The former socialist countries of Eastern Europe (that is, Europe east of Germany and west of the Urals, but including all of Russia) began a transition to a market economy in the late 1980’s and early 1990’s. This paper looks at one aspect of that transition: the transition from state ownership to private ownership of agricultural land and the accompanying transition to a land market for agricultural land.
The countries included in this study have been divided into four groups:
While the Eastern European countries have a shared history of socialism for varying periods of time, there are strong social, economic, and philosophical differences. In addition, the Eastern European reforms have been affected by the individual countries’ recent histories from 1989 onward as well as their socialist pasts.
Russia, Ukraine, and Belarus in the Western CIS still do not have a legal and policy framework that adequately allows for private land ownership, private farms, or efficient land transactions. They are still struggling over what the role of the state should be in relation to agricultural land use and productivity. The state has firm control of agricultural land and there is not enough political will to prevail over the former communists who oppose private ownership and sale of agricultural land.
The Transcaucasus, while also a part of the CIS, made very different philosophical choices and quickly privatized agricultural land and restructured farms into small family units. Certainly the difference in size of the countries had some effect on the ability to accomplish reform more quickly, but beyond size, cultural differences and political will for reform had an impact as well.
The history of the Balkan countries has had a major impact on their agricultural sector and land market possibilities. The former Yugoslavia, after a brief experiment with collectivization , had opted for private farming. Then, in 1989, what some see as the first link in a long chain of events took place, forever changing Yugoslavia as it existed then and setting the stage for the creation of the Balkan countries reviewed in this document (with the exception of Albania). In that year, Slobodan Milosevic pushed Serb-favoring changes to the Yugoslavia Constitution through the parliament. Croatia made its bid for independence in 1991. Macedonia followed with its declaration later in that same year. In 1992, Bosnia and Herzegovina followed suit. Serbia, Montenegro, and Kosovo struggled with each other about issues of independence in the late 1990s. The war and political strife accompanying each of these transitions have much complicated the land transition process.
The EU accession states are by some standards the farthest along in terms of land reform and market development. But several of the EU accession countries have resisted and feared change in the agricultural sector and continue to support large, collective-style and failing farms. Of all countries reviewed, Poland’s reform was the least traumatic because Poland never collectivized its agriculture, and Poland’s land market is the closest to Western European land markets in terms of amount of turnover of land.
One over-arching consideration in terms of agricultural land reform is the role of agriculture in the economy of the countries reviewed. Of the CIS countries and the Balkans, agriculture contributes more than 10% to the total GDP of each of these countries, with the exception of Russia and Croatia. However, in the EU accession countries, agriculture makes up less than 10% of the total GDP in all countries except Bulgaria and Romania. See figure A.
In view of this, countries like Armenia and Azerbaijan were quite brave to totally restructure their agriculture. On the other hand, with so many people dependent on the agricultural sector, the inefficient collective farms had to be dismantled. In Armenia, agricultural employment reached 41% of total employment in 1999, reflecting a doubling from the late 1980s, and the private sector provides 98.5% of agricultural production (one-third of GDP). In Azerbaijan, the agricultural sector employs one-third of the entire population.1 In contrast, agriculture’s role in Hungary’s economy has declined over the last decade in spite of the fact that Hungary has more arable land per capita than most other European countries and the land is relatively fertile and well-suited for agriculture.2 Furthermore, Hungary has not significantly transformed its farm sector and collective-style farms are still prevalent.
This paper explores the relative status of the Eastern European countries in relation to land reform. It is divided into four sections, and each section discusses one group of countries -- Section I, the Western CIS; Section II, the CIS Transcaucasus; Section III, the Balkans; and Section IV, the EU accession countries. Within each section the paper discusses the policy and legislative framework for land reform and land market development in those countries, including land privatization, State land reserves, farm restructuring, transactions, and mortgage. Following the discussion of the policy and legislative framework, the administrative framework is discussed, including registration, consolidation programs, land use, and the roles of the public and private sector.
Section V compares and analyzes the status of the land reform and land market in the Eastern European countries and suggests policy options for dealing with some of the issues raised by the paper. Where appropriate the downsides of some of the policy options are mentioned as well.