export by reducing receipts in local currency. Fifteen percent of foreign exchange earned from export must be surrendered at the official exchange rate set by the Government, and another 50% must be redeemed at the interbank Currency Exchange rate. This leaves only 35% which can be held as foreign currency deposits or sold for the free market rate which is higher than both the official and interbank rates. Thus, the surrender requirements act as a tax on exports. A number of types of export transactions are not subject to the obligatory surrender of foreign exchange, one of which is he import of "needed' food products, seeds fuel, or veterinary supplies. 4.75 As enterprises have experienced increasing financial and other pressures and found their input sup-ties becoming precarious, they have been less willing or able to maintain deliveries through traditional channels of state orders for export. The result has been the growth of defaulting and nonperformance on contract. In addition to the licensing and tariff measures described above, there have been serious inter-Republican trade problems in the areas of payments, settlement and clearing. These problems and the fact that surrender requirements do not apply to barter transactions have encouraged barter trade substantally. (Barter transactions are subject to a special tax paid in foreign currency equal to 10% of the value of the barter exchange, as calculated at state contract prices). Agrcultural and Forestry Export Prospects 4.76 The prospects for Belarus' agricultural exports depend on trends in domestic production and consumption as well as on the demand on international markets. Although domestic production is not likely to grow in the near future, shrinking domestic demand and the need for foreign exchange make agricultural products available for export. Potential markets exist inside the FSU, especially in Russia, where Belarus has established trade relatons. Belarus is lkey to remain competitive in the marketfor meat and dairy products because of low production costs and relively low transport costs. 4.77 Though the other FSU Republics stiUl seem to be the major potentl export markets, difficultdes in exporting to these markets can be expected to contnue. Domestic demand for meat and dairy products in these counties is declining because of falling income. Exports of tractors and ferdlizers will be held down by contraction of the agricultural sectors in other FSU Republics. Moreover, present trade agreements do not provide a clear framework for traditional transactions, though recent measures especially reduction of implicit and explicit taxes on "cash" exports remove incentives for barter deals. Disputes over prices and difficulties with payments will however probably continue to create problems, so that barter, in spite of its shortcomings, will prevail. 4.78 The export of Belarns'agriculturalproducts to areas other than the FSU seems to have limitedpotential in the short term. Fertilizers and timber however, are more easily marketable. Quality of meat, dairy , and other processed food produ" lu- kw compared to world standards. The Chernobyl accident has additional negative impacts on market potentials in the West. The fear of conminated products wil limit exports to international markets. There is a need for credible monitoring of foodstff for radioactivity in order to improve the image of Belarus food products. Processing and marketing are 56 Chapter 4 bottlenecks because of lack of experience in selling to Western warkets. Fortunately, these are precisely the areas in which the entry of foreign capital and the appearance of the multinational food corporations is most likely. As a result, the quality and range of Belarus' agricultural and food products offered for export will increase. 4.79 The intemational market for agricultural products is distorted by the protectionism of many countries. Access to these markets are limited by a complicated system of trade barriers. Beyond quality problemts, Belarus exports are further inhibited by these measures. Any potential export of agricultural products to the West requires an active trade policy guaranteeing the entry of Belarus products. Trade Reform 4.80 Auarky and seif-sifficiency are inappropriate goals for trade policy. Maintainin the current trade restrictions and controls impairs the performance of local producers in international markets by cutting them off from their best sources of supply. It also reduces pressures for demonopolization and competitive prices and qualities, in both foreign and domestic markets. The result would be the failure of agricultural producers and processors to retain traditional markets for Belarus exports or to penetrate new ones. 4.81 Restrictions on trade generate implicit taxes and subsidies, suppress producer prices and rise consumer prices. Export quotas and licensing requirements have the same price-depressing effect as taxes on the production of the affected commodities. Excluding foreign buyers from the local market by restricting or licensing exports depresses the producer price and shifts resources away from the production of exports. Conversely, import restrctions increase local pries of the restricted imports and of import substites, taxing local consumers and inappropriately encouraging relatively inefficient import-substituting producers. 4.82 There are some marked differences in potential for agricultural exports to the FSU and non-FSU countres. The FSU countres constitute a natural market for Belaus livestock products. Therefore the re-establshment of trading relations and the development of a marketconformng trade and payment system with FSU Republics, especially Russia, is critical immedate importance. If Belanus is to re-establish and benefit from closer trading ties with the FSU, it will have to move away from the highly inefficient barter and bilateral agreements that have dominated trade over the last few years. These arrangements limit price and quality competiton and generate high transactons costs. 4.83 In general, reforming the trade and institutional system in Belarus will allow development of commercial and private sector trading institutons and agencies, financial and payments arrangements, and trade and exchange control policies, and systems that facilitate trading transactions and encourage the integration of domestic and external markets. The state foreign trade monopoly has already been eliminated. The remaining quantitative restrictions and the cumbersome license system on agriculural exports in the form of quotas and licenses should also be phased out and replaced by a transparent system of iarffs and import and export tazes. A new foreign marketing structure, including competitve private trading houses and direct sales by producers, would take shape fairlly soon. Steps toward libelizaon of foreign currency regulatons are also crucial to the development of viable agricultural trade. CHAFrER S LAND REFORM AND PRODUCTION EFFICIENCY 5.1 The establishment of a comprehensive market structure and the elimination of direct govermment controls will improve the performance of Belarus agriculture. The improvement will be limited unless the farms can respond flexibly and individually to new initiatives, are able to improve their production technologies and are supported by competitive services. This chapter reviews land reform and farm restructuring developments and recommends fuher actions in these areas together with proposals to improve production efficiency and reshaping research, educational and government organizations in agriculture. A. LAND REFORM AND EMERGENCE OF PRIVATE FARMING 5.2 The desired main economic objectives of land reform in Belars are to: (a) establish the basis for a functioning land market, through suitable provisions for selling, buying and leasing land, and; (b) disengage the Government from the management and operation of agricultural land and production assets through their transfer to individual reform beneficiaries as property or under a lease arrangement. People designated to receive land as property or under a lease arrangement should have a free choice as to how they wish to conduct their farming. They themselves should decide whether to farm individually, in groups, in cooperatives, in joint stock companies, or whatever other form they choose. Different individuals will prefer different solutions and will choose different forms of management and operation. It is the Government's responsibility to ensure, through appropriate legislation, that a true sense of private ownership of land, assets, and profits is created or that land lease arrangements are conducive to a productive and sustainable utilization of the leased assets. Beg _in of Land Reform 5.3 During the Soviet era al agricultural land in Belarus was state owned, and this tenure system still embraces all but some 10% of the farm land. The first enabling Union-level legislation providing for the establishment of private ownership of agricultural land and production assets was passed by the USSR Supreme Soviet between November 1989 and March 1990. These laws permitted individuals and families to hold long term leases on land within and outside the collective and state farms, as well as allowing the granting of individual proprietorship over land. Proprietorship gave lifetime inheritable rights to work the land, but not the right to buy, sell or mortgage it. This Union-level legislation delegated important powers to the republics to pass additional laws on these subjects to provide essential details and mechanisms for the legal process of establishing private land ownershp and private peasa- faims. 5.4 Between December 1990 and mid 1993, Belarus enacted its own set of land legislation laws. Based on this legislation, the Government issued the Decree on Conducting Land Reform in the Republic, a decree to establish the State Committee for Land Reform and System of Land Tenure and to legalize the private fanring that already existed in Belarus. Laws also established procedures governing payment of land taxes. The first phase of land legislation in Belaus failed, however, to address the most important issue, namely the establishment of complete private ownership of land. 58 Ohapter S Land Law of June 1993 5.5 After lengthy discussions between the Government and Parliament, in June 1993 a law on ownership of land was passed which recognized private ownership of land. At the same time, it confined private ownership of land for individual subsidiary farming to a maximum of 1.0 ha per family and to 0.5 ha per beneficiary for use as orchards, dachas and residential dwellings. Implicitly, this law establishes that for all practical purposes, agricultural land will remain publicly owned and its utilization will be in the form of leasing to collective, individual and corporate operators. The law does not specify the terms and conditions for leasing, the future status of collective and state farms or the arrangements for administering the leasing of land. It is expected that regulations to implement the new law on land ownership and amendments to the 1990 leasing law will stipulate the aspects not covered by the existing legislation. Obviously, it is crucially important that the rules and regulations goveming tenancy as the main form of land tenure will provide for clear and secure tenure rights, mobility in the land market through tradeable lease rights and equal access by eligible tenants. 5.6 Ihe main features of the land law of 1993 are that it: (a) recognizes public and private ownership rights and abolishes the institution of collective land ownership; (b) confines private land ownership to individual subsidiary farming of up to 1 hectare per family, and to rural housing, smaU gardens and dachas; (c) excludes state forest lands, state water resources, communal pastures, radioacive contaminated lands, nature and ecological reserves and several other lands from privatization; and (d) provides guidelines for payment for the acquisition of private land. The law establishes, by implication, that the predominant, and economically most important, form of tenure for agricultural land will be tenancy or leasehold. It also provides a guarantee by the State on rights to lease public land by collective and state farms, other agricultural enterprises and organizations and by individual farmers, without indicating priorities or rights of refusal for any of the potential beneficiaries of land use rights. The Land Law of 1993 is a step forward. However, itfails to establish the land ownershipframework required by a market system: (a) it confines unrestricted private ownership of agricultural land to such narrow agricultural use tha its importance rests more in the provision of a basis for subsistence farming as a social safety net rather than in an economic factor for the agriculture sector; (b) it severely restricts the use of state-owned agricultural land due to the fact that lease rights to state owned agriculural land cannot be transferred or marketed; and (c) it fails to include details on the administration and implementation of the law and leaves implementation for local governments. 5.7 As a result of this recent legislative process, Belarus acknowledged the principle of private land ownership, but it maintained state land ownership as the dominant form of tenure and the unrestricted private land ownership has not been legally established. Private agriculture is seen as supplementary to a farming structure based on large-scale fiams operated collecively. The legislation did not provide for clearly delineated and transferable land use rights for most of the agricultural land, which is a prerequisite to reforming the present land tenure system. Further legislative actions therefore are needed beyond the land law of June 1993. There is a call for a land tenure system that offers secure and tradable land rights, not necessarily ownership. This requires three inseparable characteristics: alienation, valuation and transferability. To make land rights tradable or transferable, they must first be Land Reform and Production Eficaency 59 alienatd (legally separated) from collective or communal blocks; they should be valued or priced; and there nmst be channels to facilitate transfer transactions. 5.8 Table 5.1 gives an overview of implementation of the 1993 Land Law as well as earlier legislation on the allocation of land for private ownership. In the framework of the new land law, 965,500 ha (10.3% of total agricultural area) have been offered for private ownership, including land already being used by the beneficiaries, and new allocations presented in Table 5.1. This process is not yet finished, and some new allocations can be expected through the end of 1993. Individuals are entitled to own only one household lot, but households of more than one person are allowed to have more than one lot, as well as an additional dacha plot within the limit of I ha. Land plots of urban housing are also privadzed in this process (about 52,000 ha of urban land). Land is tranwferred to private ownershp on a paymen basis. Since Belarus did not have a land market, prices are set on a normative basis. Those who already use the land are required to pay five times the land tax, for additional agricultural land payment varies between 1.4 and 5.7 million Rbl/ha and will be indexed arnually. Urban land has a higher price and local governments have the authority to adjust payments. 18 months is given, stardng September, 1993 for eligible persons to inquire about and purchase land accordig to the scheme described above. Privately owned land can immediately be freely marketed and rented within the limits for private land ownership set by the law. 5.9 Land above the I ha limit cannot be privately owned. State owned land is given for lifetime lease, with the right to inherit in the case of individual fiming without payment. Decisions on leasing agricultural land are made by local governments. Local governments have already set aside 900,000 ha of reserve land from sovkhozeslkolkhozes. Further appropriations can be expected by local govenmments through the end of 1993 to redistribute state owned agncultural land among various users. The increase of reserve lands is strongly opposed by collective farm managers and some members of the collective and state farms due to the fact that the creation of land reserves decreases the land remaining for eventual release to collective farm members. Individual fiums and collective farms will receive confirmed lease rights in the forthcoming months. Reserve land will be used for allocations for new private farms and for muicipal development and wdil temporarily remain in the use of colective farms or be rented by private farmers. 5.10 Implementation of land legislation requires the improvement and upgrading of the lad registration system. The present system is not sufficient to handle private land ownership and frequent changes of ownership. To provide new land owners with titles has created difficulties and will be a lengthy process. Lease right certificates will be issued in a later stage, creating some uncertainies among present users involving collective farms. The Government itends to develop a computerinzed cadastre on the basis of the existing system. A Swiss pilot study was completed recently, however, implementation is delayed due to funding problems. Emerging Private Fanming 5.11 The beginning of the establshment of independent private farning is one of the most important results of land reform legislation. It has been facilitated by appropiating land and transferring it as reserve to local governments. Individuals who are inested in farming can receive land from the local government for long term lease, provided they are qualified in terms of experience, education, and willingness to become farmers. They can be members of kolkhozes or sovkhozes or individuals not 60 Chapter 5 engaged in agriculture at present. The upper limit for is 50 ha of arable land; an additional 50 ha of pasture and meadows can also be obtained as long term leases. Short term leases can be arranged for additional land. 5.12 The international evidence is persuasive that Table 5.1: Aoati of Landaaresa lt of land Rform individually-managed private farms L ati (as of Octote 1, 1993) achieve greater total factor productivity than collective or state Total ha % of total farms. That is, private farms am in Belaus l tpe likely to get more output per total Land AB ed for input land, material inputs, and labor o d Plots QO: than collective or state farms. They from begiemg of land reform 361588 3.85 are more likely to ensure effective total in1993 44087 0.47 production, harvesting, storage, and transportation. Evidence from of which ale land 40532 0.67 Central and Eastern Europe suggests Lan Alloated for New that when individual farms exist Priate Farms (ha): beyond a certain number, they help * begzming of land 53755 na create effective demand for new, reform competitive sources of supply for includih agricuu land 44808 0.48 inputs and chamels for marting, of whic a labnd 34436 9.55 storage, processing and distribution. in 1993 10168 na 5.13 The development of Includinggricura bnd 8473 0.11 an Mdivdprivatefarmng sector is of whwh amble lnd 6522 0.10 at an early stage.' Despite the fact that establishment of ide dent Tot Lad Aocated for private farms is supported by Orchrs and Vegetable subsidized credit, requests for land Cardns 51292 0.55 have been limited. As of April 1994, only about 2,800 independent private in 1993 8651 0.09 farms had been established, operating Source: State Coemme for Iand Reform and System of about 54,000 ha or 0.48% of total LdTenure agricultural land area in the country (Table 5.2). These private farms average 19 ha in size, including 14.8 ha of arable land. This first group consists mainly of educated farm technicians and farm managers who can easily meet the skill requirements and seem to have good connections with local authorities. Of all new farmers, 37% come from outside the village where their land is located. Heavily subsidized credit (14% anmual interest rate) is available for private farmers to begin farming up to 600,000 Rbl/ha (1993). 1 The Association of Belarus Farmers, an organization similar to the Association of Peasa Fanrms and Cooperatives in Russia (AKKOR) has been establisbed to promote independent family farmig and represent e interests of farmers. However, this Association has not yet played a sgficant role. Land Reform and Produchon fficiency 61 Tlo 52: _ Ipmduat Private Famrs (April 1994) Total in Brost Vtebsk Gomed arodo Minsk Mogiev Belarus Number of now private 249 719 380 297 658 512 281S frms fom begining and refoDrm Number of new pnvate Wms 49 102 106 75 145 46 523 establisd snce Jan. 1993 Number of qukidated private 4 19 19 7 8 21 78 fars Number of _mai pdrivat 24S 700 361 290 650 491 2737 Soure: Ste Conmutee for Land Rom and System of LndD Tenure 5.14 Early experience indicates that there is more reservation about private farming than originaly expected. Most collective farm members are reluctant to become independent fiamers. The reasons for lmited interest in family faing are complex. New owners are asked not only wo accept the normal risks of agricutural activity, but the additional risks of transition. Individuals do not have much farm management experience in a non-planned economy and are uncertain whether the reforms will be permanent. Uncoordinated changes in institutions, laws, market strwctes, barely functional markets, lack of credit facilites and general stabilizuion programs have created an environment in which real incomes fluctuate, relative prices sift strongly, and exchange rate changes are large. An added disincentive is that frmland can only be leased from the state though local municipalities. Livestock farnung, which is typical for the conditions in Belarus, requires higher capital nvesne and present livestock prices provide mited incives for those who wish to begn i endent farming. It is not surprising that independent farmers grow mainly crops, especially grain, since they have no resources to establish efficient livestock operations. Mebers of collectives and state farms also enjoy social infraructure and rlative income security provided by the large scale farms. These conditions make privatization seem less attractive to farmers. Outlook for the growth of private frming 5.15 The growth of private agriculture will argely depend upon the development of the farm support sector - material/technical supply, agricultural services, fmancial service and credit availability, marketin of agricultural commodities. The current farm support system is designed almost entirely to serve state and collective farms. The uncompetitive input supply and produt marketing systems could become serious constraints on privatzotion of primary agriclture unless development of a private input supply system and output makting is accelerated. 5.16 the sector of small, dW dent famiy farms wiU emerge gradaUy as farmers gain experience and accumulate capital, and as the hiput and output marketng systems evolve to meet their needs. The pace at which private fming emerges depends strongly on the evolution of the supply of capital and labor. Experience has shown that shortages of either capital or labor can constrain the 62 chapter S development of prvate farming. Labor supply does not seem to be a constraint. There is however a shortage of capital in Belarus in two senses already: first, the weak financl positions of most familes will make it difficult to acquire capital goods and finance inputs needed for private farning; second, the availability of capital goods suitable for smaller family farms is limited. Moreover, the input supply and crop marketing systems are likely to remain ill-equipped to met the needs of small farmers for some time. 5.17 Even with modest growth in numbers, a large proportion of the private farms created can be expected to run into financial difficulties and fail within the first three years of their formation. In 1993, 78 private farms (about 3% of the total) were liquidated. This "natural selection" process should not be regarded as a waste of resources. More importantly, it should not be considered a reason to expand government subsidy of agriculture in general or for newly emerging farmers in particular. This can only lead to the creation of a new class of inefficient, dependent farmers. Meetng the Needs of Private Farmers 5.18 Government should quickly resolve the unceraies created by the transition process; make clear its comnmitment to private independent farming; specify the options for reorganizing agriculture and agribusiness and assist in implementing the enterprise reforms; delineate the rights of members of collecives vith regard to joindy owned assets other than land; indicate the kinds of taxes that will be imosed; specify how existing debts and obligations will be handled. Beyond this, frer specfic actions would have to be taken in order to promote the creation of viable indendet pnvate fWms. This would include: (a) establishment of an advisory and extmension system in combination with financial restturing facilities for meeting the immediate needs; (b) development of a sustsinable rural financing system to meet the taditional credit needs of agriculture; (c) decontrol of input and comoodity markets and development of free and competitive narkets; and (d) strengthening infrastcre and tansportation systems for the mrual sector. B. RESTRUCTURING COLLECTIVE AND STATE FARMS 5.19 The restructrng of the kolosovkhoz seaor s the second most impor comWonent of kad reform, which is closely interrelated with the establishment of individual private farms and privadzation in the sector. In Belarus, no law prescribes reorganization of kolkiozeslsovkhozes. The Law of Private Farms and the general privatization legislation provides the framework for this process. Sovkhozes were mostly reorganized as kolkhozes in 1991, and those excluded from privatization serve eperimental, educational, seed and animal breeding purposes. There are no plans to privatize or restuce the large-scale livestock complexes. A rather moderate rtuctmring is being undertake in the collective and state farm sector. In mid 1993, a total of 704 collective and state farms out of 2,S20 Land Reform and Production Efficiency 63 showed signs of reorganization (Box S.1). This is only 26.2% of the large scale farms, while comparable indicators in Russia and Ukraine are 70-72%. According to EU TACIS estimates, Status of Rergnation of ectlves there are only about SO kolkhozes in which real no Stat. Frm (Aug. I9) rcstructuring and internal privatization has taken Total large scale farms 2n. 0 place. The Presidium of the Supreme Soviet, at ReorgAd fms 660 262 the end of 1992, prohibited the division of of which. kolkhoz land into shares for those remaining in - fomied am and lad funds 238 9A the kolkhoz so as to retain state ownership of - fomed oey asset funds 389 15.4 - created cwopeives inside fam 26 1.0 land. Legislation, however, allows kolkhoz - creamd c1osedjoi-stock cfmany 7 0.0 members to exit from the kolkhoz with their land share to establish individual private fanning on a Bolt .1 long term lease basis. 5.20 Various forms of reorganization have been chosen by Belarus collective farns. Creation of a so called joint stock companies based on vaguely defined, non-transparent ownership structure, is the most common mode of reorganization. In a small number of collective farms, internal cooperatives are organized based on the distribution of physical assets and land shares. These cooperatives operate as independent legal entities within the skeleton of the former collective farms which provide various services. There is some evidence of reorganizons in which independent private farms of some of the members wiere created within the framework of the collective farm structure. These latter modes of reorganization involve real change in the way of operation and can be considered as appropriate transitory forms towards private operator based farming structures. 5.21 The reorganization of collective farms in Belarus is seriously complicated by the fact that the Belarus parliament failed to establish private land ownership of agricultural land and that core rights cannot be marketed and directly transferred am-ng farmers. Though collective farm members have the right to exit with their land share with lease rights, the present legal framework and procedures for handling lease rights are not encouraging real reorganization of the collective farms. Emerging new conditions will make large scale fann reorguiization unavoidable. Government should facilitate this process with fiuther legislation and support. Guiding Principles 5.22 The reorganization of existing large scale farms is probably the most complex task of the reform. The overal objeaives of reorganizadon and privatization are seldom questioned however there is a widespread disagreement on the timing and pace of changes. The majority view in Belarus is that change should be gradual. Those who hold this view refer to the human heritage of the past system, the historically underdeveloped markets, the lack of capital and infrastructure, and other bottlenecks. They are concerned that a rapid dismantling of the inefficient, but still functioning, collective and state farm system might lead to a sharp decline in production and to the loss of production facilities and technology. 2 One example of this type of reorganizaton is the Kolkboz Plochany in the Molodocheno district about 40 kn northwest of Minsk. 64 Chapter 5 5.23 While inmediate changes are needed to adjust farming operations to the emerging market economy. experience in Central and Eastern Europe also indicates that large scale farm restructuring cannot beifly inmplemented immediately, and to reachfull completion will require time and rather carefid management. Although the completion of the restructuring process should be targeted for 3 to S years. The restructuring of collective and state farms should be guided by three major principles: (a) distribution of land or land use rights and of other productive assets to the kolkhoz and sovkhoz members in physically identified form and not as anonymous shares; (b) freedom of decision by members about the management system and future organization of production after the distribution of land use rights and assets; and (c) eventual separation of production activities from social and municipal functions which would be supported by emerging local govemments or private entities. 5.24 In Belarus and other FSU republics, especially Russia, several methods nhe Nlzi-Novgwod Farm Privaution MOM have been tested to privatize collective and state farms. Among them, the IFC Nizhni-Novgorod PFO4WP PLepand ry Work Land and property inventoi project has been the most publicized (Box 5.2) * Clarication of land and properq Aiement According to this method, farm members and lists pensioners each receive land and machinery * Calcuation of land and property entitlemen certificates graded according to job and age. The * Approval of the Model Plan certificates are then used in individual farm nlnge: Dburnon Enffe1s auctions, in which only the farm's workers and * 'e distnbutin of land and propery pensioners can participate. Participants are entitlemen to quLifying individuals encouraged to form partnerships with other * Public informdaon campaign to inforn land workers to bid for, and create, viable fann units. and property entidement holders on their rights The strength of the scheme is that it avoids the an otns proliferation ofpoorly-equipped, small-scale farm 2: Cr2tion of New Enteies and holdings. The auctioning scheme appears to Conduding Conurc suffer from some drawbacks however. Closed * Prepaaion of foundation agreem and participation in the auctions implies that an regktaon of enterpises effective producer, with land neighboring a Concluding contras collective farm, will not be able to expand his StW 3: Auctions holdings. Also, a successful company newly * Division of the land and propert of the farm investing in agricultural production will not be into lot able to acquire these lands. The pilot project has Submission of applications for land and also been a rather expensive enterprise. A new p*apetr lots The distrbutio of w dpoetthug decree by the Prime Minister of Russia, signed in an auction April 1994, allows state and collective fanrs to auction off land as private property to their Sage 4: land and PropertTasfer workers. The Nizhni-Novgorod pilot project * The tansfer of land and propet and issuance scheme is recommended to be used as a model, Of title although the farms are free to use other methods Box 5.2 as well. Land Reform and Production Efficiency 65 5.25 The process of restructuring of agricultural enterprises will be encouraged by contdnued progress in price liberalization, privatization and development of competitve stuctures in the maiweing of agricultural output and inputs, and scaling back of producer subsidies. The latter is particularly important, because continuation of what is sometimes referred to as the "soft budget constraint," or routine coverirg of enterprise losses by direct government subsidy or loans that are not expected to be repaid, allows enterprises to ignore market signals and continue inefficient operations. 5.26 By separating socal responsibilities and assets from production activities and managing and financing them independently, the production system could focus on efficiency and profitability, without the burden of social activities. About 25% of the total expenditures of large-scale farms are related to social services such as heating worker apartments, kindergartens, etc. As a general guideline, all housing should be transferred to the ownership of the pennanent residents and all social assets and services entrusted to the local or central authorities. Though existing laws allow for the transfer of such social services, the majority of them continue to be rnt by the large-scale farms due to lack of funds in the local municipalities. Rural opposidon to the break up of collective farms is often based on the fear of losing some of the social services run by thefarm. Transitional Agriciltural Structures 5.27 It is not possible to predict what structure of agriculture will emerge and what the mix of larger and smaller enterprises will be, nor is this the key issue. In all probability, there will be a mixture of smaller, famulyfarms, large corporate-typefarming and variatons of cooperatives and looser associations emerging out of the excsting kolkozlsovkhoz structure. If at all, family faming will probably merge only slowly and the farming stucture will remain rather heterogenous for quite a long time. However, in all cases, the key to creaing an efficient structure is the clarity of the definition of ownership and land use rights, the lack of restrictions on use (except for environmental regulation), and the transferability of titles or leases to the most efficient farmers. 5.28 Closed Joint Stock Companies. Joint stock companies are formed by dividing the balance sheet value of all farm assets into "conditional shares." Shares are notionally allocated to workers based on their seniority/tenure and actual labor contnbution. Neither the shares nor the stocks are currely tradable outside of the farm. The capital represented by the conditional shares or stock certificates is part of a collective asset pool and can neither be sold and nor freely transferred. The only way an individual can take possession of physical assets is by declaring a wish to leave the collective and start private farming. 5.29 These features are similar to the self-managemen systenat in Yugoslavia or to the companies managed by the so-called enterprse councils in Hungary. East Iuropean experiments with worker-management structures (which are similar in concept to these joint stock societies) have largely failed. While closed type joint stock companies established in Belarus agri lture are better than the present administrative-command structure they will prove to be inefficient in the long run because of the lack of a real feeling of ownership and involvement, and because it does not riuce the moral hazard of free riding". In distrbuting earnings, the short run interest of workers in higher levels of wages may dominate over long-run investments. The decision process in such an orgaiiization are diffuise, it is impossible to assign individual responsibility, and the worker-members continuously press the "friendly" management for higher salaries and greater social benefits without acknowledging the need for greater 66 haOpter 5 personal effort and equity capital formation. 5.30 ' This orgaiizational form is very much favored by collective and state farm managers since it does not require any major changes. In addition to the accountability and investment disincentives mentioned above, past experience with kolkhoztsovkhoz voting indicates that, at least initially, the general assembly will rubber stamp management proposals. The existing mangement structure remains in place, but the voting in the management council is be weighted by the size of individual shareholding (no longer none man, one vote"). Therefore, this mode of reorganization should remain a transitory form towards the break down of the fanns or towards an open stock holding company with transparent ownership. 5.31 The Role of Household Famine. Cultivation of privately owned famiiy plots by members of kolkhozes and sovkhozes will remain an important element of the system during the period of transformation, making a substantial contribution to the overall production and food supply. Above all, it will provide an effective social safety net for the rural population, ensuring as a minimum subsistence living staudards for potentially unemployed excess agricultural labor. Though exisng linkages to collective faris have created an interest in maintaining large-scale farming, Indidal household plots can serve as starting points for individual privatefarming through leasing of adtional pubic land. Support provided to small individual household farms should be similar to that provided to larger scale leasehold fanting. Further development of these fanns into full fledged independent private farms and improvement of their efficiency should be promoted through better input supply and advisory services. Allocation of additional leasehold land for private plots should have the same priority as leasing to ste and collective enterprises. 5.32 Establishment of Lease Cooperatives. Lease cooperatives are a functional subdivision of exitng collective farms. Although only few exist currently in an informal way, they may be good trsitional models that provide for large farms to be divided into smaller functional groups that assume management and financial responsibility for their operation. This allows smaller farm units to emerge, that can later be changed or subdivided fiuther if initial subunits are unsuccessful, or too large, or if the members become sufficiently confident of their abilities to want to begin own-account farming. The smaller scale of the new farms creates a more immediate inrolvement of the workers and a more direct link of the individual with the fruits of his or her labor. 5.33 The Role of Weste-trn-e Cooperatives. Production cooperatives are almost unknown in the West. General experience suggests that production cooperatives are not a successfil and efficient form of organization. Empirical evidence indicates that agricultural production succeeds beater on private farms. Servce coope-atives, which specialize in provision of agricutural inputs and marketing of agricultural products, are the dominantform of cooperadves in the West. Service cooperatives have the potental to efficiently provide iput and output marketing. Service coopatves often establish processing facilities, that improve; menbers' welfare through vertical integration into value added tax processing. Cooperatves can also develop local and regional infrastructure. Another important fimction of cooperatives may be to provide accounting, financial, and professional services. These *consulting" cooperatives can build on the considerable knowledge and experience of the qualified experts and managers currently employed by the large scale farms. 5.34 The est -nnment of service cooperatives should not rule out the option of the establishment of private rn.ns in the same lines of business. Compedtion between the two fonns of organization would improve the economic efficiency of the system by providing the producers with more Land Reforn and Production Effidenty 67 options. Since there is no experience with private cooperatives and only limited information available, internaal aid might be sought to provide training programs and direct technical assistance. C. MEASURES TO IMPROVE FARM PRODUCTION AND EFFICIENCY Adjustments in the Lvestock Sector 5.35 Profitability of livestock operations, particularly intensive poultry, pork, dairy and beef fattenig operations, is low. High investment and operational subsidy levels and price distortions led to production systems which: (a> overused feedgrsmanufactnred feed, while neglectng cheaper feed resources, such as pasuhneadows, forage field crops, and agro-industial byproducts; (b) wasted energy and other inputs; and (c) encouraged concentaon of large numbers of animals, often causing severe managerial, animal health, and environmental problems, as well as high internal and external transport costs, and difficulties in applying efficient fteeding, milking and manurelslurry removal techniques. These production systems, combined with the current low productivity levels (Table 5.3 compares livestock productivity in Belarus with neigh' 3ring and westem European country averages) cannot be sustained under the emerging relative price structure. Table 53: CemprOm of Lvetwk Rodcty (190- 1991) Hungaly Russia Ukaine EU Belarus EU as percen of Belarus (%) Milk (1/cow) yr. 4919 2731 2840 3771 2990 126.1 Beef (PU/kg) 4.4 13.0 12.9 na 12.4 35.5b Pork (PU/kg) 4.6 8.1 9.5 3.5 6.8 51.5 Milk (FU/Kg 0.4 1.5 1.5 0.4 1.3 30.8 -'-u - FMe unit (siandar Mas) bluly as peretge of Barug Sourc: EBRD 5.36 Changes in the stucture of consumer and producer prices, and consequently, of consumption patterns and feed costs, will require a major adjustment of the livestock sector. Livestock 6 kChapter 5 production costs will be much higher under free market conditions and domestic consumption considerably lower. Export prospects outside the FSU are not bright, and other republics of the FSU, particularly the Baltics and Ukraine, have similar problems. 7he size of the sector should be allowed (and assisted) to adjust downward. Is. Belarus, livestock adjustment is at a much earl-er stage than in Central and Eastern Europe, and in most of the other FSU Republics. Efforts would ;.ncentrate on measures to improve the efficiency of the livestock subsector, but attempts to maintain or restore the size of the sector through subsidization should be ruled out. However, livestock products should remain Belams' main agricultural exports. 5.37 Belarus'comparative advantage in livestock production in relation to other FSU republics is based on higher crop yields and cheaper feed availability. With the currently low conversion ratios compared to the rest of the world and lack of renumerative prices and underdeveloped processing, the livestock sector in Belarus has no comparative advantage vis-a-vis the West. However, due to its substantial potential for high yielding field forage crop production (namely forage maize and leguminous grasses) and from the large amounts of agro-industrial byproducts available. This can be the basis to develop a comparadve advantage outside the FSU republics. In additon, as mentioned before, Belarus has and will have for some time, relatively low cost for labor. hnprovement of the conversion ratio and adoption of better management and feeding practices are all essenial for building a comparative advantage in livestock production. 5.38 Considering that nearly all grain produced in Belarus is used for meat and milk production and that the nearly 60% of fardand under grass and fodder crops supports meat and milk production, the production of 1.5 million tons of meat and 7.5 million tons of milk is low. The 3.0 million ha of pastures and permanent grassland produce only 1.5 tons of feed units (oat equivalent) per ha. With better production techniques it should be possible to raise the output per feed units two or three times. Implementing such a program could profitably increase meat, especially beef, production. The change to a more etensive cade producton systemn based on better utilization of greenland would require getting rid of the large cattle and pig fattening units that, in addition to being inefficient, also present an ecological hazard to the environment. Improvemenlts in the Crop Sector 5.39 Cropping patterns undoubtedly will change considerably as market forces affect the agricultural sector, and farming tuns to optimizing rerns rather than increasing production. Attention will then have to be given by farmers to price relationships, markeWig possibilities, labor and machinery availability and other production and economic factors. In the short term, farms probably will turn toward the more profitable grain products (Box 5.3) and the application of chemicals and fertilimers will increase if availability and the financial situation of the farms improve. Later on, market forces definitely will generate further adjustments. 5.40 The agricultural soils in Belarus are brown forest soils with relatively good soil stmcture. The sandy and peat and swampy soils (about 24% of total) are not the most suitable for intensive agriculture and received considerable stress in the recent past. The renoval of these soilsfrom intensive cutivation should be considered. They either should be reforested or used as pasture or meadows by the livestock sector. Land Refonn and Production Efficiency 69 5.41 Cropping patterns will change to reflect market forces and significant . T.ACI P,oposalS _ for changes in production patterns are expected. SOw A*ege Adjusmes The composition of crop species and varieties G c : c - o e s Ga aerzge-is c.ubiased osex:esive sowing' would be based on mainy profitability and of rye (78,000 hanoas 50,0 ha), bot o wh market prospects. 7he direcion of most likely sd be dU C b 5%. Th- areas could be more dianges are: (a) grain crops will gain rFiN tably th trOt a( aadwintr importance in the short tern; (b) industrial -barey (150.0 ha), ir whic IS sown in silnt crops such as flax and sugarbeet and oilseeds D O present.Te maining 300.000 ha old be siiare reallocated to wheat (doubling to 200,000 ha) adspring may gain sham; and (c) forage crops will play a A o a a more important role. The adjustment to a i " wy aisure v structure leading to better utilizaton of agro- .selfffficiencyJn hod wheat ind * ber balanced fed ecological conditions might generate furhder gimwhic b oheavily.us ye change. Major recommendations of the EU- a. barley .u d TACIS team for the adjustment of sowing i = o woud ettr *swn~an poln. Tes chngs ould structure summaized in Box 5.3 support of t acreage by these projections. 3 e re a .' would be enough to meet hma poato d#eman PtWates.. acrag aloain hul nld h edcino0an Improvement in Farm t a 5.42 Potential for efficiency = ha improvement exist also in labor and machinery utilization, management, and by decreasing large losses during planting, Box53 harvesting, and storage. - Labor. About 20% of the working population, including technical staff working on farms, is engaged in agriculture. This translates into a high labor component per fim high employment of administrative staff. Farms also employ groups of craftsmen, such as bricrlayers and electricians, who work solely on farm-related schemes. They account for up to 25% of the agricultual labor force. These services add an unnecessary burden to farm expendiures and could possibly be performed more cheaply by outside contractors in a market system. Establishing these service as independent units at the village level would provide employment for villagers and would contribute to the privatization effort. - Management. Cuniiy, management is still inhibited by lack of commecially-oriented policy plaming and by a certain "subsidy menality" that relies on the state to make up losses. There is also a social component that forces the manager to provide employment for mral people. The lack of market orientation in production can be solved through greater specialization in a limited mmnber of production branches and by the closure of unproductive units. The problem of low work morale can be alleviated tirough performance-orient remnemeaon. - Production and Processing Losses. Government officials readily admit that losses in production and processing of agricultural products are very high. Et is estimated that losses of agriculturl products vary between 25 and 35%, and arise because of inadequate handling during harvesting, feedig, and processing. Losses are also caused by outdated, broken, and low quality mnchinery. 70 kWper 5 It is estimiated that widt better seeding equipment, seed requirements could be reduced. urdher losses occur in harvesting and storage. Processing machinery in the daires and bread factories is generally well over ten years old and is in need of replacement, if for no other reason than to reduce the rapidly rising cosdy demand for spare parts. Another source of losses is low quality feed rations, which result in higher feed input per unit of output. Because of low quality grai and concentrate input and difficulties in mainning consistent rations, excessive amounts of fodder have to be fed to produce livestock products. An additional source of waste is the feedn of meal rather than pellets, which causes losses in handling. - Application of Chemicals: Usage of potassium ahnost everywhere is excessive, while only about 70% of nitrogen fertilizer needs are supplied. There is a deficiency in use of phosphoric fertilizers. Only about one third of pesticides requirements are applied. Beyond indequate ratios, the process of application of chemicals is often technologically poor. - Overcapacity in Machinery. Belarus agriculture uses 2.9 tractors and trucks per 100 ha of agricultural are, the same level as in the former German Democratic Republic (GDR). This intensity is one of the highest in the world for this type of farming system. It is not justified by work requirements, particularly if one considers that nearly 60% of the agricultural area is under grass and fodder crops and that the fertilizer supply enterprises do a considerble amount of fertilizer and manure spreading for the state and collective farms. The number of grain combines per 100 ha of agricultural land is 0.2, a level that is one of the highest in the world. The overcapacity of machinery was encouraged by low prices for fuel. In addition to past low fuel prices, the large amount of machinery per farm is explained by the low qualiy of machyiery. It is sometimes necessary to keep one tractor for spare parts to keep another one going. At the same time machinery scaled to the needs of smaller farming units is hardly available. 5.43 These inefficiencies are not i oe. Most farms should be able to increase their productivity through: (a) better plant and animal breeding material; (b) better use of less, but hir quality, machinery; and (c) better agricultural techniques, including machiney able to redue losses in production, storage, and processing. After abolishing admnistrative planing, most farms should be in a position to adjust their production programs according to climatic and soil siuations in the franework of a market-oriented production policy, without necessarily intensifying agricultutal production through higher inputs. D. INVES S IN FOOD AND AGRICULTURE 5.44 The completion of the agricultural reform program, first of all the land reform, state and collective fam and enterprise restructuring and privadzetion are important preconditions for the improvement of the efficiency of primary production, processing and distribution of food and agricultral products. Appropriate poliaes are also needed to support invesimem to introduce new tecdnologies and mehods of production. The improvements in production techniques and methods would be reflected through improved crop and livestock yields at constant level of input use or alternatively receiving same yields at lower input level. The naural endowments of the food and agriculture provide potentas for Belarus to competitively produce food and agrincltaal products, maily livestock products and flax and oilseeds. In the medium term, Belarus should try to exploit these potenials. However, competive and profitable export of agricultural products require substatial investments in product quality as well as in Land Reform and Production Efficency 71 international marketing. 5.45 Based on the review of the current situation and the major tasks of transition, the investment prioties can be listed as follows: (a) development of physical facilities to create a working market for agricultural products and inputs for agriculture; (b) recapitalization of agriculture to promote the emerging new farming structure; (c) reconstruction and major modernization of support services (industries such as seed industry, machinery maintenance) and agroprocessing; (d) introduction of environment friendly techniques; and, (e) development of education, research and development potentials. 5.46 Belarus has experienced a decline both in production and demand for food. Investment, especially in replacement and more suitable machinery, is needed to stabilize production during the critical first period of transition. No doubt as a result of the process of farm restructuring and land privatization a large amount of farm equipment and buildings will become unsuitable for the new system, or will require substantial reconstruction. Though it is very difficult to estimate the magnitude of new invesm requrements created by the land reform in Belarus, investment mruements will be considerable. 5.47 Food processing is the bottleneck in the sector. The relative backwardness of the processing of foods is an extremely serious handicap for the agricultural sector. The level of processing is crucial to exported products since it determines their quality and price and, indeed, whether they can be sold at all. It cannot be overemphasized that world market food processing standards will only be attained if a much more developed level of processing is introduced. The development of food processing in a way that is clearly linked to export strategy is a indispensable condition for competitiveness and the improvement of export efficiency. More demanding processing is also becoming increasingly important for Belarus consumers as well. 5.48 Increased environmentalprotection requirement mean, above all, that greater scope must be given to technologies that economize on materials and energy and that protection of the soil and the safeguarding of its quality must become a fundamental criterion of agricultural production. Other principal aims are prevention of enviromnental polluton by harmfiul by-products and the spread of enviromen-friendlY packaging materials made from "natural" materials. As a result, the proportion of waste-free or recycling technologies should be increased, technologies preserving the original property of the basic material and foods made with these technologies must be given greater emphasis, and the reduction and elimination of the use of chemicals should become an increasingly important consideration. 5.49 Agriculturl universities, research institutes and the yet to be created farm advisory/extension services, i.e., the agricultural information knowledge system, will be of strategic importance. Preparing the next generation of agricultural professionals is vital. As the full effects of economic reforms play out, it will be important to be able to identify, adapt, adopt and/or develop 72 Chapter 5 technical innovations to increase factor productivity and underpin competitiveness. Therefore, investment in human capital should be a high piority. 5.50 The private sector should play a decisive role in future investment in agricultural as privatization proceeds. The Goverrnent role is to provide an enabling environment, including an incentive framework that creates the right motivation for private investment in primary agriculture as well as in agricultural processing and distribution. Public investment needs to be directed at improving human and physical infrastructure, and to be linked to the implementation of a program of fiuther reforms which set clear priorities. E. MODERNIZING HIGHER EDUCATION, RESEARCH AND EXTENSION 5.51 Upgrading Education and Research. Belarus' agricultural education and research system is in difficulty. If agriculture is going to be responsive to the country's needs it must be current with international scientific and technological developments: the system is now out of touch, indeed isolated. Scientists are also out of touch with the evolving needs of domestic farmers. They need more contact to ensure the relevance of their work, and to develop a constituency that will ensure long term financial sustainability for the system. A premium needs to be placed on the system's ability to be creative, promote excellence, encourage entrepreneurship and foster agility in the use of scientific resources. 5.52 The agricultural universities and the research institutes under the Belarus Academy of Agricultural Sciences (BAAS) are undergoing an unprecedented period of budgetary stress that threatens their core. Their most important asset, the human capital embodied in scientists and faculty could be lost ff the situation is not corrected soon. A two phased approach to the needs of the agricultural university and research instituions is called for. As a quick response, to forestall irreversible damage to the institutions, as well as initiate some of the more immediate modernizing requirements, the first phase would aim at immediate repair and mainenance of inrumentation, and ending the professional isolation of the universities and research institutes from their inernational peers. Resources need to be augmee to support collaborative research and attendance at international professional meetings, to provide access to and moderization of information systems, and to develop new course offerings and updated curricula. 5.53 A second phase would focus on the institutional and policy reforms necessary to mdlernize the research system. This would require a comprehensive study of alternative models for modrnizing higher education, research and extension. Given the importance of harnessing the iherent synergy between research and higher education, a stategic issue that should be confronted is how the agricultural universities and research institutions can be integrated. Associated with this issue is the need to rationalize the allocation and utilization of resources available for research and in the agricultural university system. The respective roles of public and private research should be defined to encourage the mos cost effective use of limited resurces. Ultimately this process has to lead to some hard decisions with respect to the reallocation of research resources, including large scale downsizing, privazation and the allocation of time by faculty to research, teaching and/or extension. 5.54 Another major issue for the research system is how to develop enhanced linkages with dients to ensure relevance of the research agendas for the agricultural reform process and long term financial support. Since agricultural research produces strong reurns to the agricultural community, it should be responble for a proportion of the cost of agricultural research, particularly the more applied work. Land Refonn and Production Effaency 73 5.55 Universities and research insdtutes should be encouraged to establishperfonnance criteria and evaluate saeni andfaculty to ensure promotion based on the quality and relevany of dtr work. Recrunitnent criteria will need to be reviewed and updated to ensure a heterogeneity of training and research methods of faculty and prevent "inbreeding." 5.56 Agricultural economics, farm management and marketing shoule receive priorities both in higher education and research. There is an urgent need for training positions for teachers as well as increased access to shorter and longer study tours and training. Books and periodicals in these subjects are also needed. Belarus agricultural economics and other agricultural related social services such as rural sociology have to be reintegrated with the mainstrm of intemnational science. Marketing research, studies on new product development to meet new market opportunities, and trade policy options for Belarus under the new conditons should be supported. Likewise research and study on the social impacts of the ongoing reforms in agricuture. 5.57 Building a Farn Advisory Service and Extension System. Belarus needs to avoid the creation of a large public extension system and a large cadre of governent extension agents. However, the emergence of a farming system with many units too small to employ specialists in market-oriented management and familiar with new production systems and technologies, will require off-farm assistance if this adjustment process is to proceed expeditiously and without too costly errors. The establishment of an enterprise advisory service to assist in and facilitate the adjustment process may be a necessity if the reform is to proceed in a reasonably efficient way. While the Goverment would initially need to play an instrumental role in establishing and managing such a service, it should from the outset include private sector paticipation which could gradually take over the management and fiancig of the system. F. RESHAPING THE ROLE OF GOVERNM 5.58 The transition to a market economy requires a fiadmnta change in the roe of the Goverment m agriculture and in the economy in general. Direct government i vention in the agricultural economy, such as establishing mandatory targ for production and/or delivery of goods and cental distribution of investments and inputs must be ended. The management of transition, however, remains a major task of the Government. The Govemment's role should be to establish the general rules and facilitate the conditons for smooth operation of markets and i business orgamizations. This role is not less important than the previous one; however, it requires a different philosophy, as well as different means and institudons. 5.59 The Government of Belarus has started to dcange the structe and scope of government organization for management of agniculure. The overall principles driving this chmge should be: (a) establishing a single center of responsibility for the food and agriculture sector; (b) dimanting of the acrrent agro-industrial complex" govermena management structure; and (c) simplifyig the sture of governmenl organizations coresponing to the reduced role of the public sector responsibilities in agriculture. 5.60 Given the uniqueness of the country, its history and politics, it is not posrible to define the exact structure of a modrnized goverment aminon of food and agriculture. However, within a market driven economic system the Government should play three roles: regulton, provision of supporting services, and analysis. Regulaton should include food inspecdon, seed inspection, 74 Chapter 5 establishment and enforcement of grades and standards, establishment and control of phytosanitary standards, epideniiology and livestock disease control. Essential services of a public nature should be provided. This might include domestic and foreign market information, agricultural research, farm advisory services (extension) and higher education in agriculture. The existing research and service stations, universities and the well-trained, experienced staff of the kolkhozlsovkhoz structures would provide a good starting point. Finally, the Government should monitor, review and diagnose the implication of changing circumstances and develop options for public policy. 5.61 The dismantling of the bureaucratic structure of centralplanning Curt Orgai ftio of the is a very important task. What is needed MiUdsy of Agilltue and Food is not merely changing the names of the No. off various ministries, but radical 1. DeparnM of Economic Directlon, Marig, and modification and/or merger. Units Forecast -15 related to central command and direct 2. Departmn of Forei Econom c Re lwships ; 8 interventions should be dismantled, while 3.Depaane of Afministration ad Dirtion - - .4. Deafn of Ahu Husa6, Milk id Ms : - ; . those remamiing should be organized and Prod iai u M a Production 4 managed to meet the needs of a free s. Deparment of Vetiay Mediccs.Animalet: market control system. Market regulation Vet-Inspection 13 and trade policy functions should be taken 6. Depame of Crop Producton nd Processi : : 34 over by the MinAg and other government Depar of En£ining, Licensing of ai: : agencies. The present structre of 8 q Es-ate MinAg (Box 5.4) already reflects a _ y, Valuation and W . ; response to new conditions. As transition 9. Dermnent 'of Ariculture) Education proceeds, the operation of MinAg and the 10. Deparmn ofQUaty Co0- S s 1 whole government structure for I. Depatnt of Recfords d s to agriculture can be furher simplified, with 3 = of legal Ai - 13. Deparmnent of*Pesonnel ni pca Assignmt 14 fewer institutional units and fewer 14. Chenoby Secion - employees. Changes are needed in the structure of regional units as well. A iiS -- 40. large bureaucracy related to the -- _:-_-_=_ -- implementation of central control still Box5.4 exists on the regional levels. There is no need for their further existence in the current form. A relatively small administration would be adequate to enforce agricultural regulations, promote development, and provide extension and market information services. 5.62 The establishment of market agriculture requires the development of a new legalframework. New laws and the adjustment of existing legislation will be legal changes are needed. The most important is revision of the land leasing law to determine the conditions for and administration of lard use rights to coninue the move toward full private ownership of agricultural land and making lease rights marketable. A legal basis for the transfonnation of kolkhoz/sovkhoz system is also needed in the near fuure. Also needed in the near fiture are laws that establish the basic principles for private voluntauy cooperatives, and an agricultural marketing law that establishes the framework for fair competition, anti-cartel policy, and quality control. At a later stage, general regulations for agriculture, forestry, and hunting and fishing must be established according to the new ownership strucure and economic management philosophy. It will be essental to harmonize Belarus legislation regarding product grades and standards with that of Land Refonm and Producion Efficiency 75 the EU and the emerging systems adopted by the republics of the FSU. CHAPTER 6 EXTERNAL ASSISTANCE 6.1 Belarus has embarked on an historic and courageous effort to transform its economy from a centrally planned to a market-oriented system. This reform will, under the best of circstances, be a long process invariably accompanied by economic, social and political difficulties. To ensure that this transition process is efficient and effective, and to minimize the transition problems, external assistance will be essential. In the agriculture and food processing industries the assistance most needed in the short and medium term would include: * development of agricultural policy formulation capabilities; * technical assistance to help to fonmulate and implement a consistent transition program in food and agriculture that includes privatization of processing and services industries; - development of institutions and support facilities needed to implement the transition program; and - capital investments for the development of competitive production, processing and marketing. A. TECHNICAL ASSISTANCE AND INSTITION BUILDING 6.2 Many difficult policy, technical, and institutional issues have emerged during the transition from a command to a market economy, and skills generally not available within the country are needed to deal with them effectively. Technical assistance and taining covering broad areas of food and agricultural sector policy are needed to facilitate this transition. The topics identified below are indicative only of technical assistance needs in agriculture of Belarus. In many of these areas a number of multi-lateral institutions, foreign goverments, and private organizations are already involved, but their support so far meets only a small fraction of the need. Also, the coordination of technical assistance activities, to ensure their relevance, usefulness and cost effectiveness is a high priority. Policy Development 6.3 For the transition period and beyond there is a need for constant monitoring and evaluation of price, income, investment, and trade policies consistent with the program of stabilization of the economy and the goal of economic restructuring. Technical assistance and training are critical in these areas. Foreign experts will have to play an important role in the stengthening of agricultural policy analysis capability in the country as well as in reorganizing public admistraton in agriculture. International and bi-lateral organizaons should also be prepared to provide expertise on economic policy issues generally, and support the upgrading of formal training programs in economics and agricultural economics. 78 chapter 6 Land Reform Implementation 6.4 While Belarus has a detailed mapping base, i has not taken any but the most basic steps toward establishing a modern cadastre and comprehensive land information system needed for land registration and titling of individual land holdings, land mark.t development and for exercising an active land and enviromnental policy. Technical assistance in developing a comprehensive land information system would facilitate not only the land reform. but also the development of land taxation and rural credit systems based on land as collateral. 6.5 While the land reform law provides a framework for the land tenure reform, the development of new production management units in agriculture and the restructuring of their production systems is impaired by the lack of knowledge and experience of the involved agricultural population. Support fbr an information system to apprise farmers on their options for owning land and a service to advise them on enterprise management would substantially democratize, accelerate, and probable rationalize the enterprise restructuring. Technical assistance is needed in establishing Western type agricultural cooperatives, specially agricultural service and input/output marketing cooperatives. Enterprise Privatization 6.6 Assistance may also be needed to help design social safety nets for rural residents as state and collective farms are restructured.' Such programs need to be stressed as labor is released during the restructuring of state enterprises and unemployment increases. Such programs may also be of value in helping lower income groups adjust to the removal of producer and consumer subsidies. 6.7 The World Bank, the European Bank for Reconstruction and Development, and the European Community are already providing extensive technical assistance to the design and implementation of corporatization and privatization programs. Agricultural processing and nmarketing enterprises are in particularly urgent need of plans for restructuring, demonopolization, and privatization. Assessments should be carried out to identify options for restructuring or closing inefficient food industry plants with outdated technology. Assessments should examine management in the dairy and meat subsectors and procurement, technology, and product marketing options in other subsectors. 6.8 Managers of large food enterprises and retail outlets need training in marketing, accounting, and finance. Foreign specialists could assist in the establishment of new, privately operated wholesale terminals in selected urban areas. Pilot projects could be initiated to teach business skills and, for each major commodity group, to develop and demonstrate commercially oriented interaction at the retail-wholesale interface and at the farm product assembly level. Input Supply, Technology 6.9 Input production facilities need to be assessed with an eye to their long-term viability under market conditions. Associated investment strategies need to be developed as well. Technical I A recent report on poverty in Belarus indicates that poverty miglht be more widespread in rural areas dhan in urban areas. Exernal Assistance 79 assistance is needed for manufacturing enterprises at the production and distribution levels and for input dealerships, to establish product standards quality control, develop energy efficient products which are scaled for smaller scale mixed farming, and to develop a network for providing service and support to end-users. Input dealers also need training in business management and technology transfer. The development of farm service dealerships or emerging service cooperatives would greatly assist in this effort. 6.10 Assistance is needed in defming the proper roles of government and the private sector in the development, multiplication, distribution, and marketing of seed. Areas requiring attention include protecting intellectual and genetic property rights; defining the rights of foreign firms engaged in seed research, production, and marketing; and upgrading national seed quality. As part of farm restructuring, a large number of veterinarians now employed by state and collective farms are likely to move into private practice or the extension service. Guidance, based on foreign experience in privatizing veterinary services, would be helpful. 6.11 The viability of various types of livestock and crop production and production technologies needs to be evaluated on a regional basis according to market principles. Priority areas for technial assistance are farm management, appropriate technology for smaller, more competitive production systems and product quality considerations, especially in the livestock sector. Research, Education, Extension 6.12 The agncultural research system would need to be reviewed and adjusted to the country's needs. It would also benefit from exchange with foreign scientists and from assistance in financing equipment and supplies and subscriptions to foreign scientific publications. Agricultural research and education systems need to be integrated into a comprehensive system of research, education, and extension that is oriented to market-based agriculture and more attuned to the sustainable use of natral resources. The growing importance of private farms creates special needs for developing new information systems (technical, market, policy), information channels, and research and extension programs for appropriate production technologies. Retraining of technical specialists at the local level will be necessary. Rural Fnandng 6.13 Substantial retraining in modern banking practices is one of the highest priority needs, particularly in the rural banldng system. Programs should encompass retraiing for policymakers and senior managers on priority issues in rural finance, retaining of instructors in bank training institutions, on-the-job training, revision of university cunicula, and temporary contmracting of foreign institutions as appropriate. Training to meet international banling stndards is needed in virtually all aspects of financial sector reform: central bank supervision, bank restructuring, legal aspects of banking, accounting, risk-based client lending, and central and commercial bank management. Technical assistance in the design of an efficient rural credit system is essential. 80 Chapter 6 B. NEW INVESTMENT 6.14 The guiding principle for all new investments should be whethea they are likely to be efficiently used and that deployment is economically efficient. Ideally, then, investments would be directed toward projects that facilitate restructuring enterprises which adjust their production systems to real factor and product market conditions and toward the physical rehabilitation of agroprocessing and distribution of agricultural products. 6.15 The international comnity has used several means to stimul.ite investment and technology transfer in the food and agricultural sector in transforming socialist econo)mies. NMost direct financial assistance comes through loans from multilateral and bilateral assistance programs for investment project development-secured by sovereign guarantees; equity and loan participation at the enterprise level in the private sector (by the International Finance Corporation of the World Bank Groap, for example); and technical assistance grants and credits, which are time-tested methods for introducing advanced technologies. 6.16 Several innovative techniques are also being used to encourage direct private investmnent, and some of these could be extended quickly to promote privatization rehabilitation, and cevelopment in Belarus food and agricultural sector. These include financing private enterprise development funds that enable local and joint-venture investors to acquire foreign equipment and material; underwriting credit guarantee funds and venture capital funds, which have proved fairly successful in the tansportation sector; and extending investnent guarantees-through insurance and other means-to individual foreign investors and their fmanciers. 6.17 In most cases in Belarus, the parership with foreign firms that provide early access to new technologies, new markets, and new management techniques may be a more importnt external assistance contribution than that of capital investment for new equipment. C. THE BANK ASSISfANCE PROGRAM 6.18 The broad objective of the Bank's assistance program is to help Belarus realize the full potential of its agricuture and forestry sector. In the short term (within the next 3 to 4 years) the program would focus on facilitatng the transformation of agriculture by providing policy support to help stabilize domestic a food supply responsive to market demand, design and implementing a market oriented framework for agricultual pricing, markedng and trade, build support services for the transformation of agriculture, and the sategies for reforming agricultual production, marketing and processing enterprises. 6.19 To assist in stabilizing the domestic food supply, the World Bank has provided financial resources in the framework of a Rehabilitation Loan for importing critically needed recrent inputs and crucial agricultural equipment in order to alleviate the shortages in chemicals, food additives, spare parts which are mainly responsible for much of the current output decline. 6.20 Forestry is one of the most important resources in Belarus. World Bank assistance was first offered in this area. The short term objective is to arrest the decline in wood harvesting and wood production levels, improve operatng efficiency and cost-effectiveness, maintain sector employment, reduce wood imports, and possibly expand exports. The medium term objective is to improve forest Extenal Assistance 81 resource management and the economic value of the standing tree stock. The project would support major sector policy reforms based on the macro policy reform programn already agreed upon between the Government, the Bank, and the IMF. 6.21 Food processing is one of the most critical bottlenecks of the Belanrs food system. The World Bank would consider facilitatng the development of initial areas of food processing, assuming that new investments are combined with demonpolization and privatization. 6.22 To strengthen the capacity of agricultural institutions and services for supporting the agricultural reform process, the Bank would consider providing resources for establishing and operaing an agricultural facility to assist the govenunent in the analysis of current policy issues and in the formulation of policy reconuendations, rehabilitating the national seed industry, rehabilitation of the national agricultural research system, establishment and operation of an agricultural privatizatioa and farm business advisory system to facilitate the privatization of fann management and the restructuring of agricultural enterprises and modernization of the cadastre and land information system. 6.23 In summary, while Bank investment support would contrbute to the technological upgrading of agricwlture through the financing of machLlery and equipment, highest returns to the agricultural economy will be achieved through the utilization of the Bank's resources for the development of the human resources engaged in agncultural production and processing. PART II: SUBSECTORAL ANNEXES CHAPrER 7 AGRICULTURAL RESOURCES BASE AND CROP PRODUCTION A. LAND 7.1 The landscape of Belaro is similar to that of Central Russia: etensive plains, low wdulaing hills, forests, and lkes. Major river basins of the Dnieper, Berezina, and Pripet in fte eastern and southen parts of the republic drain into the Black Sea, and in northwestern Belarus the Dvina and Neimun river basins drai into the Baldc Sea. Total land resources of Belams extend over 20.8 million ha, the maxmum distance frm east to west is about 650 km, and from north to south 560 km. There are abundant lakes (10,800), but only 470 laoes have a water spread area of above 50 ha and the majority of them are found in the northern and northwestem part of the republic. Over 39% of Belarus is covered by forests. Tree cover has well-defined zones. As one traverses from north to south, the dark coniferous fir trees of the north gradually shift to broadleaved birch and oak trees in the south. There are rougly three geo-botanical zones: (a) the centrl zone of oak-conifer forests in the north and on the Orsha-Mogilev plateau; (b) birch-oak-conferous forests of the central and western zones; and (b) te broadleaved and pine tree forests of the southem zones. Tabe 7.1 DBrIbu of Agculul Lad and ped Arem by Oblt (1) Obat Total Aea _u Land Pen of Ag. opped Area Peraen of Sown Land Are Br"t 3270.3 1464.6 44.7 848.6 54.5 GameR 4036.3 1444.2 35.7 864.5 59.8 Grdno 2511.6 1292.1 S1.4 890.3 68.8 Mink 4019.3 1888.8 46.9 14.3 67.4 Mogiev 2908.3 1504.3 51.7 1012.5 67.2 Vitebk 4004.7 1736.2 43.3 1198.1 69.0 TOWal ateus 20759.5 93302 44.9 6088.3 65.2 tre Vunooyi a1 et (19) 1.603 miMl ha (41.7 Of the agiiaMi linO usn) Source: Sae Commifee for Land Refom and System of Land Tenur 7.2 Review of the long-term data on general land use, reveals that total agriculual land area decreased by 560,00 a in the past two decades, from 9.8 million ha in 1970 to 9.35 million ha in 1993, whereas the cropped area declined during this period by only 130,000 ha, from 6.2 million ha to 6.1 million ha. A closer look at land use, especially at the annually cropped area in farms, reveals that after 1985, the area under amnual crops declined by about 154,000 ha. Area under cultivated grasses also declined from 1.7 million ha to 1.2 million ha. 84 Chpter 7 B. CLIMATE AND SOILS 7.3 Belarus has a temperate continental climate, transitional between maritime and contnental. It has relatively mild and humid winters because of the influence of the sea winds from the Adantic. During the summer, sea winds brmg cloudy and rainy weather, and with the weakenig inluence of the Atlantic Ocean, the weather turns continental. 7.4 The average annual precipitation of the republic is 641 mm; varying between 621 mm in the Brest region to 658 mm in Vitebsk. About 66% of the precipitation falls during the vegetative period of the year. The precipitation during summer is higher than in winter. Maxinum precipitation flis during July-August. Occasionally, low moisture levels, especially in sandy and sandy-loam soils, cause moisture stress on the crops. Moisture stress is experienced usually once in three years, during Apil/May, and/or September/October, in the southern provinces of the Republic. This affects the early vegetative periods of winter crops. Crop losses are not uncommon in sandy and sandy-loams. Southwesterly winds during winter, and northwesterly winds during summer, determine the general weather conditions. The land is generally covered by snow for five months, from November to April. The highest average snowfall is around 31 cm in Minsk and 15 cm in Brest. 7.5 The monthly mean temrature reaches 17.90C during June, and during January dips to -70C. Based on genera anmnal precipitation, evapo-transpiration, and the thermal resource availability for crop growth, Belarus is divided broadly in to three zrones: • The norten zone has excess moisture during the main rainy season and just sufficient moisture during the spring and autumn for crop growth. This zone generally receives, on average, an annal precipitation of 750 mm, and the annual thermal resource is below 42 k cal 1cm2. This zone abounds in lakes and ponds, however, during the summer in the drought years the sandy and sandy-loams marginally suffer from soil moisture deficiencies. The total anmual evapo- transpiration ratio of the zone ranges between 570 - 600 mm. * The central zone is charaterized by the medium moisture zone, has an annual rainfall of around 700 mm and amual evapo-transpiration of 570-590 mm. During years of drought, the rainfall deviation is as high as 150 mm from the ammal average rainfall. The annual average thennal resource available is around 43 to 45 k cal/clm in this zone. Shallow rooted cereal grain crops suffer from moisture deficiencies during the years with lesser raifall in the sandy soils. * The souihern zone is a moisture deficient zone, even during the normal rainfall years. Anmnal rainfll is 620 mm and the annual evapo-transpiration ratio ranges between 540 -570 mm. The annual thenmal resource availability of the zone is above 46 K Cal/cm2. There is moisture deficiency during May and August in this zone. The temperate continental climate requires both drainage in the marshy reclaimed lands and irrigation during May and August for a successful and sustainable high level of crop production in this zone. 7.6 Belarus soils are essntially Argilo-iluvial, Gleyic-Podzoluvisols, and can be grouped into six broad soil types: 1) podzol soils - 45.1%; 2) soddy-carbonate podzol soils - 0.2%; 3) marshy podzol soils - 22.6%; 4) marshy carbonate podzol soils - 9.0%; 5) moist (flood-prone) podzol soils - 8.7%; and 6) marshy peat soils - 14.4 %. Agridcukra Resources Base and Crop Producion 85 7.7 On the basis of the soil texture (physical composition), the Belarus soils can be grued into four categores with a respective share in the total land area as follows: a) clay-loam soils - 27%; b) sandy loams - 49.1%; c) sandy soils - 18.6%; d) peat and marshy soils - 5.4%. 7.8 There are incidents of sheet erosion on undulating and sloppy lands over wide areas (12% of the agricultural land), where moderate to severe erosion is caused by wind and water. Erosion is also seen on the large farm lands. Farm managers and agronomists on these farms are aware of, and have an appreciation for, the impact of erosion hazards. They are also aware of the conservation practices that can reduce the negative impacts of erosion, but the use of large machinery and the large- scale cultivation practices of state farms have not permitted efficient land management. Quantity requirements, as opposed to quality needs, limit the adoption a. contour strip conservation pracices for smaller land units. The water-holding capacity of these eroded soils is very low, and during the years of moisture stress, for instance the 1992 drought, crop production suffered on these soils. Reduction of productivity under such conditons could be more than 50%, compared to the other no-neroded lands of small plots with bumds, especially on the sandy and sandy loams of the southem province. Areas exposed to such erosion hazards constitute roughly 1.2 million ha of the agricultural land in the republic. 7.9 Generally, the soils of Belarus agricultural lands are strucurally adequate, but are acidic (pH 5.6) and poor in base exchange capacity (6 -15 mg eqo100 g soil) and availale phosphorus (more than 28% of lnd has P205 less than 10 mg/100A- fwii grams of soil). They would rerequ- limng and fairly adwmced nutrient .. ... and crop producton management to gethighergram yieldstlanthepresent level of 2.4 tons per ha. There aeAfal1O 44A .. ... however pockets of fertile clay loam a I w soils with humus content of above ' - 4 % 2.5%. These areas, 1.5 miion ha out of the total 10.3 million ha of the .. ........-. 14gi4 agcultral land, are spread about in the central and western region of the state where poten exists to ; 11 - maxmize given production wel above __-___________.__ 3 tons/ha (see Box 7.1). ox 7.1 7.10 The Belarus lands have been surveyed' for Land Capability Classification and graded on the "0 to 100" scale. The Rayon soil maps only provide rough pictures of the aggrgated average value of the ferdlity points of the agricultural lands. The fertility maps by farm also provide only the aggregated value of fertility points of the kolkhoz or sovkhoz as a whole and not of the individual land parcels. The parameters expressing land productivity are scientifically established on the basis of information collected once in five years through survey on physical and chemical composition, erosion rates, slope, stoniness and cropping intensity etc. The points awarded do not consider location values 'lelamus has a deailed soR *edity map based on the soil survey conduted on 5 year cycle by Bdems Researc nstiut for Soil Science and gricua Chemistry. 86 _awpter 7 such as access to the tows., market, road, electricity source, water, storehouse, etc, which have considerable influence on the cropping and farming systems. While the methodology employed can help to draw a macro picture of soil fertility in a broad sense at the Rayon or Oblast level, such classification is not a sufficient tool either for farm management decisions at the enterprise level, or for land taxation and fixing of rental rates. C. CROP PRODUCTION Production Trnds 7.11 Crop production is diverse, but clearly oriented towards livestock, which accounts for almost 60% of the gross value of agriculture output. The share of feed crops, cultivated and natural grass land is around 80% of the total agricultural land. Grain crops are sown during both winter (about 40%) and spring (about 60%). The main grain crop is winter rye, which is sown in 35% of the total cropped area. The rest of the crops; spring barley, oats, and wheat (occupying about 38%, 13.5%, and 4.5% of cropped lands, respectively), are essentially grown for feed purposes. Potatoes comprise about 8 to S% of the total food crop, flax around 0.6%, and sugar beets roughly 0.2%. The long-term trend in the areas sown with different crops, shows that the grain area declined from 3.1 million ha in 1980 to 2.7 million ha in 1993, compelling the state to import 2.5 million tons of grain. The area under sugar beet cultivation increased to 55,000 by 1993. The area under potato cultivation decreased from 786,000 ha to 749,000 ha, and the important potential export crop, flax, decreased in area from 234,000 to 95,600 ha between 1980 and 1993, reducing the quantities of linen produced and exported from Belarus. 7.12 The production trends of various crops indicate that grain production increased from 5.1 million tons in 1981 to 7.8 million tons in 1987, but declined to 6.3 million tons (a 20% reduction) during 1991 and increased to 6.9 million tons in 1993. Productivity of grains also followed the same trend, increasing from 1.7 tons/ha in 1981 to 2.8 tons/ha in 1987, and falling to 2.5S; tons/ha (13%) in 1993. Sugar-beet production declined gradually from 1.4 million tons in 1981 to 1.1 million tons in 1991, but then increased to over 1.5 million tons in 1993, increasing productivity from 27 tons/ha (1989), to 28 tons/ha in 1993. Flax production, which was 116,500 tons in 1982, fell to 57,000 in 1993 and the productivity during this period increased from 5.1 quintls/ha (1982) to 5.9 quialsa (1993). Potato production fell from 14 million tons (1981) to 11.6 million ton (1993). The fal in production in the past two years is due to overall shortages of critical inputs like pesticides, phosphatic fertilizers, and appropriate farm machineries, as well as drought. 7.13 MinAg, in line with its objective of reaching self- sufficiency in grains, has considered only the technical option: to 1.xpand the area under grains from the present level of 2.6 million ha to 2.8 million ha by 1995. This may prove counterproductive. Area expansion may lead to sowing of grain crops on marginal lands which are nct agro-ecologically conducive to grain crop production, which will further reduce yield levels, as well as make production more expensive, because of higher amounts of purchased inputs. Efforts are to be made to concentrate on the areas which are already under cultivation, by improving both the technology of production, and land management techniques, including the use of high quality seeds of hybrid varieties, modem seeding equipment, appropriate plant-protection chemicals such as herbicides, as well as an efficient system of feeding livestock with green fodder instead of expensive imported grains. Agricultural Resources Base and Crop Production 87 7.14 Grain production increased by about 3% annually during the 1980's. The grain yields are below the levels harvested in other central and west European countries (Poland 3.1 ton/ha, East Germany 4.4). The quality of cereal grains such as wheat, rye, and barley produced within Belarus is not high. The need for food grains was mostly met by imports. The review of the grain balance indicates that during 1993, Belarus produced 6.9 mllion tons of grain, and inported 1.5 million. About 0.70 million tons were used for seed purposes, and 6.1 million tons for anfial feed. There were also storage and stored grain reprocessing losses of 0.40 million tons. Of the import of approximately 1.5 million tons of grains, about 1.2 million tons were used for human consumption. 7.15 Sugar Beets are grown on about 50,000 ha, primarily on 400 state and collective farms in the western regions of Brest, Minsk, and Grodno. Production of these farms, which was 1.6 million tons in 1985, declined to 1.2 million tons in 1992, but increased to 1.5 million tons in 1993. Modest yields of sugar beets (28.0 tons/ha), and poor recoc:ery of sugar (11%), is attributable to the use of genetically low-yielding varieties. Most of the area is covered by improved Uladovskaya-752, which is a multi-seed variety. Seed production and distnbution practices are poor, including the use of low quality planters, untimely and improper application of herbicides and fungicides, and inappropriate harvesting, transport, storage, and processing of beets. Sugar beet productivity can be raised to 40 tons/ha in the western regions of Brest and Grodno by the use of high yielding varieties of seeds, efficient planters, and by the application of bio-degradable fungicides and integrated Pest Mamgement. Also necessary is the introduction of area-specific production management, and a mo ion to cost- effective production systems. 7.16 Flax fiber has been a foreign-exchange-erig crop for Belarus, and provides considerable employment in the rural areas. Production of this crop has come down, from 127 thousand tons in 1987 to 57 thousand tons in 1993. The variety Orshanski-72 is an old variety of local selection, which is susceptible to wilt disease. There is an urgent need to introduce a better variety which is taller, resistant to seedling wilt and blight, and with very high-quality fiber for linen production. Appropriate seeding, harvesting and processing machineries are needed to increase productivity and production potential. Efforts should made to improve the quality of the fiber, so as to regain the European nantral fiber linen market. An increase in production, along with the improvement of the flax, would create emloyment opportunities both in field production and in the linen mills and fabric industries. This could act as an alternate area where laborers retrenched from some of the agro-industries could be gainully employed. Input Use 7.17 Fertilizers: Amual consumptior. of mineral ferdlizer bas been on the order of 1.9 million tons of NPK nutrients, including 0 - million tons of "N", 0.4 million tons of P205, and 0.8 million tons of K20. This accounts for ap . cation of, on an average, 261 Kg/ha of NPK nutrients. The long-term consumption pattem of 1970-1990 suggests that the consmption of fertilizer increased gradually up to 1990, reaching a peak of 2 million tons (273 kgs/ ha) in 1989, and declined after 1991. There have been no reports of fertilizer elements accumulation in toxic levels, either in the soils or the underground water, except around the huge animal complexes, where nitrate levels had occasionally reached 225 mg/liter. The consumption of mineral fertlizer (191kg/a in 1993) is lower in comparison with western European averages. For instance, in 1988 Belarus consumed 258 kg/ha, West Germany 411 kg/ha, Poland 346 kgs/ha, and Hungary 277 kg/ha. There has been no problem with the availability of N and K fertilizers, but the phosphatic fertilizers are less easily available. Purher 88 Chapter 7 increase in fertilizer use, especially in the potentially productive farm lands, can fiurter increase yield. Current application of nutrient ratios are not balanced; it is 0.75 N : 0.5 P: I K, instead of the recommended 1 N: 0.9 P: 0.6 K. Since the potassic fertilizer is locally produced, it is used in higher doses than necessary. 7.18 QOgnc Mjanure is an important factor in humus soil as it maintains the nutrient balance, and is a measure of fertility and productivity. About 70 million tons of organic manure, consisting of 14.5 million tons of liquid organic manures from the pig-fattening complexes, 14.8 million tons of semi- liquid manure from cattle farms, 25.4 million tons of farm yard manure, and 31.6 million tons of compost, are used annually for production of food grains and fodder. On an average (1992), 13.2 tons/ha of organic manure is used, compared to 14.9 tons/ha during 1986. The use of excreta from the large animal-fattening complexes (cattle and swine) as liquid manure has increased considerably. The C:N ratio of the liquid manure is 1:8, which causes environmental problems, because 200 to 250 kg N/ha in the form of liquid manure is applied with low carbon content (< 13 %). The mineralization of the applied liquid manure produces higher levels of Nitrates in the soils, and in the water in and around these complexes. Use of peat or lignite to raise the carbon contunt of liquid manure is also uneconomical, because of the heavy transportation costs of peat to, and the treated product away from, these complexes. Pelletization of the liquid manure is being attempted, but it is an energy wasting proposition. The Government is aware of the problems associated with disposal of the liquid manures, and is investigating various alternative methods. 7.19 Lkimni: The soil application of lime is made by Belagrochem once every five years. In the last twenty years (from 1967), a massive lime application program has been undertaken by the government to reduce the soil acidity of all the agricultural lands. So far, about 100 million tons of lime (dolomite) has been applied to the agricultural lands with an acidity level of 5 pH. This has helped reduce the amount of agricultural land with acid levels higher than S pH from 66 to 12 percent. The Government has a plan to apply about 4 milion tons of dolomite annually through Belagrochem. About 4.1 million tons of dolomite was spread in 1992, at a rate of 5.1 ton/ha. No cost-efficiency analysis has been made at the farm level to justify the rationale of applying 5 tons of dolomite per hectare, once every 5 years. 7.20 Pesticides: In 1993, 7,200 tons of pesticides were applied, an average of 1.7 kg/ha. This represents an almost 70% reduction from 1987 peak levels. Use of Granosan, DDT, TMTD, and Pentauram has been banned, and the use of pesticides such as biton, vitavax, fundosol, synthetic pyretiroids, ambush, and sumicidin are being promoted. These pesticide and herbicide formulations are imported annully by Belselkhozekhem from the west, and through other CIS countries, mostly through barter trade. Availability of the herbicide, systemic insecticides, and synthetic pyrethroids has declined consequent to the crunch in foreign exchange availability, and due to rising prices. The country is totally dependent on imports for its pesticide needs. There has been very weak application of IPM technology, and an over-dependence on imported pesticides. There were instances of producers losing a crop, just because the specific pesticide (pliosphomidon) compound was not available. Por instance, the "colorado beetle" devastated the potato crop because the monopoly procurement agency made no alternate arrangements to contain the out-break of the pest in the absence of the necessary chemicals. Agricultural Resources Base and Crop Production 89 Fam Nlachinery 7.21 In 1993, the agriculture sector in Belarus was served by 123,OOW tractors (almost 1 tractor per 100 ha), 25,500 cereal combines, 9907 fodder harvesters, 8,436 potato harvesters, 3,954 flax, and 1,799 sugar beet harvesters. Belarus manufactured over 100,000 tractors, and 12,000 forage harvesters annually. The majority of these (about 85%), were exported to other FSU republics, and the rest were allocated to sovkhozes and kolkhozes, based on priorities drawn up by the Belagrosnab at the central pool. Most of farm machinery is suited to large farms, with T-130M (160 hp), DT-175 (170 hp), as well as wheeled tractors T-701M (300 hp), and MTZ- 142 (150 hp). Most farms do not have small (type T-30 or T- 25) or medium-sized tractors (UMZ-6, MTZ-80), or other machinery and equipment needed for much smaller, emerging private farms. Most existing farm machinery has outlived its age, and, although rugged, are less efficient. The planters, especially the winter planters, are not very efficient, nor are the fertilizer applicators. The seed drills imported from the GDR during the early 1980's are all worn out, and state-of-the-art precision equipment for spraying ultra-low-volume (ULV) plant protection chemicals, to improve efficiency, are rare. The numbers of good, working planters, harvesters, combines, and balers are very low at the farm level, especially in kolkhozes. The situation with regard to the farm machinery has deteriorated, with a fall in the replacement rate since 1987, due to diminishing allocation of funds to Jhe state farms, and the poor fimancial position of the collective farms. There is an urgent need to address the problem of availability of machinery, including planters, harvesters, and ultra-low-volume pesticide sprayers, to provide the necessary resources to arrest and reverse declining farm productivity. Constraits on Productivity 7.22 To meet the increasing domestic demand for quality grains, sugar, and edible oil, the stratey of the central government has been to adopt a program which emphasizes import substitution in agriculture. The MinAg has developed a program for increasing the domestic production of grains, sugar, and vegetable oil through area expansion. However, current production practice uses outdated machinery, is dependent on imported pesticides, and uses an inefficient marketing and distribution system which cannot be sustainu mder the emerging relative price structure. There is a wide gap between the yield levels achieved in grain production in terns of quantity and quality achieved at research stations (4.5 tons/ha), and the yields achieved in the farms (around 2.5 tons/ha). The downward trend in grain crops in the recent past has been caused by number of factors: * availability of a quality, high-yielding vanety of seeds. The seeds used by the farms are genetically low in productivity, with low resistance to biotic and abiotic aberrations. Processing, grading, treatment with fungicides, and storage of the seeds is not optimal. The present level of production can be enhanced by 10 to 15% by a mere change in seed quality. * availabity of herbicides and insecdcides. Weed infestation and pests take a toll of 20 to 30% of cultivated crops. Weed infestation, Fusarium wilt, sucking insects, like aphids and jassids on cereals, colorado beetle and phytophthora on potatoes, and altemaria on sugar beet, causes considerable reduction in yield. Herbicides and pesticides are imported from western counties, or on a barter basis from CIS through the Belselkhozkhem. Belselkhozkhem requires most of the farms to place requests as much as a year in advance of the sowing season, and to buy and stock the required quantities whenever they are made available. Prevailing storage conditions 90 Chapter 7 on fams are not adequate, and quality suffers. Lack of dependable availability, in adequate quantties, is the major reason farn managers go without, or use available, poor quality materials. avilability ofphosphadcfertilizers. Application of smaller quantities than recounended results in an imbalance in the ratio of nutrients used. There are also negative effects associated with the excessive application of lime. The applied phosphorus is rendered unavailable to the crop, because of fixation as tricalcium-phosphate. * availabty of predsion planters. Productivity of winter crops, especially of rye and winter wheat, suffers in many farms because of the lack of efficient seed drills, which maintain a uniform depth of sowing crucial to winter crops, especially in hilly areas. * Moisture stress at the time of ear emergence and/or grain formation stage. Moisture stress, especially during May and August, reduces yields by 30 to 50%. Moisture stress reduces both the quantity and the quality of grain, making it unfit for breadmaking. Grains become deformed, shrivelled, and unfit for human consumption. Agronomic studies have shown that provision of 50 to 60 mm of irrigation facility, to protect the wheat and rye crop from moisture stress during crucial growth, especially at the grain formation stage, in the southern zone, and arrangements for timely and appropriate quantities of herbicide and insecticides, could substantially enhance productivity. However, the economics of this have not been established. =Recomendations 7.23 Major recommendations for improvements in the crop sector are as follows: * The crop production potential of Belarus has not been Jidly exploited. Results of the research institutes and some of the lead collective farms have demonstrated that with appropriate technology, and timely supply of inputs, yields of most of the crops could be substantially increased. By employing modem production technology, which has demonstrated higher production capability under similar agro-ecological conditions elsewhere in the west, it is possible to enhance the quality and the quantity of grains produced domestically. * There is an urgent need to review the entire seed industry for each crop, including the fodder crops, and to take a hard look at breeder seed production in the commodity crop research institutes, localize the testing process of varieties, nmltiplication, processing of super-elite and elite seeds at the regional research stations and experimental stations at the rayons level, large scale multiplication of seeds of first and second generation in the special seed production fanms, as well as the processing, packing, storage, and distribution of seeds. The state may consider launching a National Seed Development Project, involving the private sector seed growers, foreign seed company investments, marketing organizations, and domestic researchlcapabilities, to evolve suitable varieties. * Effort should be made to secure the required quantities ofpesticides, including herbicide. The Govenment should encourage more competition in pesticide dealings by providing commercial licensing and easy access to information on technical advice, research reports, and credit. Agricultural Resources Base and Crop Production 91 Depending upon the advantage, the Govermnent in the initial stages could provide tax concessions to the emerging pesticide dealers, to enable them to establish a network of services, including contracts for distribution of insecticide. Attempts should also be made to establish an IPM system, by encouraging private firns to organize production and distribution of hight potential biological parasites, rotational and cultural practices, use of pest-resistant varieties, and the selective use of pesticides. e Improvement in sugar beet, flax, and oil seed production and processing should be taken up. Good quality seed material with superior genetic capability for high sugar content and yield has to be procured from suitable agro-ecological areas abroad. Feasibility studies on the modernization of sugar beet and flax transport, storage, production, and processing systems has to be undertaken immediately. * The Govenunent of Belaris needs to address the technology issues in crop prodution by conducting studies on the needed improvement in agricultural production technologies, to facilitate investnent in viable on-farm agricultural enterprise development projects with appropriate credit systems. CHAPTER 8 LIVESTOCK SECTOR A. PRESENT STATE OF THE LIVESTOCK INDUSTRY 8.1 lhe topography of Belarus, the relatively poor, acidic soils, and the cool climate, are not fully favorable for arable agriculture, but do favor livestock production. Indeed the livestock sector has been the mainstay of agricultural production in the country, contnbuting 58% of the total agricultural output, despite the fact that approximately 80% of agriceltural land is allocated to pasture or the growing of fodder crops. 8.2 Livestock production, up to 1965, was mainly small scale, with major contributions by small private plot owners. In the late sixties, however, there was a drive towards the development of large-scale livestock units ("complexes"). These complexes, which housed 12,000 to 100,000 pigs or cattle, and larger numbers of poultry, increased the labor efficiency in livestock production, but also became a major environmental liability. Moreover, the more or less equal distribution of these complexes in the various oblasts and rayons was irrational and without economic justification (either in terms of feed production, or in terms of marketing opportunities). Little consideration was given to energy costs (neither with respect to housing/heating efficiency nor to transport cost of in- and outputs). 8.3 Traditionally, the markets for Belarns livestock products were, in addition to the local population, northwestern Russia, especially the Moscow and St.Petersburg regions. In 1990, for example, Belarus exported 176,000 tons of meat to Russia, nearly 12% of Russian meat imports. In 1993 exports of meat were only 67,000 tons. The exports were, in relative terms, without much competition, and few incentives existed to improve the quality of the product. Transportation was also underpriced, and the location and viability of the industry was not based on economic criteria determined by open competition. These distortions, as weU as poor data, complicate economic analysis and consequently little analytical effort has been attempted in this descriptive report. 8.4 At present, the whole system is livestock production is unstable, in part because of changing political and macro-economic conditions, because of a partial collapse of markets, because of concern for radioactive conmination due to the Chernobyl accident, and, finally, because of the drought of 1992, which reduced output and increased concern about the recycling of radioactive sails after forest fires. These changes forced the Government to review its policies in livestock production and marketing. 8.5 From an economic point of view, livestock production is the major agro-production system. The performance of the livestock sector, under prevailing conditions, has generally been good. There was an expansion during the late 1970's and early 1980's (coinciding with the creation of large feeding comnplexes), and a slow decline beginning in the late 1980's. The per capita consunption of meat and milk, often proudly stated by govemnment officials, reached 75 and 425 kg respectively in 1990, the highest in the CIS, but declined to 70 kg and 380 kg in 1993. 8.6 At present, the sector is at a crossroads in coming to terms with the major changes that took place during 1992 and 1993. These include: 94 Capter 8 * macronmWc changes (especially in the exchange rate), resulting in chaotic changes in input and output prices; * changes in the export markets; related to an overall downturn in the world economy, as well as changes in the traditional marukes in (mainly) Russia; * a severe drought in 1992, which lowered fodder producdon; and, * a pending. but still unclear, farm and land privatization effort, B. CATTLE 8.7 Dairy production Is the mainstay of Belams agriculture. Cattle nmbers peaed in the mid-1980's, and xm db_ . slowly declined during the period 1985- 1990 (Fiure 8.1). The decline during mm 1985-1990 was nationwide, but more \ common m the areas affected by the Chernobyl falout (Gomel and Mogilev -/a oblaSts. ) 8.8 After 1990, the mmabers have been decreasing more rapidly, a urn process which has by no means ended. The nber of dairy cows dropped from 2,362 thousand in 1990, to 2,119 o thousand in 1993. Milk production has also declined by 25% from 1990 to 1992. 8.9 The two major providers FIBue 8: Cages to tie Number of Dairy Cows of milk are; collective or sae farms, and private farmers. The latter are mostly farm workers who have one or two cattle on their private plot. In summer, these privately owned animals may graze in a communall pasture around the village, and in winter they are housed in a shed in the yard. Private farmers provide approximately 33% of the total milk production, with some used for personal coumption, and some delivered to the factory via the kolkhoz. 8.10 Bdaws Is more than self-sufficient milk and meat, and depends to a large extent on exports. In the late 1980's, approximately 30% of the dairy product (Butter, cheese, canned milk &,d some milk powder), were exported to Russia, mainly to the Moscow and St Petersburg regions. The Govermnent clims that the declining etal demand, and declining producion, has caused a 50% 1 Comm_al is, in this context, diffeent fom collecive (e.g. kolkhoz). Sdt, the boundary between private and colletve, in tms of resource use, is rather grsy. Livestock Sector 95 mease in the export of milk and meat. 8.11 Breedine and 3enetic. Friesian (black/white) is the dominant breed in the country; other dairy breeds include Sinmeal and some Holstein. In recent years, an effort has been made to upgrade the dairy herd by importation of quality Friesian/Hoisteins. The acceptance rate is fairly low, as these animals are poor beef producers ard tend to be rather susceptible to calfhood problems and dises. Nearly all breeding (97%) is done by artificial insenination (Al). It is estimated that 20% of the small- plot private animals wer bred by Al (the rest of the small-plot owners would use a communal bull). Each oblast has one (some have two) insemination centers, housing 150-200 bulls, and some larger fenms have their own Al center (a total of 28 Al centers). Bull testing is done centrally, utilizing specialized breeding farms (kolkhoz). The accuracy and methods of pregnancy diagnosis vary considerably. In some kolkhoz, pregnancy is determined by visual inspection, and in others the animals are tested by rectal examination. Calving rates declined from 90 per 100 in 1989 to 86 per 100 in 1991. 8.12 Milk Production. Average per cow milk yield reached 3000 1 in 1990, but has since declined to 25001. Cattle in some of the state and collective farms have a milk yield of 60001, but such yields are difficult to maitain without the availability of quality feed. Milk production is somewhat seasonal, with over 60% of the milk produced during the spring and summer months. 8.13 Quantity and Oality Conol. Raw milk is purchased by the dairy collection centers or factories. Purchase prices are based on standard milk with 3.4% fat. Milk with higher fat content is adjusted to volume (e.g. 1 liter of milk with 4% fat is valued as 1.2 liter; it can also be adjusted downward). At the factory the milk is graded as grade 1, grade 2 or no grade, based on a number of criteria including reductase, pH and cell count (standard SMC - 300,000). The price differential is 10% between grade 1 and 2, and 20% between grade 2 and no grade High quality milk may be graded 1 plus, and is used mainly for the transformation to baby milk (only two baby milk processing factories exist, one using liquid milk and with a capacity of 5 ton/day, and the other prepaes baby milk powder. The average shelf life of milk products is 36 hours for sour cream (18 hours in the plant, 18 hours on the shelf), 24 hours for yogurt (kefir), 36 hours for cottage cheese, and 36 hours for liquid milk (data from Bereza dairy, as indicated on the bottle). 8.14 St9rage and Tranasortation. Most collective and state farms have storage/cooling containers (open-top type, with a capacity of 1200 - 2000 liters per container) at the farm. The storage capacity is almost fully utilized in summer, when production is highest. Milk is delivered daily; about 10% is delivered by the farms to the factory, the rest is picked up by a special milk transportation company. Beef 8.15 As in most FSU countries, beef production is complementary to the dairy industry. Most fattening operations, including the large cattle complexes, use non-castrated male dairy calves. Per capita beef consumption is fairly low (Byelorussians prefer pork), and a large part of the produced beef was exported to other parts of the FSU. The main breed is the dual-purpose black and white. A few beef breeds (Hereford, Charolais, Limousin) are used, either for crossbreeding with the Black and White, or as purebreds. 8.16 Beef production in the approxinately 100 large cattle complexes is stratfied according 96 oupwr 8 to centrally determined plans (Box 8.1). The purchase price of calves, per kilogram of live weight, is generally 1.5 times the per kilogram price of finished beef cattle. The efficiency of production has decreased in recent years, however, because of a lack of a balanced diet. Average daily weight gain in State and Collective farms, 389 grams/day in 1980, increased to 496 granmday in 1990, but declined to 449 grams/day in 1991 and to 371 grams/day in 1993. This decrease is caused by the shortage of protein feeds, as well as of minerals and vitamins. 8.17 Reommendons for improving the beef production in Belarus include: OeDw4steofCstde - A study should be carried out to Age u determine the environmental liability of I 20s the large cattle and pig complexes. : 86&154 days. Recommendations should be made : -- 5--s-: -v er regarding shrt-term improvemen of the systems, as well as their long-term future, S: BaofA,J oadPOQ e includig altermative uses, and the option of closing inefficient systems. 8.1 i The possibility of shifting cattle production systems on marginal soils towards extensive beef production, and/or niche production systems of wildlife should be investigated. C. PIGS AND PORK PRODUCTION 8.18 The total pig popuation was around 4.9 million in 1991, but declined to 4.2 million in 1993. Pig production is divided among private farms, medium-sized collective and state farns, and large livestock complexes. Private farms accounted for the "lion's share" of production until the early 1970's. At that time, the goverment built some of the large swine production complexes. Presently, the private producers account for a little over 1/3 of the total number of pigs. Production reached an all-time high of 457,000 tons in 1988, but has declined to approximately 300,000 tons by 1993. 8.19 Genetics and Breeding. The majority of the pigs are Large Whites. Minor breeds inchlde Duroc (which, according to local sources, have not adapted well to the relatively mediocre feed) and Estomian breeds. Most large farms produced their own genetic stock; western genetic stock is rare. Most sows were bred naturally; in 1992 only a few sows w re impregnated using artificial insemination. 8.20 The main production units in pork production are the pig complexes which were begun .n the mid-1970's. The set-up was based on Italian designs, and the complexes were built in modules for 12,000 pigs each. The largest complexes have a capacity of 108,000 pigs. Although most of these complexes are integrated (breeding and raising sows, piglets, as well as feeder pigs), they still do introduce feeder pigs, as well as occasional genetic stock, from outside. 8.21 Feeds and eig. Few of the complexes and kolkhozes mill their own feed. For example, the Belovecbskin complex, near Brest, requires 130-140 tons of feed daily which is brought in by rail and truck. Most feed is obtained from large inter-kolkhoz or rayon feed miUs that provide a variety of feed formulations (at least 7 types of pig feed were mentioned). The present d ian. Livesatok Sector 97 however, allows individual fan the freedom to buy a "base" feed, and then mix in some of their own igredients2. This has become more important In recent years, as the quality (especially protein content) of the basefeed is low. It was not quite clear, however, whether the diet is still balanced after the addition of these *enrichments". Little, if any, of the feed is pelleted; most is provided as meal. Some of the larger complexes provide feeder pigs with liquid feed mixtures3, which are mixed centrally, and then distributed through pipes to the different pig houses and pens. 8.22 Most swine production units follow the nation-wide rcommnded system of Table 8.1: FIg Productio Cyle Standards producton, which requires 3 stages of pig feding (piglets until day 26, weaners until day 105, and Type Cycle length Target weight feeder pigs). However, the difficulty in finding a market for finished pigs has recently led to Piglet Day 1-26 6 kg increaed slauger weights; the length of each Weaner Day Z7.105 38 kg cycle was increased, especially the last cycle, leadig to weights of, respectively, 7.8-8.2 kg, Feeder Day 106-222 112 kg 32-34 kg, and 140-145 kg (Table 8.1). This So.: Belarus Minsy of Agncultr and Food despite the fact that, at least officially, a system of price incentives exists. 8.23 These standards could not be reached this year because of: (a) the low quality of feed (protein, as well as minerals and vitamins); (b) lack of medicines (in terms of quality, as well as quantty); and (c) a sub-optimal standard of production4 (Table 8.2). Moreover, the quality of production was also adversely affected by the lack of disinfectans, and to a lesser extent, vaccines. Among the diseases of concern are pseudorabies, leptospirosis, colibacillosis, and erysipelas. Tabe 8.2: Prodtvy Daft for Pig Proctio in Bebrs I99 1991 1992 Averagenwmberofpiglet(yr) 26.1 24.4 nd ADO, ovel (gm) 396 381 345 ADO in olective and state fanm 388 368 nd Feed consio (kg feedik gain) 4.5 - 5.5 nd nd Avep slaut weight (kg) 112 ad 140 TOtal number (xlOOO) 5051 4702 nd Motaty (data from two farm only) nd 16 nd Source: Boelros Miniy of Agriculture and Food 2 For example, some farms were able to obtain milk powder, fishmeal, molasses, and antibiotics for their own use. 3 Feeding in liquWd form requires a very accumrte mixure of feed and water, higher water content wiUl cause early *sadsfton- of the pigs, and will reduce feed intake. The pipe-borne feed trnsportation system in some of the complexes requires a raher watery mixture, and may be one reason for the lower feed conversion rates in these unils. 4 For exaple in the compx visied, it was felt by the saff that pigs wee handled and transported too often. leading to stress and lower producfivty. 98 chapter 8 8.24 Recommendations: * Improvements can be made by reducing pig numbers, and by trying to find a match between numbers, available feed, and market demand. * Introduction of better genetic materials ('lean raeat') is necessary, in addition to strict selection programs. * Similar to the beef industry, there is an urgent need for a review of the environmental inmpact of the large pig complexes, improvement in the disposal of waste and manure, and an assessment of alternative uses for the facilities. D. SEEP 8.25 The sheep industry is of little importance, and has been declining. The major breeds are Finn and Finn-type crosses, as well as Ronmanovs. Wool production is low, with an average fleece weight of 1.7 kg in privately owned shaep, and 2.2 kg in state and collective farms. Total greasy wool production, which was 1,222 tons in 1970, declined to 772 tons in 1991 and further to 583 tons in 1993 (253 in state and collective farm, and 330 on private plots). The sheep industry does not require urgent atention, but subsidization of wool and meat should be reviewed and, where possible, abolished. E. POULTRY 8.26 The poultry industry consists of backyard poultry, geese, ducks, and turkeys, and of large scale production facilites managed through a parastatal organiation ("Pritsepromm), which concentrates on poultry production, but has also a few production lines of ducks and geese. Total production of Ptitseprom affiliated producers (64 specialized poultry units and six Sovkhoz with poultry production facilities) was 171 tons of meat (live-weight basis), and 2.2 billion eggs in 1992. At present, approximately 14% of the per capita meat consumption consists of poultry meat. It is the aim of the government to increase this to a per capita consmption of 20 kg. 8.27 Broiler Production. Broiler production is based on indigenous (Russian) genetic stock. Recently, efforts have been made to experiment with some foreign lines (Ross). Growth rates of local stock are approximately 44-50 grams per day. Feed conversion rates in the public sector are between 3- 3.3; in the private sector, where animals are dual purpose and free roaming, the conversion is far worse, but the profitability is fir better. 8.28 E^gg Production. Layer production is based on local genetic stock (Byelaris cross #9) producing approximately 270 eggs/year, compared to 250 eggs/year nation wide (128 eggs/year in backyard flocks). Recently, contact has been made with European producers; approximately one percent of the production capacity consists of Lohman Brown or Rhode Island crosses. Layer production is stratified in growers which raise production stock till 120 days. 8.29 At present, the Ptitseprom-affiliated industry uses one million tons of grain, of which approximately 200,000 tons is produced locally (mainly wheat). The rest, including most protein feeds, Lvestock Sector 99 are imported. Before 1991, feed was obtained through the Soviet Union, the US and Canada, and to some extent from other parts of the FSU. Most feed is obtained from Khazakstan through barter. Some fish-meal is obtained from Russia, and local abattoirs recycle their offal in bone/meat meal. 8.30 The mortality rates in broiler production systems vary between 3-10%; the rate in layers is less than 5%. Some concern has been expressed about the quality of the presently used vaccines, which are either produced in the country (Vitebsk), or imported from Russia (Kurtzk, St.Petersburg). There are plans to increase production capacity and choice of vaccines in the country. Aflatoxins in imported feed are occasionally a problem. 8.31 Recommendations: * The poultry industry may require restructuring. This may require in-depth study of infrastructure and potential market position. The monopolistic position of Ptitseprom should be also reviewed. * Prioritization of the supply of protein feed may be continued (in poultry), but should be based on market forces, rather than on govenmment allocation. This could be achieved through privatization of the feed industry. However, such a privatization should be carefully designed to be tansparent, in order to prevent takeover by present management without paying a fair share, and allow for reduction in size of the operations. The possibility of providing smaller (private) poultry producers equal access to feed should be a high priority. 3 The new pricing of energy may require a program to rapidly improve the energy efficiency of housing (including closure of the most energy costly operations). This may require a downscaling of the size of poultry farms, with opportniities for the start-up of smaller, private fIams. * Further improvements are needed in the genetic quality of broilers and layers. - The above suggested improvement may be coordinated with investments by the western poultry industry. CHAPTER 9 AGROPROCESSING A. ROLE OF AGROPROCESSING 9.1 In 1992, agriculture the agroprocessing industries and forestry contributed to 23.9% of the Belarus Net Material Product, and employed 24% of the national labor force, or 1,250,000 people. The output of the food industry constituted 13.9% of all industrial output by value, and the food industry contributes 8.2% in terms of all value added through industry. Table 9.1: Prindpal Agroprocessng ACUviU In BDearus (1991) Raw Product To Agproessing Share of Pocessing (%) Food and Fewd Grain Produced 6,000,000 t Food Grain Imported 1,000,000 t Feed Grain Imported 2,000,000 t Grain Milled for Flour 1.700,000 t Grain Milled for Feed 6,000,000 t Grain to Odter Industrial Uses 400,000 t (Rminder to Seed) 90% Nik Produced 6,800,000 t Milk Processed 5,500,000 t (Remainder to On-Farm Use) 81% Slaugter Aimals Produced 1,600,000 t Slaughte Animals Prcessed 1,600,000 t 100% Oilseed Produced 37,000 t Oilseed Imported 28,000 t Olseed Crushed 65,000 t 100% Sugar Beets Produced 1,150,000 t Sugar Beets Processed 1,150,000 t 100% Fruit and Vegetables Produced 1,200,000 t Fruit and Vegeables Camed (Estim.) 300,000 t (Remahiner to Fresh Sales) 25% Raw Flax Produced 320,000 t Raw Flax Prmcessed 320,000 t 100% Potoes Produced 8,590,000 t Potatoes Processed 300,000 t 35% *Live weights Soce: Belams Mimisty of Agriuhulre and Food 102 Chapter 9 9.2 The primary agroprocessing activities in Belarus are listed in Table 9.1. Agroprocessing employs approximately 115,000 people, or almost 10% of the entire agricultural labor force. Secondary industries include bread balkng and pasta making, which are based on flour from grain milling. Although done by time-honored technology, they have been heavily centralized, which has bestowed on them many industry characteristics. Thle same can be said for the confectioners' sector. In addition, there are the processes based on vegetable oil, and the entire beverage industry, including the distilling of alcohol and spirits, wine making, beer brewing, as well as soft drink and nineral water bottling. B. STRUCTURE AND ORGANIZATION 9.3 Most Belarus agroprocessing industries, especially those with a low investment threshold for industrial plants, show a markedly bipolar structure. On the one end, there is a set of large plants, mostly located according to input procurement considerations, which process a very sizeable share of the industry's agricultual output. They are centrally controlled by government agencies reporting directly to the Cabinet of Ministers. Their output is distributed to consumers living in urban centers. On the other end of the structure, there are smallplants, which are conveniendy located for supplying consumers in remote rural areas. These small plants are much more locally controlled, normally by the same organization that controls distribution. 9.4 Plants of the first group are production-centered, and their inputs and outputs are suitable for central plaming. Those of the second group respond less well to central planning and these plants are relegated to the buffer area of consumers' cooperatives (Capsize), along with other ideologically 'uncomfortable' functions. 9.5 With respect to control of the large, urban-consumer-oriented portions of agro-industry, there are three princpal players: The Ministry of Agriculture and Food (MinAg) The State Concern for Food Processing (SCFP) The Ministry of Bread Products (MBP) 9.6 The last two bodies were independent ministries unti a few montis ago, when they were made part of the MinAg. They continue to finction, however, with considerable auonomy. 9.7 The MinAg centrally controls all of the 120 dairies, and the 49 industrial meat processing plants. Through its oblast and rayon officials, it also controls any processing done at the state and collective farms, and at the Inter-Farm plants which make up a sizable part of the country's feed mills. 9.8 The MBP operates a total of 30 integrated elevators, 21 of which are large feed and flour Kombinats. It also operates 64 bakeries. In addition to procuring grain to adequately supply the population with bread, which includes all necessary grain imports, the MBP procures the necessary protein ingredients and other additives for all feed mixes produced in Belarus. 9.9 Most of the remaning processing operations, including the 4 beet sugar factories, the single operaing vegetable oil mill, as well as the country's 33 largest caming plants, are run through Agroprocessng 103 industry-specific "Associations" by the SCFP. The same applies to most of the secondary processing industries. The SCFP, through a special branch, also indirectly controls the operation of any Capsize plant. 9.10 National monopolistic processing, input supply, and procurement organizations directly report to the MinAg. A network of research instibttes and testing stations is also centrally managed. Prices and subsidies are governed by the Ministry of Finance and by the State Committee for Economy and Plamning. 9.11 The main distribution channel for food products in urban areas is the Ministry of Trade which operates general and specialized stores. The MBP operates its own stores in urban areas. Capsize, which has an independent national organization, operates some food stores in the cities, but distributes every type of merchandise in rural areas. C. OWNERSH[P AND MANAGEMENT 9.12 Most of the large prmary agroprocessing facilities in Belarus are owned diretly by the state, through the State Committee for State Property or local governments. The exceptions include small processing plants owned by collective farms, either individually or as Inter-Farm enterprises, and the substantial number of processing plants, owned by Capsize. Among the latter, there are sausage-making shops, bakeries, and small canneries. 9.13 Plant managers, except those working for state and collective fams or Capsize, report directly to the respective "Concern' or 'Associatione at the oblast or rayon level, and through them indirectly to the MinAg. The MBP has its own oblast level structure. 9.14 Capital investment decisions are made by the state, and financing also comes from the state. Labor is plentiful, and its opportunity cost is low. The social effects of low wages are buffered through multiple schemes of payment-in-kind and paternalistic services. Thus there is no true labor market. 9.15 The internal management structure of the typical Bearus agroprocessing enterprise Is a rather steep and muhi-layered pyramid. The General Manager, called the Director, has five to seven Department Heads or Deputy Directors, who normally are in charge of raw materials supply, production, product warehousing and distribution, weconomics", and the social sector. Each one of these controls about half-a-dozen professionals, engineers or section managers, who deal with foremen or group leaders. The outlook of management is production-biased, with the "stepping stone" to directorship wually being the job of Production Manager. The Economist is responsible for financial transactions and for keeping track of the fulffllment of all plans, and the conscientious accounting of all perdnent percentages. The Deputy Director of the Social Sector is in charge of personel, but, most importanty, of all services furnished to the enterprise commnity, such as housing, food, medical care, child care, schools, and, most recently, churches. It is obvious that, in a market economy, such a management team and structure would be wholly inadequate. Considerable technical assistance will probably be reqed to remedy this situation. 104 QCapter 9 D. FACILlllES 9.16 Most of the agroprocessing plants are either old, or designedfor high quality production. This makes them inadequate to operate under competitive conditions. In some industries (e.g. flax), plants are too small to compete in the long run, even if in the short-term they may be able to survive becuse of their completely depreciated equipment. Investments wil eventually have to be made by most plants to lower production costs, improve product quality, broaden product range, and conform to environmental standards. Some of these investments will require operation at the minimum efficient plant size, which is larger than many of the existing plants. Significant changes in the structure of these industries will be needed in the coming years. 9.17 The actual physical dimensions of plants are disproportionately large. Construction, including equipment support, is largely concrete, mostly of prefabricated elements, and is of extremely poor quality. All industrial structures are very poorly maintained. 9.18 Processing equipment is mostly imported in spite of Belarus' considerable manu base. A lot of specialized machinery, designed in the 1960's and 1970's, is inmported from central European countries. This situation causes some problems, because of the need to now pay for spare parts in ha currency. As a rule, there is a considerable amount of installed overcapacity, especially of CIS equipment. The excess of capacity seems to be compensated by a dearth of maintenance, at least by western standards. E. PERFORMANCE 9.19 In almost all agroprocessing industries, a slow, steady increase, took place during the decade of the 1980's. This increase was the result of growth in consumer demand, as well as improve- ments in the efficiency of raw materials production and processing. A peak was reached in 1989, but was followed by a period of decline which has continued through 1992 and 1993. 9.20 The persistency of the decline, however, points to the disruption, during the past he years, of many of the established flows of production inputs and outputs. In several of the agroprocessing industries (e.g. sugar), the quality of raw materials suffers from the lack of critical agricultural inputs, including seed and plant protection materials. The availability of these materials would lead to higher process yields, lower umt costs and increased competitiveness. A third reason is the discontinuation of traditional patterns of trade. The meat and dairy industries, for example, are cut off from their traditional markets in Moscow and St. Petersburg and have no alternate outlet for their production. 9.21 By international standards, most of the Belarus agroprocessing plants are seriously overstaffed, and have excessive fide, energy, and water consumptions. Being the only employer has allowed the government to maintain a very low wage level, at an equivalent of US $30 per man-month at the going exchange rate of September 1993. Since multiple schemes of payment-in-kind and paternalistic services socially buffer the effect of low wages, and because under the communist system industria plants assumed the social services which elsewhere are the function of local govemment, labor is not quite as cheap as the direct payroll may indicate. But, even if all of the fringe benefits: food, transportation, nursery and culture centers; were to double the direct payroll, labor would, at most, represent 12% of total cost. It is evident that a true labor market does not function. Agroprocessing 105 9.22 There appears to be a serious lack of skilled craftsmen within the labor force of the agroprocessing industries, but there is no lack of relatively untrained mamual laborers. Another category in plentiful supply is that of office clerks. All of the places visited had about between two and three times the personnel required in the West for a plant of similar capacity. 9.23 Unfornmately, the conventional measure of technical efficiency, output obtained per unit of raw material, is not readily available in all industries, partly due to the orientation of materials counting towards volume targets rather than efficiency, and due to the complexity of some of the processes. It is safe to say, however, that in all industries observed, these efficiencies correspond, at most, to those obtained in Western Europe and the U.S. about 30 years ago. 9.24 In Belarus, the view is widespread that the crucial issue in rehabilitating the sector is the acquisition of up-to-date technology. It must be stressed, however, that lack of technology is not a cause of the sector's critical state, just one of its symptoms. Competitive conditions and the prospect of profits, once allowed to take hold, will bring forth technology from foreign and local sources. F. ONGOING REFORMS AND RECOMMENDED ACTIONS 9.25 To date, economic and structural reforms in Belarus have been progressing slowly, despite the formal reform program adopted by the government after independence in 1991. In spite of such a slow and uneven pace, some progress can be registered in the following areas that are essential to the future competitiveness of agroprocessing: 1. Pemoplization - Little progress has been made to-date in breaking up the large monopolistic producers in Belarus. The State contimnes to be the chief producer and distbutor of processed agricultural products. The lack of progress in this area may be attnbuted to the fact that current legislation does not preclude monopolies from being privazed in their original form. 2. Commercialization of Enterorises - The transformation to autonomous conmnercial entities of all public sector production or service operations is necessary, regardless of evenala ownership. This would imply cutting their hinks to the state treasury, letig them survive solely on the true financial residual of their operation. The prime objective of this measure in the agroprocessing sector would be the "Concerns" and "Associations" through which the different industries are operated as government departments, but also in some of the input and output marketing branches of the Ministry of Trade. 3. Privadzadion - In recognition of the key function of private ownership in developing a market economy, the Belatus government has established provisional reguations which permit the sale or lease of state property by several mean: Worker Buy-Ous occur when more than 50% of the workers vote to buy-ou the enterprise. If the buy-out is approved by the appropriate govemment agencies, a valuation of assets is carried out. Up to now, most collectives have paid very low prices for enterprise assets, due in part to valuation problems, and in part to the commonly accepted belief that workers, by virtue of their employment in an enterprise, are eniled to its assets. 106 Chapter 9 Conversion to a joint stock company is another method of privatization. Although a few large scale enterprises have been privatized using this method, no major agroprocessing enterprise was among the newly converted joint stock companies. Management at the Slutsk sugar factory was, however, actively pursuing its transformation into a closed joint stock company.1 Leasing of a state enterprise, as the first step to a future outright acquisition by bidding, auctions, workers' buy-out, or negotiated ventures with foreign investors, are permitted under the provisional regulations. As of March 1992, real estate of enterprises can also be included in enterprise sale or privatization. Foreign companies and investors are permitted to purchase 100% of state owned enterprises. 4. Foreign Investment Environment - While the Belarus government acknowledges the importance of attracting foreign investment and tie critical need for privatization, little is being done to improve the situation for investors. Condidons are particularly unsatisfactory in respect to several macroeconoinic policy areas. The government continues to be involved in production and distribution. Belarus is without stable fiscal and monetary policies. International convertibility, or at least a more stable national currency, a minimum requirement for attracting foreign capital, is still a distant goal. A stable and tasparent legal system and commercial code would enhance Belarus' ability to compete with the other FSU republics for foreign investment. Although numerous foreign company representadves, mainy from western Europe, are visiting Belarus, it does not appear that these companies are actally investing capital and technology. Rather, they are in the business of providing imports of technology, machinery, equipment, and other goods. Agroprocessing is well represented in the itineraries of these foreign visitors, which include many of the major food and agriculWal processing equipment makers. Although plants, equipment, and technology in Belarus are old, sales are not likely to materialize, due to the lack of foreign exchange or exportable products for barter transactions. At least two major American oilseed companies had approached the Vitebsk Oil Mill concerning a joint venture operation. G. ISSUES 9.26 Managerial and Business Know-How - There is an almost complete lack of basic concepts in the workings of a market economy among the persons called upon to implement the changes in the economic system. Additionally, existing expertise and experience in marketing will have to be upgraded substantially. The commercial dearmet of agroprocessing firms usually deal with the administrative processing of sales, rather than their promotion. 9.27 This siuation could be remedied by the _magement and business training, which could take the form of courses, workshops, and study tours in subjects such as finance, accounting, management, organization building, and all areas of markedtng. It should be aimed at present-day 'Two instances of processing plaprivatzation were registered during he review. AttheVitebsk Vegetable Oil Extacti Kombinat, 60% of the equity had been transferred to a workers' collective. Similar action was being contemplated at dhe Slutsk Sugar Factory. As shares under this arrangement can be neiher voted nor aded by their individua owners, it esembles more of a profit sharing scheme than to tme privatization. Control remains ffmly in the hands of suate-ppoimd management. Agroprocessing 107 management and accounting personnel to enable them to cope with the transition to a market economy. More importantly, however, it should be aimed at the next generation of managers. Management training should be begin immediately, with the help of established international public and private programs. 9.28 The variety of business skills that are lacking in Belarus could also be supplied by outsiders on a temporary basis. This could take the form of a professional advisory service, organized by potential local beneficiaries, staffed by international professionals in such specialties as engineering, chemical control, materials handling, cost accounting, etc., and funded with the help of public and/or private donors.2 9.29 Export Markets - Interational trade in agroprocessing outputs has not played an inportant role for Belarus in the past. In Belarus' future development, however, export earnings will be an impor- tant element. The country's success will be influenced considerably by its ability to identify and develop agroprocessing outputs that hold a comparative advantage. A certain amount of public or sub-sector funds should be dedicated to the development of export markets for Belarus agroprocessing outputs that hold comparative advantage. At present, flax, as well as casein and pectin, are commodities that could be sold in hard currency markets, provided product quality was acceptable. Addressing this issue would, in the long run, result in increased profits at company level, and increased factor returns at industry and sector level. 9.30 Food OualitY and Safetv Standards - Improvement in the legislation and its enforcement related to quality enhancement and sandardization are greatly needed in the sub-sector. In spite of the government istitutes and technicians currently involved in these activities, the quality of food and agricultural products is generally do not meet the standards of developed market economies. There is a high potential for improvement, coordination, cost cutting, and better organization. 9.31 Adopting and enforcing inunationally accepted quality and safety standards in the Belarus food and agroprocessing industry will allow the country to export value-added products to international markets. This could be accomplished by seeking technical assistance in establishing international standards from western Europe and the U.S., by developing the required taiing for inspectors, and by establishing workable regulatory fimctions in Government, empowering an appropriate enforcing agency. 9.32 Technolo_gf - Although the levels of technology in the Belauss agoprocessing sub-sector are out of date and below international standards, new technology alone will not solve all of the sub- sector's problems. As Belams moves toward a market economy, and the idea of meeting the needs and desires of the customer becomes a reality, it is imperative that 'the customer and his needs" be identified prior to acquisition of new technology. If this is not the case, Belarus agroprocessors will find themselves in the same position as now - that of producing goods for which no one is willing to pay. 21t is reported that Land O'Lakes and USAD are jointly organizing a Dairy Advisory Servke for several Central European counries, among them the Baldc Republics. CHAPTER 10 THE FORESTRY SECTOR A. FORESTRY IN THE ECONOMY 10.1 The forestry sector plays a significant role in the economy of Belarus; in 1990 it accounted for 3 - 4% of the GDP and employed an estimated 175,000 people. Total annual harvest of wood is about 10 million m3 sob,' which is low in relation to present growth of the forests. Potential harvests, due to natural growth, will increase dramatically over the coming two decades, when these still young forests will become fully productive. Therefore, Belarus' forests are expected to play an increasingly important role in the economy. 10.2 Forest Industries. Industrial logging and wood processing are the major contributors in the forestry sector to the Belarus economy. They represented 5.2% of the industrial output, and 6.09% of the indstria employment of Belarus in 1990. These industries mainly produce for the local market; performance is on average at the level of the industrial sector in general. Trade in logs and processed wood in the past was mainly with other republics of the FSU; imports balanced exports in 1990, but exports have declined significantly since. The export potential of processed wood (pulp wood, sawn logs, veneer, fiumture and parts, construction elements) to western Europe and Scandinavia has not been fully developed and is only now commencing. 10.3 Forest industries should be seen in the overall context of the industial sector of the country. Industry is very important to the economic well-being of Belarus, providing about 60% of GDP and 40% of employment. Machine building was the most important industry during the Soviet period, with about half of this activity directed toward the military. Belarus industries were highly integrated in the industrial stucture of the FSU, and were badly hit by the disintegration of the Soviet system because of reduced demand for mirlitary products, and disrupted supplies of energy and raw material. The Government now faces the difficult task of leading the restructuring and transition of the industial complex to a market economy. The wood processing industries, the supporting mechanical industies for the manuacture of forestry and wood industries equipment, and the construction sector (as a major uses of wood products) all face the same constraints and difficulties of transition as does the industrial sector in general. 10.4 WoZYod En . The share of the forestry sector in national energy production and consumption is presently minimal. However, wood is still used for heating, mostly in rural areas, but also in urban centers. Present anmual firewood consumption is an estimated 3.5 million rn. This is expected to decrease, due to the ongoing gasification programs in rural areas. However, the recent changes in imported energy prices may have a favorable impact on the economic viability of fuelwood as a substitute for imported fuels. Therefore, in the near future, there may be an increase in the demand for fuel-wood, primarily for industrial heating. 10.5 Non-wood Forest Products. These products are exploited by the local market, and there are minimal exports of selected items. Little has been done to increase production and revemnes from I sob - solid over bar 110 Chapter 10 non-wood forest products. Nature-based toursm in Belarus has good potential; it had been popular in domestic tourim (essetially FSU), but has recently declined because of the ongoing transition. Its potntial for western Euopean tourism has been neither developed nor examined. B. FORESlRY RESOURCES 10.6 Forest gads. Belars has very important, but still young, forest resources. Total forest lands (i.e. the so-called "forest fund") cover about 8 million ha, with an acual forest cover of just over 7 million ha. Forests are fairly evenly spread over the country's six oblasts (provinces), with higher forest cover (i.e. more than 40%) in the Gomel oblast in the South-East. The average age of these forests is aroumd 40 years, with a very unbalanced distribution in age classes: about 50% of stands are younger than 40 years, and only 13% are older than 60 years. This is the result of an intensive effort begining at the end of World War U up until the 1960's, of combined reforestation following overexploitation of older stands, and afforestation of non-forest marginal lands. 10.7 Given the relatively high proportion of poor soils in Belarus, and environmental problems arising from agriculture on marginal lands, there is scope for further extension of forest cover on land tha may be abandoned by agriculture in the future. Within the 9 million ha of agriculture land, about 1.6 million ha. on very poor sandy soils have been identified as unsuited to sustainable and profitable ariculture. No decisions have yet been made on the future land use of these soil types. 10.8 Fores . ei. Forests are maily composed of conifers; pme (Pius sylvestris) rpen 58% of dte forest cover, and spruce (Piia excelsa) 11%. The forests also include some broadleaved species: *soft broadleaved species, including birch, alder and poplar, representing 27% of the forest cover; "hard" broadleaved species, including oak, ash, maple, and hornbeam, cover about 4% of the total forest are and are mainly located in the South of the county. Forest lands are flat, favoring mechaniztion of forest work, but they include about 20% of wetlands which make extracion of wood and forest regeneration sometmes difficult, and raise ecological questions on wetland uses and _utanbility. 10.9 PAM= . In spite of the predomce of young stands, standing wood resources are already reladvely large and will increase significantly during the coming two decades. Total standing stock is now about 1 billion m3 or about 135 m'/ha and is stadily growing; it was about 90 m3/ha in 1970. The present acual annusl growth is an estimated 3.6 m3Iha. This should allow for an annual exploitation of up to 15 milion mn of wood, given the need to build up standing stock and takdig into account that about 80% of the forested area is exploitable. According to existing yield tables, Belarus forests wil have an estimated potial growth of 5.9 m'/ha/year when they reach full development. This should allow for a future amnnal exploitation of about 25 million m3 sob wood (by compaison with the present harvest of about 10 million m3' sob annually). The quality of timber produced is good, in particular, the spruce. About 40% of wood extracted from forests are for industrial uses and the other 0% are for firewood, for both rral and urban populations, and also for otber traditional uses such as building poles. 10.10 Forest non-wood resources are also significat in Belarus. Forests are the naural habitat of a large proportion of the 1545 species of plants and 432 species of vertebrates fund in Belarus. Non- wood forest products are exteively used. Huntig Is a traditionally valued form of forest use; actual 7he Forestry Sector 111 pressue of hunting on game populations is low since hunting is still reserved to relatively few nationals - - the hunters association has 84,000 members - and foreign hunters. 10.11 About 12,000 tons of mushrooms (about one third of the potential anual yield) are collected every year mainly by individuals (85%) but also by Government organizations (15%). Collection of berries is popular for both household uses and marketing through Goverment organizations; the latter handle about 5,000 tons a year. Forest based production of honey is about six tons a year. Bitch sap collection yields about 25,000 tons a year; and significant amounts of pine resin and medicinal plants are also collected every year. C. FOREST RESOURCE MANAGEMENT 10.12 Land is classified in seven main use-categories in Belarus; agriculture, urban land, forest land, industri land, wetlands, reserved or "non-allocated" land, and Zapovednik2. The "forest fund" at 8 million ha constitutes about 38% of the total land use: actual forest-over is about seven million ha (34%), as there are forests in urban, agricultural and the Zapovednild and Zzkin (lightly protected) lands. 10.13 All forests under the jurisdiction of the Ministry of Forestry (MinFor) are adequately managed (given MinPor's limited financial resource), for sustained yields of wood and non-wood products and for increased prction of the environment. Manag t plans for these forests are prepared according to high scientific and technical standards. Continuity and dedication of the forestry admintradon has protected and expanded forest resources. However, conservatve silvicutural methods, insufficient financial resources, and a narrow market for small wood have resulted in stands that are too dense, thus redcing future yields and increasing forest health risks. Not much is known about actul management of forests (15% of national forest cover) which are under the jurisdiction of entides other than MinFor, such as kolkhozes, sovkhozes, the Ministry of Defense, etc.; there is strong evidence that these entites are far less efficient than MinFor. 10.14 The key manage_m objectives of MinFor since the late 1960's have been to recover from the overexploitation of forests before and during World War II and to enhance the envronmt protection functions of forests. 10.15 Since the end of World War U, sophisticated forest management plans have been prepared every ten years for forests under the jurisdiction of MinFor, and also for forests under other jurisdictions, by the Belarus Enterprise for Forest Management (Belgosles). These management plans are prepared for each MinFor forest enterprise, 80,000 ha per enterprise on average. They are based on aerial photographic sueys complemen by ground forest inventories on sample plots for stads aged 40 years and above, and by visual estimates for younger stands. Management prescriptions - i.e. objectives, harvest and forest works programs, yield and costs forecasts - are developed in order to achieve sustned yield and even distrbution of age classes at the level of the tota forest area of the enterprise. The basic management unit is usually a square compatmnent of 100 ha. 2 Nadto and obt paks, conservaton areas, etc. 1j& Ohapter 10 10.16 Since the end of World War II, 1.8 million ha have been regenerated, mainly by plantation (85% of the area) - naural regeneration (15%) being difficult to achieve under Belarus conditions - and 300,000 ha of new forest have been created by afforestation of abandoned agriculture land. To support this re- and afforestation effort, MinFor has developed seed supply facilities (seed stands and seed orchards), and plans for modemization are to be supported under this project. 10.17 The major environmental problem affecting forests inBelarus is radioactive contamination that resulted from the Chemnobyl disaster in 1986. About 20% of dte nadonal forest cover (I.57 million ha) is contaminated with long half-life (30 year) Cesiumws (13Cs) and Strontiumei in various degrees.3 D. WOOD PRODUCTION AND PROCESSING 10.18 LQgigg. Forest exploitation is still under a strict command system. Annual extraction of wood from forests and distribution for processing was planned, before independence, at the Union level by the USSR State Committee of Forestry; it has, to date, been planned at the central level of the Republic by Goseconplan - the State Planming Commission. The volume to be logged is determined on the basis of proposals prepared by MinFor, according to forest management pians. Since the late 1960's, the USSR State Commitee, and now Belarus' Goseconplan, have generally accepted these proposals, with minor modifications. Goseconplan planned fuirher distribution of logs from MinFor to processing units. 10.19 Total annual harvest from Belarus' forests has been stabile over the last 3 decades; between 10 and 12 million n3, and is now closer to 10 million m3. The bulk of this harvest comes from forests under MinFor jurisdicdon where final cuts and thinnings are respectively 55% and 45% of the annual volume; harvest in forests under other jurnisctions varies between 300,000 and 400,000 m3. Logging in MinFor's forests is the responsibility of MinFor enterprises (mainly for thinnings) and Bellesprom logging enterprises, (for final cuts only). Annual harvest of wood is almost entirely for local use, with the exception of about 200,000 m3 of pulpwood exported to Scandiavian contries. 10.20 Logging operations are mechanized and mostly carried out under the traditional stemwood method4. Most of the logging equipment is of Russian origin, frequently more adapted to Siberia than to Belarus conditions, mostly outdated, and not environmentally friendly. However, efforts were initated in the mid-1980's by central USSR authorities to improve methods and forest work efficiency, to limit wood wastes in logging operations, and to modernize equipment. MinFor and Bellesprom have started using the assortment method' for about 10% of their total harvest and have acquired a limited number of harvesters and forwarders. The assortment method is more adapted to Belarus forests (fiat terrain and high proportion of thinnings in total harvest). These modernization efforts are stalled now as a result of capital shortages for equipment imvestment. 3 see Belars: Ehvironment SrteVy SW (Report No. 11926, June 11, 1993) for a taller discsssion on the legacy of Chermobyl. 4 In which trees are felled and delimbed in the forest, skidded to roadside, and transported in ftll lng tO direcly to the sawmil. S Where after felling and delinbmg, roundlogs are cross-cut at the loggmg site, and the diameter-based assortmns ansponed to roadside by tractor-trailers (i.e. ddding is eliminaed). The Foresity Sector 113 10.21 Wood Processin2. Belarus has an important but very heterogenous wood processing sub- sector which used to fit USSR industrial priorities. This sub-sector is now ill-adapted to present market opportunities, and is ill-equipped to process the present and potential smallwood' dominated producdon from Belarus' forests, and even less to exploit any potential for wood export to non-FSU countries. The sub-sector processes about 7 nuillon mn3 annually of which 6.5 million m3 are produced locally and 0.5 million e3 (large diameter logs) are imported from Russia. Belarus also imports various processed wood products and 200,000 tons of pulp from Russia. In addition to pulp and paper, the forest based sector also produces furfural, resin-related and other chemicals for both local and export mats. 10.22 7he main operator in wood indostries is Bellesprom, a "concern* that replaced the Ministry of Wood Idustries in 1990. Beilesprom includes 32 enterprises: 8 logging entpris which represent about 45% of logging by Bellesprom; 8 complexes integrating all activities from logging to furniture making, which represent about 55% of logging by Bellespom; 4 furniture enterprises; I putpmill and 9 paper factories; 1 mechanical maintenance enterprise; and 1 training center for wood processing. Bellesprom processes about 2.5 million mi3 roundwood and produces sawnwood, plywood, particle boards, fibre boards, joinery, fiurniture, matches, and about 40,000 tons of pulp per year covering about 20% of local needs. Bellesprom has exported about 8% of its total production to other republics of the FSU and to Western European counties. In spite of ongoing economic difficulties, Be11esprom is said to be financially viable; low stumpage rates are among the reasons for this relatively favorable financial situadon. 10.23 Biodiversitv and Nature Conservation7. Biodiversity in Belarus has high nadonal and intnational significance, since forests and associated wetlands are habitats of rich and diversified flora and fauna. In addition to species diversity, Belarus also has a variety of unique ecosystm becuse of its location at the juncture of the Western and Condnental European ecological zones. Some of the last remnants of the prmeval lowland mixed deciduous forest of Europe are found in the West of the counry; weedands support a unique range of plant and animal species; endangered species that have diappeared from other European countries, such as the European Bison and Capercaillie grouse, are still found in Belarus. 10.24 Since Belarus forests are at the margin of the natural distribution range of nrior commercial forest species, such as the Norway Spruce, they are crucial for genetic resource conservation. Given the high cultural significance of forests in Belarus, people still have a high degree of traditional knowledge about forests and forest products which has disappeaed from other European contries. 10.25 Nature conservation has been well taken care of in Belarus so far, but needs increased attention, financial resources, and increased conservation education. Areas devoted to conservation, with various degrees of protection, cover just over 1 million ha. They include: * Zapovednila or strict nature reserves, totalling over 350,000 ha; * the Belovezhskaya National Park, which is in fact a &poved where recreational and educational tourism is allowed; 6 The semi-commerial mber that resus ftom maitance (hiig) of ime sns. See GEF project: Belaw Forest Biodversity Protecdon Projed (Repott No. 11042-BY, Augs 21, 1992). 114 Cat7pter 10 * Zakizniki or lightly protected areas, totalling over 675,000 ha; and, X zelonia zona, urban protected green belts, totalling 288,000 ha. In addition to this, many of the above-mentioned forests managed for various protective and recreationa objectives are also managed for nature conservation. 10.26 This system of protected areas has three main problems: * it does not yet cover the whole range of the country's biodiversity; several additional Nadonal Parks and Zakizn are planned but not yet creaed beuse of lak of fimds; * it is increasingly at risk, for Zaovedni&i in particular, with the ongoing difficut economic transidon which results in increased pressue from neighbring populations and fading law enforcement capacity; and, * it faces increasing financial difficulties with ongoing budgetary constrit which affct infrastrure maintenance and development together with protection, educationl and recreational activides. 10.27 Protection and ecreation Functions. Forests have an importan role in soil, water and infrasucture protection. As mentioned above, these fumntions are given high emphasis mdr present management regulations on about 30% of total forest lands. Protection of roads from snow and adjacent fields from vehicle emissions is also given great atention with an exensive network of roadside tree plantadons. The recreational role of forests is also very important, for urban people in pnicular outdoor activities, mushroom and berries collection in particular, are very popular in Belus and tae a significant part of leisure time. This recreational role is enhanced by the strong cltu significance of forests which are particularly cherished by Belarus citizens. 10.28 Forest Stress Factors. Forests also face various stresses, fires being the most impotnt. During the 1980's, the number of registered forest fires varied from about 800 to 4,800 a year with corresponding damaged areas ranging from a few hundred to about 7,000 ha Forest fires are beomin an increasing concern of MinFor, particularly In the radioactive-conminated areas. SpeCaulr forest fires occurred in the summer of 1992 as a result of an exceptional drought, (which affected about 20,000 ha). These fires highlighted the Inadequac of the present forest fire protection resouces. 10.29 Air pollution is also an increasingly significant stress factor. Defoliation, ascribed primarily to trans-national air pollution, is carefully monitored on sample plots according to EC stndr.8 PreliminaWy resultsshow significant defoliadon of pines. Only 10% of all pines ar reported as having less than 10% defoliation. Other species are affected to a lesser extent. s Betans is a member of the UN Commision for Euope's umnaion Coopeatio Prorm for poresty (ICP. Foress), which moio pan-European ai pollunpac on fors. SrATISTICAL ANNEX Note: Unless otherwise noted, the source of data for all tables in the Statistical Annex is official data published by the Belarus Ministry of Agricultre and Food. Table 1: Structure of NMP by Sector, 1980-1993 Percentage of yearly total Sector 1980 1985 1990 1993 lndusty 62.5 58.7 58.6 Construction 7.8 8.0 9.0 Agriclture 18.8 23.0 23.0 Trnsport and communication 2.7 3.0 3.3 Thde and food 2.5 2.1 2.7 Materialtecinical supply 0.9 0.5 0.5 Procurement 0.5 0.3 0.3 Other 4.3 4.4 2.6 Total 100.0 100.0 100.0 100.0 sowure: Goskomstat BSSR Table 2: Size and Struchure of Rural PopuEron by Age and Gender, 1979, 1993 1979 1993 Total % share Total % share In '000 % Male Femal I '0(X % Male Female Total rnur population 4298.2 100.0 45.6 54.4 3309.5 100.0 46.1 53.9 Under 15 years 1064.0 24.8 12.6 12.2 665.0 20.1 10.2 9.9 Between 16 & 59 years 2184.4 50.8 26.3 24.5 1652.0 49.9 25.4 24.5 60 years and above 1049.8 24.4 6.7 17.7 993.0 30.0 10.5 19.5 Table 3: SeleteId Rural Infrastructure Indicatons, 1980-i9Y3 Indcator 1980 1985 1990 1992 1993 Number of vilages 25,923 25,450 24,.392 24,717 24,753 Number of vilages with gas connectons 17,274 17,287 17,964 17,949 17,965 As % of tota 66.6 67.9 73.6 72.6 72.6 Number of vilages with centrl water supply 303 731 3,978 4,258 4,320 system As % of total 1.2 2.9 16.3 17.2 17.5 Number of villages width central sewer system 108 245 1,629 1,880 1875 As % of tota 0.4 1.0 6.7 7.6 7.6 Number of lbraries 5,645 5,634 4,991 46.71 4,554 Number of movie theaters 6,226 6,193 5,542 3,684 3,342 Rural roads ('000 of km) 34.5 38.4 46.3 48.4 49.5 Table 4: Housing In Rural Areas, 1980-1993 1980 1985 1990 1992 1993 Toud avaiabiity (million ml) 67.7 72.2 76.0 76.8 77.2 In private ownerhip 59.5 58.3 55.8 56.9 58.9 Per capita availabiUly (nr) 16.3 19.1 22.6 23.2 23.5 New constructos ('000 n2) 933.0 1,539.0 1,179.0 868.0 826.0 By state agences 632.0 1,342.0 1,014.0 722.0 647.0 By pivte household plot owners with state 301.0 197.0 165.0 146.0 179.0 crdits Table 5: DistribIo of Agriculural/Cropped laund by Oblast (1992) Aea of %of agr. land Land area in Agr. land in % of land crmpped land n wfdch is Oblast '000 of ha '0M of ha which is agr. 000 of ha awoped Brst 3,270.3 1,483.3 45.4 847.6 57.1 Gomel 4,036.3 1,463.5P 36.3 868.6 59.3 Grodno 2,511.6 1,298.7 51.7 885.4 68.2 Minik 4,019.3 1,913.7 47.6 1,277.0 66.7 Moglev 2,908.3 1,494.7 51.4 1,009.1 67.5 Vitebsk 4,004.7 1,737.2 43.4 1,196.6 68.9 Total 20,759.5 9,391.1 45.2 6,084.3 64.8 B Before the Chernobyl accident: 1.663 milion ha. Source: Gosagroprom-Otsenka pochva Belansii, Mins Table 6: Average Annua Preipitaton by Oblast, 1975-1969 Pred#piltaon in mimeers Jan Feb Mar Apr May Inn Jul Aug Sept Oct Nov Dec Totl Belarus 37 34 34 44 57 78 88 76 54 48 48 43 641 Brest 36 35 33 44 56 74 84 75 52 48 45 42 624 Vitebsk 38 34 35 42 58 77 92 78 59 50 51 44 658 Gomel 37 3'0 34 45 56 80 90 73 52 47 47 43 638 Grodno 36 35 35 44 58 78 84 74 53 46 49 43 635 Minsk 37 34 34 46 57 80 88 80 56 48 48 44 652 Mogiev 38 34 35 42 56 78 88 74 53 50 48 43 639 Table 7: Average Mondtly Temperature by Oblas, 197-q1989 Temeate in dgrees, Centigrade Region Jan Feb Mar Apr May June J Aug Sept Oct Nov Dec Belarus -7.0 -6.1 -1.9 5.9 12.9 16.4 17.9 16.7 11.9 6.1 0.9 -4.0 Brest -5.2 -4.1 -0.1 7.2 13.6 16.8 18.4 17.2 13.0 7.3 2.0 -2.4 Vitebsk -8.0 -8.3 -3.0 5.0 12.1 15.8 17.5 16.2 11.2 SA 0.2 -4.8 Gomel -7.0 -6.1 -1.5 6.6 13.8 17.0 18.6 17.4 12.5 6.5 1.0 -5.3 Grodno -6.2 -5.8 -1.7 5.8 12.4 15.8 17.3 16.3 11.9 6.3 1.6 -3.2 Minsk -7.1 -6.3 -2.0 5.5 12.6 16.2 17.6 16A 11.7 5.8 0.5 -4.2 Mogilev -8.0 -8.3 -3.0 5.0 12.6 16.2 17.8 16.4 11.4 5.2 .0.2 -5.3 Table : Sol Types of Belarm As % of total land area Podzol soils 45.1 Soddy-carbonte podzol soils 0.2 Marshy podzol soils 22.6 Marshy carbonate podzol soils 9.0 Moist (flood-prone) podzol soils 8.7 Marhy pea soils 14.4 Table 9: Agrocbemicl Composition of the Agrcultural Laud of Bdelarw Variable Value Remarr pH 5.6 < S on 12% of agricultural land Available P205 14.1 mg/100 g < 10 mg/100 g on 28% of agrcultual land Available 1(O 15.6 mg/100 g <8 mgll00 g on 14% of agricultural land Humus content 2.04% < 1.5% on 14% of agricultal land Available MgO 14.3 mg/100 g < 6 mgllO0 g on 12% of agricual land Base ecag capacity 12 m.eq/100 g < 8 m.eq/100 g on 20% of agriculturl land Table 10: Soil Types by Oblast %of %ofmois, % of % of podzoc- podtol, % of soddy- % of podzolistic- marshy- flood-prone turfic- Area carbonate podkzolinc marshy carbonate soils mshy Oblaat (f000 ha) soils soils soils soils soils Brest - 2,511.6 0.4 22.6 26.3 14.3 5.9 30.5 Gomel 4,036.3 0.1 33.0 26.6 7.6 10.9 18.8 Grodno 3,270.3 0.1 59.9 15.6 10.2 4.7 9.5 Minsk 4,019.3 0.4 48.0 21.8 7.6 2.9 19.3 Mogilev 2,908.3 0.2 53.8 25.0 6.9 5.8 8.9 Vitebsk 4,004.7 0.1 43.3 29.0 10.1 2.2 15.3 Belars 20,759.5 0.2 45.1 22.6 9.0 8.7 14.4 Table 11: LaUd Use and Temre, 197I01994 1970 1985 990 1993 1994 _,, Omka l % '00kha %I % TOha % 'O0 ha % % ',MMh % Tota area of the country 20,759.7 100.0 20,759.7 100.0 20,759.7 100.0 20,759.5 100.0 20,759.6 100.0 Totd rural land 19,070.4 91.9 19,133.5 92.2 18,854.2 90.8 18,703.1 90.1 19,404.5 93.5 Total rund land 19,070.4 100.0 19,133.5 100.0 18,854.2 100.0 18,703.1 100.0 19,404.5 100.0 Agriculture 9,795.4 51.4 9,638.7 50.4 9,330.2 49.5 9,391.1 50.2 9,353.6 48.2 AnUal cropped area 6,173.2 32.4 6,198.3 32.4 6,068.3 32.3 6,084.3 32.5 6,103.7 31.5 (arable land ArifWcal meuadows 1,806.1 9.5 1,411.1 7.4 1,280.4 6.8 1,311.4 7.0 1,28.3 6.6 Naxtr pasures 1,611.3 8.4 1,880.1 9.8 1,810.4 9.6 1,818.9 9.7 1,817.4 9.4 Orchds 150.8 0.8 149.2 0.8 151.1 0.8 176.5 0.9 144.2 0.7 Foreas 7,497.3 39.3 7,355.2 38.4 7,383.4 39.2 7,415.4 39.6 8,224.6 42.4 Other uses 1,777.7 9.3 2,139.6 11.2 2,140.6 11.4 1,896.6 10.1 1,826.3 9.4 Koldkbons 8,300.5 7,447.6 7,440.8 7,54435 7,55S0 SoybNKhs 4,160.5 4,294.0 3,952.9 2,605.8 2,58.2 Other enteiss 0.1 12.5 39.9 47.1 25.5 Rivaty usd lad 600.9 611.6 632.3 1,467.6 1,445.7 Stae land reses (InludIng 6,008.4 6,767.8 6,788.3 6,967.8 7,023.3 th lnd of f est nprse) Table 12: Number of Farms by Type and Resoures per Farm, 1980-1993 Item 1980 1985 1989 1990 1991 1992 1993 Total number of farms 2,698 2,632 2,504 2,507 2,512 2,251 2,520 State farms 897 917 883 866 724 659 658 Collecdve farms 1.801 1,715 1,621 1,641 1,788 1,862 1,862 Interfarms n.a. 44 n.a. 45 43 43 30 Average land area per 3,361.4 3,440.7 3,496.0 3,482.0 3,219.0 3,108.0 3,060.0 farm (ha) Average cultivated 2,128.7 2,181.4 2,252.7 2,242.0 2,094.9 2,033.0 2,007.0 area per farm (ha) Fixed assests per farm (thousands of Rbl) State farms 4,573 7,277 n.a. 10,976 12,372 188,725 4,580,840 Collective farms 3,559 5,577 n.a. 8,868 10,147 443,916 4,032,400 interfarms 2,235 n.a. 3,464 3,879 5,663 351,204 Table 13: Farm Employment in the Agro-industrial Complexes, 1970-1992 1970 1975 1985 1990 1991 1992 in % In g L % In % I InT % In % _ t000 l oo o I 00 low J 00 , ao oo Total employment 1,795 100.0 1,697 100.0 1,321 100.0 1,143 100.0 1,107 100.0 1,057 100.0 in state and collective farms By gender Male 848 47.2 825 48.6 729 55.2 641 56.1 627 56.6 Female 947 52.8 872 51.4 592 44.8 502 43.9 480 43.4 By farm trDe State farms 664 37.0 623 36.7 511 38.7 419 36.7 348 31.4 312 29.5 Collective farms 1,311 63.0 1,074 63.3 810 61.3 724 63.3 759 68.6 745 70.5 By subsector Agricultue 1,337 91.7 1,234 90.4 1,074 89.6 831 76.9 798 80.4 Agroprocessing 121 8.3 131 9.6 124 10.4 250 23.1 194 19.6 Agriculura 13.7 12.6 11.1 8.9 8.6 employees per 100 ha agr. land Surce: Goskomstat BSRI Mt 1992 Table 14: Per Capia Iome In Stae and Colve Farms, 1991-1993 CoUecdve Fams Sae Ealoyees 1991 1.992 1 1993 , 1991 1 1992 1 1993 Average monthly income 380 3,787 47,057 391 3,786 45,553 Share derived from: Family member's salaries 5.6% 4.8% 4.8% 65.5% 64.5% 61.2% Colective farm income 43.3% 34.0% 33.1% 0.0% 64.5% 0.0% Personal plot produce 27.1% 42.6% 46.3% 3.7% 0.0% 7.1% Socil security Income 21.0% 15.6% 12.2% 18.3% 13.9% 12.2% Other sources 3.0% 3.0% 3.6% 12.5% 16.1% 19.6% Table 15: ContrPtdon of Hohold Plots and Private Fanrs, 1980-1993 Year 1980 1985 1989 1990 1992 1993 Shae of privately used land in total 6.7 6.9 7.5 8.5 15.7 15.3 agricuturla land (%) Share of total agricultural producdton 33.6 30.3 25.3 24.5 32.7 38.6 *%) In crop producdon (%) 34.1 30.5 28.8 28.5 39.0 47.8 In livestock production (%) 33.3 30.2 22.7 22.1 27.7 29.6 Table 16: Number of idvestock by Fa. lType, 1970-1993 dzouands of heads 1970 1980 1990 1991 1992 1993 5,382.6 6,768.2 6,975.3 6,577.1 6,220.6 5,851.4 Collecidve & state farms 4,017.2 5,684.7 6,200.3 5,777.1 5,411.0 5,037.3 % of total 75 84 89 88 87 86 Private farms 1,365.4 1,083.S 775.0 800.0 809.6 814.1 % of total 25 16 11 12 13 14 Cows 2,490.4 2,737.7 2,362.1 2,314.4 2,220.1 2,199.1 Colectdve & state farms 1,350.9 1,847.5 1,698.9 1,629.4 1,515.8 1,479.2 % of tot5 S4 67 72 70 68 67 Private farms 1,139.5 890.2 663.2 685.0 704.3 719.9 % of total 46 33 28 30 32 33 Dug8 4,004.5 4,567.1 5,050.7 4,702.8 4,308.1 4,180.8 Collecdve & stae farms 2,250.2 2,937.6 3,544.7 3,221.0 2,839.1 2,658.1 % of total 56 64 70 68 66 64 Private farns 1,754.3 1,629.5 1,506.0 1,481.8 1,469.0 1,522.7 % of total 44 36 30 32 34 36 SheeR & C_ats 663.2 545.6 403.3 380.2 335.8 271.3 CoUectve & stae farms 395.8 396.8 209.6 173.2 136.1 82.3 % of total 60 73 52 46 41 30 Private farms 267.4 148.8 193.7 207.0 199.7 189.0 % of totd 40 27 48 54 59 70 Fb^dtrv 27,042.8 39,183.8 50,616.7 51,702.9 48,949.2 47,300.0 Colective & ste farms 6,828.6 19,820.3 29,063.6 28,870.6 25959.9 25,200.0 % of total 25 51 57 56 53 53 Private farms 20,214.2 19,363.5 21,553.1 22,832.3 22,989.3 22,100.0 % of total 75 49 43 44 47 47 HonEes 328.9 231.4 n/a 211.8 214.5 214.6 Conecdve & state farms 327.9 230.6 n/a 192.3 185.6 171.1 % of total 100 100 n/a 91 86 80 Privae farms 1.0 .8 n/a 19.5 28.9 43.5 % of total 0 0 n/a 9 14 20 n/a Not available. Table 17: Prko&duton of Meoda, Milk, Sad Wool, 1970.1993 1970 1980 1990 1991 1992 1993 Milk producio (:00toa Total 5,263.5 6,104.6 7,457.3 6.812.3 5,889.8 5,584.0 Colective and state fanms 3,084.4 4,056.6 5,651.0 5,022.3 4,020.7 3,644.0 % oftotal 58 66 76 74 68 65 Household plots 2,179.1 2,048.0 1,806.3 1,790.0 1,869.1 1,940.0 % of total 42 34 24 26 32 35 Eg wroduction (milion units) Total 1,669.2 3,034.6 3.657.0 3,718.1 3,501.8 3,547.1 Colective and state farms 497.7 1,729.0 2,244.7 2,290.7 2,073.0 2,116.7 % of total 30 57 61 62 59 60 Household plots 1,171.3 1305.6 1,412.3 1,427.4 1,428.8 1,430.4 % of total 70 43 39 38 41 40 wool roduction (tonsm Total 1,222 1,122 958 m 682 583 Colective and stae farms 846 9S4 640 455 356 253 % of total 69 85 67 59 52 43 Household plots 376 168 318 317 326 330 % Oftotal 31 1S 33 41 48 57 Meat roduion ('000 tons live) Totd live weigbt 998.9 1,308.6 1,760.7 1,513.0 1,268.0 1,197.8 Collecdve and state fams 650.6 854.9 1,415.4 1,241.6 970.2 894.5 % of total 65 65 80 82 77 75 Household plots 348.3 423.7 34S.3 271.4 297.8 303.3 % of total 35 35 20 18 23 25 Total slaughter weiht 684.5 856.8 1,181.4 1,065.1 950.3 819.9 Coflective and state fams 428.9 619.0 1,011.4 906.9 792.5 660.2 % of totd 63 72 86 85 83 81 Household plots 255.6 237.8 170.0 158.2 157.8 159.7 % of tota 37 28 14 1S 17 19 * udig P Tabh 18S Aneal Avage Litoc Produtivity, 1980-1993 In kilo8ms 198Q 1990 1991 1992 1993 AR fams 2,218 3,0S8 2,883 2,564 2,518 Collctve and stae fam 2,223 3,220 2,961 2,518 2,426 Collective and stat fas 241 258 257 242 239 MW, gr ow All fam 2.1 2.0 1.9 1.8 1.7 Colective ad stae fams 2.3 2.3 2.2 2.1 1.9 WEd&h (gm= gOr day) Cattl (state and collecve fams) 389 496 449 366 371 Pigs (stae and Hlectdve farms) 243 388 368 334 33 Averas number gir 100 head of livestoc Calvs 82 90 86 84 77 Pisp 2,031 2,617 2,441 2,159 2,172 Ib 19: Labo iput for lveto& ProducIo 170-1993 Mwas, per hwadu iogm of outp Milk B rk Lamb Poidry Wool Eggs' 1970 11A 44.0 38.6 81.6 26.1 387.2 14.9 1975 9.6 46.7 36.6 81.3 13.1 351.2 5.9 1980 8.9 46.7 32.8 69.5 6.8 258.5 2.5 1985 7.77 38.3 22.7 69.4 4.6 281.9 2.0 1990 5.67 31.02 6.24 68.36 .30 227.90 1.50 1991 6.14 34.84 17.76 70.92 4.20 253.50 2.10 1992 7.30 39.40 21.10 112.70 4.30 315.70 1.80 1993 7.83 44.92 22.48 116.86 4.90 357.60 2.01 Man hous per 1000 eggs TWO!e 20; Cipjdu Faten. 1V7093 l~~~~~~~~~~~~~~oa 1970 .m 198 1 I9 1912 1993 rcdot ~~ToSd T OW rozol Total Grain crops 2,505.3 41.4 3,139.2 49.8 2,645.2 43.2 2,697.7 44.9 2714.1 15.5 Podder crops 2,223.5 36.8 2,038.3 32.3 2,553.6 41.7 2,258.5 37.6 2,273.9 38.0 potatoes 956.3 15.8 786.6 12.5 638.3 10.4 179.1 13.0 749.3 12.5 Vegetabes 48.6 0.8 53.8 0.9 40.9 0.7 60.4 1.0 64.6 1.1 Flax 261.1 43 234.3 3.7 149.2 2.4 125.0 2.1 95.6 1.6 Sugar bees 48.9 0.8 51.7 0.8 46.2 0.8 51.0 0.8 55.4 0.9 Others 3.4 0.1 4.2 0.1 52.8 0.9 33.7 0.6 26.3 0.5 Total cropped 6,047.1 100.0 6,308.1 100.0 6,126.2 100.0 6,005A 100.0 5,978.2 100.0 am Table 21: Croped Area by Yaom Type, I 1993 Area in 'O1* of ha 1970 198 1990 1992 J990 Total 313.3 290.2 248.2 208.2 177.3 Collecdve and sta fams 313.3 290.2 248.2 207.4 176.7 % of tot 100 100 100 99.6 99.7 Total 261.0 234.3 149.2 124A 95.6 Collective and state fams 261.0 234.3 149.2 124.4 95.6 % of tol 100 100 100 100 100 Total 48.9 S1.7 46.2 50.9 55.4 Collective and state faim 48.9 51.7 46.2 50.9 SS.4 % of tot 100 100 100 100 100 Total 956.3 786.6 638.3 779.1 749.3 Collectdve and state famus 516.7 394.2 288.9 245.2 202.2 % of tota 54 50 45 31 27 Household plots 439.6 392.4 349.4 533.9 547.1 % Of total 46 50 55 69 73 Total 48.5 50.2 39.0 60.4 64.6 Collecdve and state farm 22.7 30.4 23.6 19.3 17.1 % of total 47 61 61 32 26 Household plots 25.8 19.8 1SA 41.1 47.5 % ftotal 53 39 39 68 74 Tab!e 22: Crop Producdon, 1970-1993 P"cd on in sossands of tons 1970 1980 1990 1991 1992 1993 An fanns 4,239.5 5,009.0 8235.5 7,199.1 7,971.6 nta Colecdve & stae 6bams 4,179.7 4,958.8 8,157.9 7,064.9 7,689.0 n/a %ofzotal 99 99 99 98 96 nJa Household plms 59.8 50.1 77.4 130.1 232.6 nta % of tow 1 1 1 2 4 noa ANI ams 13,233.6 9,332.5 8590.4 8,958.1 8,983.9 11,644.2 Colective & stme farms 6,117.1 4,474.7 3,965.0 3,139.3 2,475.5 2,960.8 % of toa 46 48 46 35 28 25 Household pkos 7,116.5 4,8S7.8 4,624.9 5,812.1 6508.4 8,683.4 % of total 4 S2 54 65 72 75 Mn hfams 102.1 60.5 52.2 76.0 60.4 56.8 Collective & stas faims 102.1 605 52.2 76.0 60.4 56.6 Faseeds AUI ammns 84.5 38.2 26.9 37.8 23.7 22.7 Collecdve & stt fanms 84.5 38.2 26.9 37.8 23.7 22.7 All farms 438.6 414.0 373.1 311.4 479.9 806.9 ollecidve & a fa 62.6 37.6 31.8 12.0 36.2 59.7 % of oal 14 9 9 4 7 7 Houseol pils 376.0 376.4 341.3 443.7 747.2 % off al 86 91 91 96 93 93 tBe_les All faums 855.0 733.1 748.8 918.2 838.4 1,047.5 Coletive & sta farms 333.9 381.5 503.1 416.8 248.7 282.7 % of total 39 52 67 45 30 27 Hoouseod plos 521.1 351.6 245.7 501.0 589.7 764.8 % off a 61 48 33 5S 73 AI fams 3,135.0 6,683.7 5,352.6 3,619.8 4,921.0 Collecdve & sate hws 1,909.8 2,816.5 6,063.3 4,608.1 4,967.3 3,914.3 %of tow 100 90 91 86 82 80 Household plots 318.5 620.4 742.1 652.5 1,006.7 % of toa 0 10 9 14 18 20 Susar bee All fms 1,030.0 1,122.2 1,479.0 1,147.2 1,117.4 1,568.5 Clective & sotae ms 1,030.0 1,122.2 1,479.0 1,147.2 1.117.4 1,561.9 Noe: Flax fiber, flax see and sugar beets wern prodoed only on Stat and Colecdve farms. T7be 23: Ap oa of Limad Omnc Mars, 1970-1992 mn (Dolomite) Organic Manure Area treated Quantty usQa used Yea o,, ha I 'O Wm tons w tons , tonsha 1970 790 3,236 4.1 43,053 7.6 1975 1,234 7,117 6.3 61,602 10.7 1980 1,278 6,015 4.7 77,428 13.6 1981 1,039 5,733 5.5 68,710 12.0 1982 1,045 5,459 5.2 71,585 12.5 1983 1,050 5,206 5.0 75,668 13.2 1984 1,128 5,280 4.7 82,615 14.4 1985 1,063 5,254 5.4 82,783 14.4 1986 939 5,111 5.4 85,692 14.9 1987 I,l1S 5,969 5.4 83,107 14.7 1988 1,028 5,766 5.6 81,128 14.4 1989 1,060 5,472 5.2 80,182 14.2 1990 1.011 5,221 5.2 77,121 13.8 1991 910 4,621 5.1 72,373 13.0 1992 806 4,102 5.1 70,659 13.3 Smwrce: Goskoms USS MInsk, 1992 Table 24 Yid of Majr Cros, 1941993 Htwdms of kgA 197 1980 1990 1992 1993 Grains (unclaoed) All farms 16.9 16.0 31.1 29.5 nla Collective and state farms 16.9 15.9 31.2 29.8 n/a AUl farms t38.0 119.0 135.0 115 155 Collective and state farms 118.0 114.0 137.0 101 146 SuLa_r _beets All fams 221.0 229.0 320.0 220 238 Collective and state farms 221.0 229.0 320.0 220 283 nisand All farms 34.1 30.6 31.9 41.6 69.0 Collective and state farms 9.1 5.0 5.6 7.1 12.0 YVeetables All fims 176.0 140.0 178.0 130 158 Collective and stat. farms 146.0 116.0 190.0 101 152 Roots and Mbas All farms 240.0 22S.0 S00.0 384 Collective and State farms 237.0 217.0 587.0 269 380 All far 3.9 2.6 3.5 4.9 5.9 Coleciwve and state fums 3.9 2.6 3.5 4.9 5.9 All farms 3.2 nra 1.8 1.9 2.4 Collecdve and state fams 3.2 n/a 1.8 1.9 2.4 ancludes all cerea and pul- . b Inudes unprocssd fibre. Table 25: ApplIcadin of N, P, K FertHlies, 19l70-93 In '000 of tons in ka/ha Year N Plot KO "O W*4 Of 1970 208.2 184.8 339.2 732.2 119 1975 369.6 248.9 583.7 1,202.2 195 1980 502.9 286.1 683.3 1,472.2 218 1981 514.9 281.1 674.9 1,470.9 212 1982 520.8 294.4 691.9 1,507.1 215 1983 578.7 280.5 694.8 1,554.1 213 1984 634.2 290.5 701.5 1,626.2 216 1985 643.2 316.5 729.2 1,688.9 221 1986 687.8 382.3 770.1 1,840.1 243 1987 700.5 425.1 750.3 1,875.8 256 1988 678.2 453.1 777.2 1,908.5 258 1989 715.9 468.4 870.1 2.054.3 273 1990 683.8 469.4 858.1 2,011.3 271 1991 659.3 445.6 830.6 1,935.5 261 1992 515.5 321.8 691.6 1,529.0 231 1993 444.4 188.7 562.3 1225.4 191 Table 26: Applicadion of Plstides, 1975.193 Year (r1otftons) -1a%) 1975 15.9 2.8 1980 15.1 2.6 1985 16.0 2.8 1986 21.4 3.7 1987 22.6 4.0 1988 22.3 3.9 1989 20.0 3.5 1990 16.3 2.9 1991 14.7 2.6 1992 11.3 2.14 1993 7.2 1.7 Source: fidoo n eh Table 27: MachInry Inventory, 1970-1993 1970 1980 1990 1991 1992 1993 Number 73,007 106,532 113,385 112,700 111,000 123,000 Num.ber/'000 be 5.8 8.8 10.5 lmka Number 41,575 55,606 74,000 72,500 71,600 70,400 Number'000 hat 3.3 4.6 6.8 Gi combines Number 24,196 26,535 30,301 28,847 26,900 25,500 Number'000 bae 9.7 8.5 11.5 11.1 10.0 Number 5,840 5,201 9,258 10,217 9,907 Number 373 615 1,701 1,920 1,896 1,799 Numberl000 ha 7.6 11.9 36.8 42.9 37.3 35.3 Number 731 4,821 4,710 4,723 4,269 3,954 NumberlOO he 2.8 20.6 31.6 39.3 34.3 31.8 Pao hred Nunber 6,291 12,531 8,684 9,058 8,624 8,436 NumberlOOO hal 6.6 15.9 13.6 13.8 11.1 10.8 Cu1ivu4d aa (mohudiug cultivated pastwes). Table 28: -laut 1992 Toldl u. of puS 8 8 7 11 6 48 W. * pwk & bob No 2 243 4 231 3 272 5 246 6 337 3 192 23 1.521 S_arn 32 39 31 28 120 41 291 Cma- 2 1i3 1 50 3 185 P_mk7 4 88 3 52 5 1t0 2 68 s ISO 3 51 22 $e Told so. of p_ 1 17 19 13 24 21 10 mpba 6 358 5 335 4 5 10 3 .2' It 1,218 2 366 31 3.01? Iawub_ 3 70 6 48 9 52 3 38 8 66 14 63 43 337 Chsuupbm_ 4 19 3 S I S 3 10 4 23 1 9 16 70 ftvdmuOR 2 3 8 5 4 9 1 4 19 17 Marerh 57 53 110 VYIlocam 's 7 105 6 S8 6 61 2 29 9 too 3 45 33 404 Swm 1 3 1 2 2 S 4 10 v.gmboF 1 200 1 1 1 4 as De' 3 5 7 11 4 57 3 5 4 78 3 34 24 190 Capacky Is in lo per _ik unu od.wb. ._ . ' CapaclIgs S im In a. ' Cq* p & Inimm of mdMay. 'Cape* t sl In bmnds of i -t . Table 29: Forest aegeneration ad Afforestmtloin 1944-1"1 dwuswd hew 194449 1950-59 1960-69 1970-79 1980-89 1990 1991 Natral egneraton 163.0 62.0 14.9 33.4 2.3 2.1 Relobrestadon 145.1 445.1 350.1 300.1 267.0 25.7 21.0 Subtotd 308.1 445.1 412.8 315.0 300.4 28.0 23.1 Afforstatios 1.1 36.3 129.7 92.0 12.4 0.9 0.3 Totd rfonsation and afforestatio 146.2 481.4 4805 392.1 279.4 26.6 21.3 Totd young stonds 309.2 481.4 542.5 407.0 312.8 28.9 23.4 Table 34k Forest ladntaio by Speies, 1944-1991 thwandsv Of trves4erem 1944-1950 1951-196 1961-1970 1971-1980 1981-1990 1991 Total 1944-1991 Sod Pimns sylveauts 165.8 82.0 373.3 82.0 415.2 83.0 258.0 69.0 157.5 58.0 12.5 59.0 1.382.3 76.0 PIhs exoba 15.4 8.0 18.3 4.0 53.4 11.0 96.1 26.0 86.6 32.0 6.3 30.0 276.1 15.0 Soft broadlaf 0.6 0.0 5.5 1.0 5.2 1.0 8.3 2.0 6.9 3.0 1.1 5.0 27.6 2.0 Hard bradleaf 19.2 10.0 S9.4 13.0 25.7 5.0 13.0 3.0 22.8 8.0 1.4 7.0 141.5 8.0 Tota 201.0 100.0 456.5 100.0 499.5 100.0 375.4 100.0 273.8 100.0 21.3 100.0 1,827.5 100.0 Tabe 31: BItbruoa of Wood 19601991 -dousard =ubic meters 1960 1970 1980 1985 1989 1990 1991 MoP 10,138 10,638 10,923 10,069 9,441 KoDkhoz and sovkhoz 109 88 123 134 126 Odher lnd owners 250 250 250 250 250 Toa 10,497 10,976 11,296 10,453 9,817 Wood extracIon on MoF and MoP 6.007 6,154 6,522 6,007 5,728 BeJieprxom 4,131 4,484 4,401 4,062 3,713 Pinus syveatr 4,580 4,627 4,499 4,877 5,307 4,978 4.474 Picea cexoda 928 1,074 4,080 1,031 1,027 983 953 Soft broadeaf 3,194 4,665 4,303 4,442 4,283 3,833 3,M Hard broadleaf 265 289 256 288 306 275 242 Bv mum= Ig Group I ptoectdon) 2,516 3,146 3,302 3,143 2,881 Ghoup 1I (production 7,622 7,492 7,621 6,926 6,560 y ofting Fona cut 5,547 5,826 6,033 5,575 5,413 ThInning 4,591 4,812 4,890 4,494 4,028 Table 32s. Captl Inves_met in Agroildwctrial Complex (nmiion Rb}) 1991 1992 1993 Agricultue 5,718.8 52,180.3 174,877.1 Food industry 226.0 2,929.8 35,889.6 Meat and Milk itdusry 191.0 2,637.3 32,812.7 Flour industry 750.0 948.9 40.5 Fish processing industry 18.0 109.1 258.5 Mirobiology industy 40.0 193.1 98.2 delcoopsoyuz 133.9 1,441.4 28,873.0 Housing: hidividual 54.2 474.6 7,761.6 Cooperative 2.2 148.1 5,756.2 Noth Data given is m cunt pries Table 33: Sale of Agricultural Products by Collective and State Farms To state procurement organizations Share of To Total Sales total sales cooperative Retail Farmers (000 tons) Total J organizations sate markets Grain 1991 1,698.9 1,155.9 68.0 3.9 227.4 311.7 199' 2,272.8 1,664.6 73.2 01 275.6 332.5 Potatoes 19'1 1,341.6 760.9 56.7 360.2 70.8 149.7 1992 753.7 458.7 60.9 92.7 73.1 128.6 Vegetables 1991 311.6 193.8 62.2 81.1 11.4 25.3 1992 176.9 108.3 61.2 35.0 10.1 23.1 Fruits and 1991 10.3 5.3 51.5 1.9 1.0 2.2 berries 1992 31.5 20.9 66A 4.1 1.5 5.0 Cattle 1991 917.6 811.7 88.5 30.8 25.3 49.7 1992 829.3 731.4 88.2 38.2 22.7 36.9 Ist half 328.6 286.1 87.1 19.6 9.7 13.2 1993 Pigs 1991 356.3 311.8 87.5 19.0 12.0 13.6 1992 285.2 246.5 86.4 16.3 10.8 11.5 Ist 1half 115.4 97.2 84.2 8.6 5.7 3.9 1993 Poultry 1991 170.9 162.4 95.0 2.1 2.9 3.6 1992 139.9 128.4 91.8 1.1 2.8 7.5 Ist lhalf 68.8 62.3 90.6 2.9 0.8 2.8 1993 Milk 1991 5,464.7 5,452.1 99.8 11.2 1.3 1992 4,061.2 4,052.1 99.8 6.9 2.2 Ist half 1,786.8 1,782.8 99.8 3.1 0.9 1993 Eggs 1991 2,046.1 1,592.7 77.8 262.2 30.6 160.6 (million) 1992 1,838.3 1,417.1 77.1 192.0 29.3 189.9 Ist half 947.1 739.3 78.1 84.1 20.6 103.1 1993 Table 34: Tem Leding to Collective and State Farms, 1980-1993 1980 1985 1990 1991 1992 1993 Anmn term lending (mil curret Rbl.) 222.0 175.0 139.0 407.0 2,053.0 8,645.0 Total outstding team loan 1,652.9 2,073.3 613.5 1,173.0 2,943.0 11,240.0 (mil cturet Rbi.) Ann term lending as % of total 15.1 14.3 5.9 12.5 11.6 7.4 ou0t long term loans Table 35: State P ement Price for Ag ltural Products, 1980-1993 carent R!J1 per ton 1980 1985 1990 1991 1992 1993 Gramns 140 193 302 281 11,209 120,000 Potatoes 110 147 251 882 10,093 44,100 Suar bees 40 59 65 119 5,633 20,400 Milk 253 264 356 614 7,900 78,300 Catded 2,129 2,525 2,683 4,800 52,700 452,500 pige 1,914 2,324 2,754 4,357 68,300 817,000 Sheep and goats 1,638 2,785 4,034 6,253 60,400 527,400 PoultmE 1,839 2,332 2,589 3,682 51,300 717,600 Eggp 93 94 93 229 2,700 43,300 Table 36: Aggrpte Costs for Crop Poduction, 1985-1993 198 51990 199) 1993 Milions % MUlons % .MiUons % MilUons % of Rb! of Rb! of bOb Total cost 3,270.4 100.0 3,626.6 100.0 5,459.6 100.0 855,456.9 100.0 Ways & 858.6 26.3 977.0 26.9 2,117.0 38.8 213,459.9 25.0 sectuity pyments Cost of inps 1,791.1 54.8 1,821.8 50.2 2,567.7 47.0 498,021.9 58.2 Seeds 480.7 14.7 618.4 17.1 703.0 12.9 59,274.7 6.9 Fertlizes 273.4 8.4 552.7 15.2 727.4 13.3 97,894.9 11.5 Fuld & 135.7 4.1 170.7 4.7 249.8 4.6 134,244.4 18.0 deecticity EquiPment 152.9 4.7 120.8 3.3 238.6 4.4 71,326.6 8.3 mainenae Srices 168.1 5.1 229.6 6.3 490.3 9.0 59,575.5 7.0 Otier costs 580.3 17.7 129.6 3.6 158.6 2.9 55,705.8 6.5 Insurance 194.5 5.9 253.4 7.0 165.2 3.0 other costs 31.4 1.0 71.6 2.0 170.3 3.1 35,886.7 4.2 Capital 394.8 12.1 502.8 13.9 439.4 8.0 108,088.4 12.6 depreciation Table 37: Cost Structure for Livestock Prodcton, 1980-1993 Percevtage 1980 1985 1990 1991 1992 1993 Total cost 100.0 100.0 100.0 100.0 100.0 100.0 Wages and social 24.9 25.7 25.4 34.9 30.7 23.5 security payments Input costs 67.4 66.3 65.3 59.6 65.5 68.2 Feed 31.3 32.3 57.5 50.7 52.1 50.3 Fue & electricity 1.8 1.8 1.9 2.0 4.9 8.4 Equipment 1.0 1.6 1.4 1.8 3.2 3.2 maintenance Services 1.1 1.0 3.0 3.6 3.7 3.1 Other costs 32.2 29.7 1.4 1.2 1.1 3.2 Capital depreion 6.6 7.1 7.3 3.5 1.5 5.8 lnuance 0.4 0.4 0.4 0.1 Other costs 0.6 0.5 1.6 1.9 2.3 2.5 Table 38a: Average State Retail Prices for Food Products, 1991 (RbL/W Jan Feb Mar Apr May Juw July Aug Sept Oct Nov Dec Mik and milk products 0.223 0.237 0.237 0.482 0.488 0.489 0.488 0.495 0.493 0.493 0.494 0.495 Mea, including poulty 1.82 1.91 1.92 4.48 4.48 4.49 4.50 4.50 4.50 4.53 4.56 4.66 Fish 0.88 0.95 1.03 1.62 1.63 1.65 1.68 1.75 1.73 1.73 1.73 2.11 Butter oil 3.41 3.58 3.58 8.36 8.37 8.39 8.39 8.39 8.42 8.45 8.51 8.48 Vegeable oil 1.68 1.77 1.77 3.27 3.31 3.89 3.90 3.90 3.90 3.90 3.94 4.09 Egg (10) 0.99 10.4 1.06 2.22 2.22 2.13 2.13 2.14 2.14 2.16 2.22 2.22 Sugar 0.81 0.85 0.85 2.31 2.32 2.32 2.32 2.31 2.29 2.30 2.31 2.30 Bread and bread producs 0.31 0.33 0.33 0.84 0.84 0.84 0.84 0.84 0.84 0.84 0.84 0.86 Flour 0.39 0.41 0.41 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 Potaoes 0.16 0.33 1.13 1.24 1.24 1.24 1.24 1.24 1.82 1.82 1.82 1.82 Vegetables 0.73 0.94 2.01 2.01 2.01 2.01 2.01 2.50 2.40 2.40 2.80 3.32 Fruits and berries 1.94 1.90 5.50 7.0 8.60 8.60 8.60 10.50 12.74 12.74 13.30 16.31 Table 38b: Average State Retil Prices for Food Products, 1992 Jan Feb Mar Apr May Jue July Aug Sept Oct Nov Dec Milk and milk products 1.94 2.10 2.23 2.25 2.25 4.10 4.33 6.49 8.05 8.11 8.06 8.21 Meat, includiw poulty 4.74 33.76 34.20 35.20 35.60 36.06 43.06 46.50 49.89 54.28 55.03 101.64 Fish 7.15 8.59 13.31 17.61 21.60 22.70 23.27 26.18 26.47 29.78 38.06 49.02 Butter off 34.29 39.40 39.60 39.96 63.30 70.20 71.11 94.15 111.76 113.44 112.53 217.75 Vegetable oil 9.65 11.30 19.70 23.94 25.28 32.76 36.59 43.91 48.48 56.96 63.23 92.88 Eggs (10) 9.85 10.15 10.18 11.23 11.93 13.18 14.64 15.94 26.09 36.92 65.7S 69.89 Suga 9.47 9.49 9.40 9.57 19.94 30.11 34.65 43.14 46.89 51.02 76.38 82.03 Bread and bread product 2.39 2.59 2.66 2.91 3.39 5.23 5.92 9.35 12.51 13.40 15.09 18.00 Flour 3.07 3.19 3.21 3.58 4.20 5.83 7.09 10.08 15.10 26.26 33.27 47.09 Pottoes 2.48 2.96 3.23 3.38 3.73 4.80 13.25 13.25 28.38 23.36 24.25 26.48 Vegetables 4.97 29.82 29.82 29.82 29.82 29.82 23.21 20.49 19.84 24.64 31.53 36.26 Fruits and beries 30.04 34.69 47.49 61.46 70.98 90.64 132.70 132.70 132.70 132.70 132.70 186.83 Table 38c: Average State Retail Prices for Food Prduxcts, 1993 (Rblk Jan Feb Mar Apr May June July Aug Sept Milk and milk products 8.07 8.07 8.13 26.25 27.80 53.74 55.94 80.80 86.90 Meat, including poutry 109.97 120.40 166.39 231.40 330.70 504.60 745.70 909.75 1,223.61 Fish 67.70 95.05 152.55 250.30 302.11 374.92 501.64 558.33 677.81 Buuer oil 221.67 224.77 348.17 592.93 608.35 1,055.49 1,137.80 1,443.87 1,838.00 Vegetable oil 153.44 201.93 271.80 314.74 334.88 340.24 340.24 385.49 621.41 Egg (10) 70.94 71.01 95.03 126.84 134.20 135.8 158.76 180.51 261.38 Sugar 94.58 106.68 127.38 156.17 179.75 273.58 375.90 702.18 1,217.58 Bread and bread products 18.00 19.76 22.41 43.12 47.04 55.74 59.92 95.39 110.18 Flour 58.05 71.34 91.03 103.14 124.39 161.21 200.71 243.46 344.98 Potatoes 29.89 37.43 40.95 43.03 45.53 45.53 112.07 112.07 126.00 Vegetables 39.27 211.18 211.18 279.18 307.93 331.33 336.30 309.74 302.61 Fuits and berries 245.63 310.15 318.76 367.85 438.11 573.48 787.39 621.2S 503.84 Table 39: Gra Balae, 1980-1993 item 1980 1985 1990 1991 1992 1993 Availability Opening stock 1,545 2,240 2,953 2,994 2,669 2,319 Production (prooesed 4,108 5,790 7,035 6,296 7,230 6,900 grains) IMPOrts 4,429 3,564 3,556 3,842 2,373 1,S15 Totd 10.082 11,594 13,544 13,132 12,272 10,734 Utilization Seed 918 867 807 860 800 700 Animal feed 5,420 6,072 7,376 6,984 6,977 6,102 Human consunption 1,348 1,311 1.295 1,297 1,233 1,225 Spirits and beer 454 367 340 353 443 250 Loss during storage & 329 463 561 471 500 400 reprocesing Exports 201 520 171 317 0 0 Strage carry over at 1,412 1,994 2,994 2,850 2,319 2,057 the end of the year Source: Belanw MinL0y of Agnaicdure and World Bank estimates. Table 40: Potato Balance, 1980-1993 item 1980 1985 1990 1991 1992 1993 Availability Opening stock 8,795 7,914 6,298 5,230 5,136 5,106 Production (harvest) 9,333 10,553 8,590 8,958 8,9S4 11,400 Total 18,128 18,467 14,888 14,188 14,090 16,506 Utilization Seed 3,057 2,687 2,523 2,509 2,506 2,500 Anima fted 5,900 5,524 4,134 3,992 3,830 5,000 Human consumppdon 1,769 1,695 1,746 1,695 1,743 1,800 Spirits and starch 294 595 456 287 316 650 Loss durming storage & 227 268 305 227 234 336 reprocessing Expons 659 1,141 497 342 355 660 Storage carry over at 6,222 6,557 5,230 5,136 5,106 5,560 the end of the year Source. Seldcohozailrtvo Belarus, Goskomsstat Bssr, 1992 and World Bon clauluatons. 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