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V. EU Accession Countries

A. Policy and Legislative Framework

1. Land Privatization

All of the EU Accession states, except Poland and Hungary, have engaged in some form of restitution of land rights to former owners. These countries can be divided into three categories: (1) those that re-established the ownership rights of individuals whose land had not been expropriated, and also restituted a much smaller portion of land that had been held by the State. (2) countries that compensated former owners, and provided or sold land to former farm workers; and (3) countries that restituted land to former owners only.

a. Re-Established Ownership Rights

The Czech Republic, Slovakia, Poland, and Slovenia did not expropriate all agricultural land during the communist era. Poland and Slovenia continued to operate small private farms throughout the communist rule.

In the Czech Republic, collectivization of agriculture began in 1948. Individual land ownership was not generally abolished, but the use rights were given to the state and cooperative farms, and under pressure many owners simply gave their agricultural land to the State. The land cadastre and registry also stopped registering individual ownership parcels and historic field boundaries were often eliminated.253 Prior to commencement of the most recent land reform, 68% of agricultural land was in cooperatives.254 State farms were also important and held about 28% of agricultural land.

In the Czech land reform, collective (cooperative) land did not require transfer of ownership but rather the re-establishment of the primacy of ownership rights over users' rights.255 For state farm land, on the other hand, the reform was based primarily on formal legal restitution to former owners. Former owners of land expropriated by the State were able to reclaim their land or assets in kind, or could receive compensation. All restitution was made from state property and governed by the Land Fund Agency.256

The process of restitution is nearly complete. By 1998, 80% of agricultural land was in private ownership, and more than 90% of restitution cases had been resolved. However, as discussed below, the pattern of use remains largely collective.257 Still awaiting privatization by sale is around 500,000 ha. of state-owned land, which is held in the Land Fund portfolio and presently being rented out.258 One unsettled issue is that of potential groups of claimants (resulting from mass migration) who never were able to request restitution under the 1991 legislation and may yet demand restitution.259

Slovakia’s restitution process departed from the Czech process after 1992 when Czechoslovakia was divided. The Slovaks claimed that the agricultural policies of the CSFR had failed to take account of the differing conditions existing between the two republics, and in fact were designed for the Czech Republic. Therefore, by the end of 1992 the land reform had resulted in an average family "farm" size of less than one hectare in Slovakia.260 Thus, as part of preparing for the bifurcation of Czechoslovakia in 1993, Slovak policymakers prepared new agricultural policies.261

Slovakia’s restitution process recognized two classes of actors. First were the "entitled persons," the intended beneficiaries of restitution. They were citizens of Slovakia who resided permanently in the country and whose land and buildings were physically (not legally) transferred to the State or a legal entity between February 25, 1948 and January 1, 1990. Second were the "liable persons," those people or entities (including the State and legal entities) which possessed the land in question. To receive land through the process, an entitled person had to assert his or her claim to the Land Office and, at the same time, to the liable person in possession of the land in question, if identifiable. These claims had to be made before January 31, 1993.

The liable person had 60 days to respond to the "invitation" to return the land in question and conclude a contract on return of the property. Parallel claims made to the same property by two entitled persons were regulated by the Land Law.262

While Slovakia's restitution process is about two-thirds complete, much land remains in the state land fund.263 Problems affecting completion include a failure to update ownership records during the socialist years. This has resulted in large numbers of unknown owners, the loss of boundary information, and general confusion and slowness regarding the land registration and restitution process.264 Also, the potential claims of evicted landholders who were ousted after the end of the Second World War further complicate the situation.265

Slovenia’s small, owner-operated farms and land institutions (land register and cadastre) largely survived under Yugoslavian communism despite unfavorable regulatory and policy measures, such as constitutional restrictions on maximum farm size.266 While Slovenian agriculture was never effectively collectivized, state farms did hold a small share of agricultural land.

A land restitution process was undertaken in 1991 to compensate landowners whose property was expropriated by the Yugoslav government after World War II.267 Under the 1991 Denationalization Law, former state land used by agriculture companies became state property and was administered by the Fund for Agricultural Land and Forests.268 Claims submitted under the Denationalization Law covered only the relatively small share of state land that was for agricultural use. However, as of April of 2000 only 40% of that land had been restituted due to ongoing disputes and legal complications.269 For example, managers of agricultural enterprises opposed assigning their lands to the Land Fund and refused to do so.270 This problem remains unresolved.271

b. Compensation to Former Land Owners and Former Farm Workers

Hungary’s post-communist land reform process was based on compensation of former owners, rather than restitution, with landless workers on state farms and cooperatives also receiving small land grants.272 Fifty percent of the country's land area was subject to compensation claims, and over 2.1 million new land units were created during this process.273

The compensation laws enacted between 1991 and 1997 provided compensation bonds to people who had property confiscated (including land), and to people who had been discriminated against for political and racial reasons.274 Compensation bonds could be used to bid for the land of production cooperatives and state farms at compulsory auctions.275 One-third of cooperative land was purchased with compensation bonds at such auctions. One-third remained in the name of current and retired cooperative members and their rights over the land were established.276 One-third was redistributed to cooperative members who did not own land earlier.277 The compensation process was completed by 1997, and 90% of the land was physically identified.278 Nonetheless, physical distribution of land for collective members has lagged behind.279 The titling of privatized land has also been slow.

In Hungary, the new owners who acquired land for compensation bonds were often not engaged in agriculture and did not live in rural areas. Instead of cultivating the land, they have rented it to corporate farms and individual farmers. Many new owners do not even know exactly where their land parcel is located because of the slow boundary marking and registration of land.280

c. Restitution

Estonia, Latvia, Lithuania, Romania, and Bulgaria restituted land to former owners. In these countries, land had been formally expropriated from its existent owners during the collectivization process. Most of the new owners who received land though restitution did not farm the land (i.e., did not work on the collectives farming the land) restituted to them. Each of these countries faced a unique set of problems related to their restitution process.

In Estonia (as in Latvia and Lithuania) the land reform process began in 1989. It sought to re-establish pre-World War II farming structures and restitute land to pre-1940 property owners and their heirs. Multiple heirs in all of the countries that have chosen to restitute land have created a serious co-owner problem, which in many cases further divided the pre-1940 farming structure. The process was complicated due to the large number of claims filed.281 Additionally, the rural infrastructure became derelict during communism: new boundaries had to be drawn and roads, electric and water services restructured, all of which dragged out the restitution process.282 Further complicating matters, during the reform process many initial claims were withdrawn when city dwellers realized that farming necessitated moving to the countryside, and taking up what at the time appeared to be an unprofitable enterprise. No functioning land market would allow land recipients to sell the land.

Because of this withdrawal of claims, the land restitution process in Estonia has returned only about 25% of the agricultural land to individual owners, while 75% of the land has no claimants or specified previous owners. Moreover, almost 30% of the land is uncultivated and idle.283

Estonia is now trying to identify and dispose of land unclaimed during the restitution process in order to bring it into productive use and allow it to be taxed. Potential buyers have applied for 52% of this land. The number of applicants is rapidly growing as farmers realize the opportunities and the good terms that are available. However, the Agriculture Ministry prefers to see this land leased on a long-term basis rather than sold outright, due to land speculation concerns. Proposed lease covenants would ensure that land is put to productive use rather than set aside for future profit through speculative re-sale. The covenants would include a clause allowing purchase of the freehold reversion at the end of the lease period at minimal price.284

Latvia restituted land ownership rights on the basis of the old land boundaries, restoring the cadastral parcels to the pattern that existed on July 21, 1940. Cadastral maps and Land Book records from 1924-1940 were used as evidence for restitution.

The transition process had two stages: (1) land use rights (not ownership) were granted to claimants by Land Commissions; and (2) land ownership rights were restituted to former owners or their descendants or users of the land to purchase land, paying in vouchers.285 Decisions regarding the validity of claims to land ownership were made by local Land Commissions,286 only after which a claim can be registered in the Land Book.287 The first stage was completed in 1997, while the second stage started in 1993 and is intended to be completed in 2001.288

Land was restituted exclusively to native Latvians. Non-ethnic Latvians who had been long-term residents in the country were only granted rights to own buildings and flats. The non-native population is very high (46%), most of whom are post-1945 Russian immigrants.289

In Lithuania a restitution law was adopted in 1991. As of January 1999, 63% of agricultural land remained in state ownership and only 37% had been fully privatized.290 However, over half of the state-owned land is leased to family farmers or used as auxiliary plots.291

In the restitution claims, former owners were given flexibility in making decisions about farming. For example, former owners could start private farming right away, lease the land to newly created agricultural companies, postpone actual farming for 5 years, or receive compensation.292 As in Hungary, rural inhabitants who did not own land before World War II were given the opportunity to purchase land from the State. Prices were fixed by the government, depending on soil quality and location.293

Lithuania’s restitution process has been slowed down by efforts to be scrupulously fair to restitution claimants. Complex rules and procedures contributed to indecision and gridlock.294

The major problems with Lithuania’s restitution process fall into three categories. First, land that was allocated to peasant farmers and private individuals prior to the adoption of the restitution law is now involved in disputes between these people and restitution claimants. Second, the legislation concerning both deadlines and categories of people eligible for restitution changed many times throughout the process. Several different laws, and potentially several versions of the same law, may be applicable depending on the date a restitution claim was submitted. Finally, numerous administrative problems exist, including the use of complex Soviet-era land valuation procedures rather than market values, and the use of Soviet-era land maps rather than ortho-photo maps which are available for 80% of Lithuania’s territory.295

In Romania the restitution law passed in February 1991.296 The law liquidated 3,700 collective farms, and returned their lands to the households that had given them up during collectivization. Up to 10 hectares of arable land and one hectare of forest land were returned to each family.297 However, the law did not address the 30% of Romania’s agricultural land that was held in state farms.298 The State justified this decision as necessary to ensure food security while the collectives were dismantled.299 As of 1997 up to 50 hectares of arable land and 30 hectares of forest land could be restituted to those who had given their land over for collective farms.300 Regarding state farms, in January 2000 Romania passed a law allowing for restitution of state farm land for the first time, up to 50 hectares of farmland and 10 hectares of forest land per family.301 The law states that claimants’ original plots should be returned if possible.302 When this is not possible, financial compensation will be paid.303

While much of the collective farm land was restituted in the 1990's, little progress has been made in disposing of the state farm land.304 As a result, of a total land area subject to restitution of about 9.4 million hectares,305 as of April 1999 about 7.7 million hectares had been restituted to eligible persons. Of the 4.3 million claimants associated with that land, 3.3 million had received their “property title”.306

An important component of restitution is the timely registration and issuance of documents certifying private ownership. In Romania, the delays in this process were largely caused by factual disputes over issues such as drawing of boundaries between land parcels, and do not appear to be primarily the fault of the legal rules. This is in contrast to the situation in Lithuania, where the law itself was the cause of many of the disputes, having given the same land successively to two different groups of claimants. In any event (and despite the existence of up to 700,000 continuing disputes which may be compared to the universe of up to five million beneficiaries), it is estimated that 75-80% of restitution beneficiaries have their rights registered and have received their documents.307

BULGARIA

Through recent legislative changes, the Government has attempted to increase security of tenure by limiting: (1) the circumstances under which land division plans may be redrawn; and (2) the types of remedies available to new claimants or people who challenge land division plans or land commission decisions.

Land division plans may only be amended to correct obvious factual errors and only pursuant to an order issued by the Minister of Agriculture. By severely limiting the situations in which land division plans may be amended, the law should provide landowners with a relatively high degree of security of title.

With respect to remedies available to new claimants or people challenging land division plans or land commission decisions, legislation limits the remedy that may be awarded, in the event of a challenge to title to a land division parcel, to either an equal amount of land from the municipal land reserve, or a registered compensation voucher, which can be redeemed for land from the State Land Fund.

In Bulgaria, agricultural land was divided into two categories for purposes of restitution. The first category, called “real boundary land,” consisted of parcels, the boundaries of which were not destroyed or could be recreated based on documentation. Parcels constituting “real boundary land” were generally preserved as separate legal parcels with definable and identifiable boundaries even after expropriation by the State. The goal of the restitution process with respect to “real boundary” parcels was to restore ownership of the actual parcel to the heirs of the former owner.

The second category of land, called “land division land,” consisted of parcels that the State amalgamated into large state and collective farms at the time of expropriation. In the amalgamation process the boundaries of the individual parcels were not preserved and could not be recreated. The goal of the restitution process with respect to “land division land” was to distribute new parcels to those with claims to land in the general vicinity of the state and collective farm land being divided. The parcels resulting from this process were formed based on the number of claims that were made, along with any written evidence or oral testimony presented as to who owned what land. Approximately 75% of the agricultural land eligible for restitution was “land division land,” and 25% was “real boundary land.”

Currently, according to government statistics, 99.13% of the agricultural land eligible for restitution has been restituted. These figures indicate that the restitution process has been virtually completed in the sense that almost all the agricultural land eligible for restitution has been included in a final land division plan. Once a land division plan has been finalized, each landowner covered by the plan is provided with a decision by the local land commission and a sketch of his or her parcel. According to the Government, land commission decisions and sketches have been provided to all owners entitled to them. This means that title to land within these land division plans is relatively secure, subject to exceptions for “real boundary” parcels.

Bulgaria is an example of a country that had many of the problems described in this section. The legislation related to the land restitution was changed repeatedly, causing confusion and difficulties with enforcement. The legislators sought fairness and to this end changed the law and re-drew boundaries causing insecure land tenure. Disputes plagued the restitution process and for every dispute, a landowner was insecure in his land rights. Slowly, Bulgaria perfected its legislation (see accompanying box) so that land owners now have secure title to their land. Nonetheless, because the restitution process has been so lengthy and at times confusing, there is a public perception that title to restituted land will never be final. The laws establishing statutes of limitation on challenges to land division plans have been amended so many times that the average person does not know when a plan is in fact final. Similarly, most people are unaware that legislation has been amended to ensure that in most cases even a successful challenge to a land division plan will not have any effect on titles held by the landowners covered by that plan.

d. No Restitution: Poland

Poland, like Yugoslavia, never collectivized the great bulk of its land during the Communist era, so it has had majority private ownership of agricultural land throughout the period since World War II.308 Seventy five percent of farmland remained in family farms during the Communist era.309

Both physical persons and legal entities in Poland have full rights to own both agricultural and non-agricultural land.310 While Poland had less work to do on privatization than many of its neighbors, it still had to privatize the large state farms that occupied one-fifth of Poland’s arable land (approximately 3.7 million hectares) during communism.311 Unlike the other EU accession countries, Poland has not provided for restitution of any land. Since the collapse of communism in 1989, Polish land law has been reformed to further the transition of former state farm land to private ownership, as well as to allow corporate ownership.

While Poland did not restitute land, it did begin privatizing its state land. The Agricultural Property Agency (APA) redistributed state-owned agricultural land in the following manner:

  1. 2.8 million hectares were broken up into smaller farm plots averaging 450 hectares and leased to 6,000 new farms. The new farms employ many former state farm workers, and function more like a miniature state farm than a private family farm;
  2. 728,000 hectares were sold outright—mostly to family farmers to expand their plots;
  3. 161,000 hectares were transferred free of charge;
  4. 330,000 hectares have been redistributed through “management,” “perpetual usufruct,” or “administration;” and
  5. 616,000 hectares of low-grade land have yet to be privatized, but the APA indicates that the land is not useful.312

Between 1992 and 2000, the APA annually sold about 100,000 hectares of the land in category 1 to the lessees, who had a right of first refusal under the Civil Code.313 At that rate, the land would have been fully privatized after 20-30 years. However, in 2000 this procedure was declared unconstitutional as an infringement on the rights of local governments to own land.314

e. Household Plots

In Estonia, the household plot farmers do not have title to their land. Household farms have an average size of four hectares, use one-fourth to one-third of all agricultural land, and are significant producers of potatoes, vegetables, fruit and milk.315 For many families these plots are the sole source of subsistence. While their average size is approximately 4 hectares, many of the families live below the poverty line. On the other hand, these plots are highly productive, yielding almost twice as much output per hectare as the average of family farms and enterprises. Giving them title would contribute to increasing their productivity further, and it would contribute to placing low-income families on a self-sustaining path of economic improvement by endowing them with an asset of economic value.316

2. State Owned Land Reserves

Continued state ownership of agricultural land remains an issue in several of the EU accession countries, notably Estonia, Lithuania, Poland, Slovakia and Romania. Some countries have been slow to privatize state land, and instead lease out that land. Many countries have formally established "land funds," the purposes of which range from consolidation of small plots to assisting family farm development to simply renting land to large former collective or state farms. An ongoing concern with leasing of state-owned land is that it is often leased at very low rent levels, thus undercutting the development of private market rents.

In Estonia, as much as 75% of the land is still owned by the State, much of it unclaimed and unused. To identify all "free land" suitable for sale to local farmers, as well as to prepare a comprehensive land record for all land in a municipality, a “S” contract was introduced. Such a contract identifies those lands for which restitution has been claimed but the specific land parcels have not yet been located/identified on the ground, or have not been occupied, or registered in the cadastre. The free lands represent lands that were not restituted or for which compensation was paid because the owners were not interested in restitution. In theory, the municipalities can lease these free lands to willing farmers, but in practice the municipalities often do not know where this land is and do not have the capacity or finances to effectively administer the land. The land market is currently frozen for these lands, and they comprise a very high percentage of the total land area.317

In Lithuania, only 36.7 percent of agricultural land has been fully privatized: 63.3 percent remains in state ownership. However, over half of this land is leased to family farmers or used by citizens on auxiliary plots. Thus, although some portion of the fully privatized agricultural land is leased to agricultural companies, a clear majority of agricultural land is used on family farms or auxiliary plots.

In Poland, long-term allocations of public land occur through the “right of perpetual usufruct” (RPU). These long-term rights may be granted to natural or legal persons for periods of forty to ninety-nine years, and during the last five years of the allocation, the land user has the option of extending the RPU for an additional term of 40-99 years.318 The only ground for denial of the extension is “important public interest.” A land user holding a RPU on such land is entitled to keep all benefits derived from the land, and any buildings or other structures built on the land belong to the RPU holder.319

RPU's are transferable, with transfers becoming valid once they are entered into the Land and Mortgage Register.320 Property under a RPU may only be sold to the holder of the RPU.321 Some RPU contracts may include a clause that requires the RPU holder to employ the same number of workers as the State did for a given amount of time, and under the same conditions.322

Lease rates on APA lands are so low that they may be discouraging privatization of the land. Since the sale price for these lands averages 26-30 times the annual lease payment, so farmers have a disincentive to buy the land outright.323 Moreover, the property tax on agricultural land in Poland is relatively high, approximately 9% of average annual production.324 This creates a tax incentive for leasing APA land rather than buying it outright; the leases include a five-year tax forgiveness.325

In Romania, the former state farms continue to cultivate approximately 1.8 million hectares of agricultural land. Part of this land is already well along the process toward privatization. The law On Land Resources, in conjunction with the 1994 law On Lease (as amended), provided that people whose land had been taken and placed under the administration of a state farm could choose to be designated as “locators.” If this option was chosen, they could conclude a five year lease with the agricultural company using the land, after which the locator would be issued an ownership document to a land parcel. These five-year leases were largely concluded in 1994 and 1995, so have begun to expire. The 1998 revisions to the law On Land Resources affirmatively state that such leased land, as well as shareholders in agricultural companies, are to receive ownership of the land. This process, once completed, will result in one million hectares of former state farm land being privatized.326

The remaining 800,000 hectares of former state farm land that remains in state ownership consist of lands that were state property between the world wars, crown land, land under reclamation works, and land that no one was entitled to inherit by law. Discussions are currently underway concerning whether or not to privatize this land. This land represents only about 5% of Romania's agricultural land.327

In Slovakia, the Minister of Agriculture stated that only 4% of the agricultural land is still owned by the State. State-owned real estate is administered by the Land Fund, a legal entity. The Fund may not use the land itself, but can rent the land for agricultural or forestry purposes, or temporarily for other purposes. Slovakia is not interested in increasing the Fund, and the Fund cannot buy land from other owners. The income from land management belongs to the Fund unless otherwise stated by law. The Fund may rent, exchange, or sell land of private owners who want to sell their land.328 Slovakia’s small fund probably has little effect on the land market.

3. Farm Restructuring

Despite significant privatization efforts, agriculture is still dominated by large, collective style farms in many EU accession countries. For such countries restitution was the focus of land reform, and general farm break-up did not accompany the restitution process. Many of those who received land were urban dwellers with no interest in farming, and immediately leased their identified and restored land back to the former collectives. In other cases, such as the Czech Republic and Slovakia, restored land rights were acknowledged as to area but not actually specified as to location, remaining as a “share” of a common landholding utilized by the former collective. Shareholders have entitlements to the land, but these are rarely converted into individualized, private plots. Instead, shareholders either exchange their land entitlement for an equity share in the company (from which they are supposed to receive dividends), or they lease out their land shares.329 All in all, the restitution process in many countries has not resulted in smaller, viable family farms.

a. Agriculture Dominated by Large Cooperative Farms

In Estonia, while some land has reverted to former owners or their legal heirs as small farm plots, over 70% of state land is still being used by former state and collective farms which have been reorganized as large agricultural companies.330 The farm sector is marked by these large companies leasing their land from private landowners and the State. Estonia does not allow legal entities to own land. The companies are usually organized as share holding or limited liability companies, or cooperatives. Despite having access to better production facilities, such as machinery and animal herds, their productivity, number and size have been decreasing, and the future of agricultural companies is uncertain.331 Agricultural enterprises play a greater role in animal production (57% milk; 48% beef; 70% pork; 64% eggs) than private farms (15% milk; 11% beef; 7% pork; 3% eggs), but smaller household farms also contribute greatly to this sector (28% milk; 41% beef, 23% pork). Livestock is the primary agricultural sub-sector in Estonia.

In addition to agricultural companies, household farms and family farms also exist. Household farms have an average size of four hectares, use one-fourth to one-third of all agricultural land, and are significant producers of potatoes (61%), vegetables, fruit and milk (28%).332 Estonia's 22,000 family farms333 operate on restituted land with an average size of 28.5 hectares.334 The amount of land used by family farms has the greatest potential for growth and development.335

Hungary has four general farm structures:
  • Large incorporated privately owned farms (land is leased);
  • Cooperatives operating in a variety of legal forms on privately owned land;
  • Individual private farms (50,000 60,000 full-time family farms greater than five hectares, and 1.2 million part-time farms);and
  • Household farms or gardens cultivated by about 1 million people.

(Taken from: Csaba Csaki, G. Modos, et al, Summary of Hungary Country Case Study (Hungary Annex A, ACE project P2128R)).

In Hungary, the post-reform agrarian structure is not significantly different from the pre-reform structure. Hungary continues to have many large-scale farms, many small holdings, and very few medium-sized farms.336 Land concentration has taken place primarily through the lease market, since legal entities are prohibited from owning land.337 Land concentration is sharply dualistic, as 90% of farming units (small household plots and family farms) control less than 10% of land, while the remaining 10% -- the largest collective and corporate farms -- control about 90% of the land.338

The new farm structure in the Czech Republic includes:

  • Transformed cooperatives operating in various forms on privately owned land leased from members (43% of agricultural land, and average holdings of 1,450 ha);
  • Privately owned large incorporated farms operating on leased private and state land (32% of agricultural land, with an average size of 690 ha.); and
  • Individual private farms using leased land (25% of agricultural land; 25,000 private farmers farming more than 3 ha; average farm size is just over 30 ha).

(TAKEN FROM: CSABA CSAKI, MICHEL DEBATISSE, OSKAR HONISCH, FOOD AND AGRICULTURE IN THE CZECH REPUBLIC 29 (World Bank Technical Paper No. 437, 1999).

In addition, Hungary’s trend has been toward supporting large farms with subsidies. While small farms also receive some support, there is an ongoing debate about whether to do so or not. The Ministry of Agriculture gives some subsidies to small farmers based on their size alone. The Ministry’s position is that the subsidies are an attempt to maintain people in rural areas.339

As in Hungary, the Czech Republic restitution process resulted in a farm structure dominated by large farming operations operating leased land.340 Pre-transition era land tenure patterns still remain: 90% of farming units (small household plots and family farms) control less than 10% of the land, while the largest 10% (large collective and corporate farms) control about 90% of the land.341

The relatively low rate of decollectivization in the Czech Republic has resulted in limited farm profitability, as most large-scale farms and cooperatives have not effectively restructured their assets and operations.342 Many of these enterprises carry large amounts of debt.343

In Slovakia, near the completion of privatization co-operative farms utilize 50.2% of agricultural land, corporate farms use 26.8%, and private farmers account for only 13.7%.344 In Slovakia, as well as Hungary, Estonia and Lithuania, a number of state and collective farms have been transformed into more “commercially oriented” corporate farms.345 The average size of a collective farm in Slovakia before 1990 was 2,667 ha. In 1998 it was 1,509 ha. The average size of a state farm pre-1990 was 5,186 ha., and in 1998 was 3,056 ha. The average size of new corporate farms is 1,191 ha. These farm sizes, while smaller than before, are still very large in comparison to farm sizes in Western Europe, or to crop-farming in the U.S. or Canada. Pre-1990 individual farms in Slovakia averaged 0.3 ha., and in 1998 averaged 7.7 ha.346

In addition to a restitution process that did little to encourage breakup of collective-style farms in Slovakia, agricultural subsidies have indicated a support for large farms as well. Nearly 40% of the agricultural budget expenditures for 1998 were direct income subsidies paid per hectare of agricultural land. The better the quality of land, the less money the farmer received. These direct income subsidies are controversial, with questions raised as to whether they actually increase agricultural productivity and whether they are open to abuse. The remaining 60% of the agricultural budget goes to: direct production subsidies to improve milk quality; pay for farm inputs and for rural infrastructure (this category consumes 90% of the remaining 60% ); payments to compensate for natural disasters ; and buying down interest rates on loans.347

In Bulgaria, farm reorganization and land restitution were intertwined processes. The same law provides both the legal framework for the restitution process and describes the legal framework for farm reorganization. Property shares were distributed in coupon form, which could be used to bid for the non-land property at an auction or could be contributed to the charter capital of the newly formed cooperative for those who chose to remain cooperative members.348

Those who left the cooperatives during the initial reorganization are farming somewhat successfully. Those who chose to remain on the cooperative farm lease their land to the cooperatives and are technically able to withdraw their property share if they choose to start a private farm or otherwise leave the cooperative. However, in practical terms the property share is virtually worthless, and it is very difficult to obtain the necessary credit for purchasing machinery or land.349

By 1998, according to official statistics, at least 42% of all cultivable land in Bulgaria was still being farmed by newly formed cooperatives, 6% by state farms, and 52% by private individual farms.350 However, an official from the Ministry of Agriculture estimated that only 25% of the land was cultivated by private farms and 75% by cooperatives.351

The cooperative farms that devolved from the former collective farms are generally failing, often not paying rent for the use of land, not farming much of the land that is available to them, and not able to secure any credit. Cooperative farm members who are not the restituted owners of the land have the most difficulty. In some cases even land granted to them as household plots during the collective period has been taken away without payment to give back to the restituted owner or his heirs.

b. Agriculture Dominated by Private Farms

The remaining EU countries -- Lithuania, Slovenia, Romania, Latvia and Poland -- have a large private farm sector and a much smaller cooperative or state farm sector. In each of the countries, the clear policy of the government has been to encourage and maintain small private farming units.

Lithuania

  • Roughly 66% of agricultural land is being used by family farmers or auxiliary plot holders.
  • Approximately 16% of agricultural land is used by the 1,650 agricultural companies which are the effective successors to the former collectives. Slightly more than half of this 16% is leased from the state, and the rest is leased from private owners.
  • About 17% of agricultural land is unused, with the remaining used in miscellaneous small categories.

Lithuania is a “bridge” country because, while it still has large amounts of state-owned land, the land is leased primarily to private farmers. The key factors leading to the relative smallness of the agricultural company sector have been government policy to transfer land (through restitution and leasing of state land) to individuals, coupled with the prohibition in the Constitution on ownership of agricultural land by legal entities.352

Slovenian agriculture is dominated by small, private farms with an average holding of 4.8 ha. These farms use 92% of the agricultural land and produce three-fourths of the total agricultural output.353 This flows from the fact that family farms were retained as the dominant form of farming in the former Yugoslavia throughout the communist period. The remaining land is used by former state farms which have not yet been privatized, but which were supposed to be privatized in 1998.354

In Romania, roughly 15% of the privately-owned agricultural land has been joined together by its owners and is farmed in large associations averaging a little over 400 hectares in size. The remaining 85% is farmed in small and medium-sized units. When looking at the total agricultural land base, both private and state-owned, about 60% of this base is farmed in privately-owned small and medium-sized units. If state-owned communal pastures are excluded, the figure rises to about 68%.355 The private sector accounts for 63% of crop production and 37% of animal production.356

In Latvia, the pre-reform farm structures were as follows: collective farms operated 54% of agricultural land; state farms 41%; individual farms 5%. In 1998 farm structures were as follows: collective 0%; state farms 1%; new corporate farms 4%; and 95% individual farms.357 More than 90,000 private family farms and 130,000 subsidiary farms have emerged as a result of land reform, and only the most sustainable privatized agricultural joint stock companies continue to operate. Latvia’s parliament encouraged and focused on break-up of former collective farms even before the land was privatized.

In Poland, 75% of agricultural land stayed in family farms throughout the communist period and remained privately owned. Nonetheless, the government still has to privatize and redistribute the large state farms that once occupied one-fifth of Poland’s arable land, approximately 3.7 million hectares.358

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