The bulk of investments into agriculture are performed on the basis of back flow vertical integration. They are directed from retail stores to distribution centres, to the processing industry, and finally into agriculture. In their desire to develop and control the supply base, investors are gradually becoming owners of significant landholdings.
Newly established large farms are managed and operated by hired personnel. In the Law on Turnover of Agricultural Land, the government has acknowledged its concern about the possibility that large tracts of agricultural land could become concentrated under single ownership. It states that one person or a company or a group of affiliated companies cannot own more than one-third of an area of arable land located within administrative boundaries of a district. With the development of market mechanisms and funnelling of investments into professional farming, large farms and private family farms are starting to play an increasingly important role in the structure of the agricultural sector.
This can probably be explained by the fact that large farms have better access to professional expertise in farming, as well as to the marketing and supply sides of agribusiness. Private individual farms lack this organization. Investors also demonstrate more interest in purchasing large farms than getting involved in multiple legal arrangements with a large number of small farmers. Professionally operated farms, large or small, are slowly pushing subsidiary farming out of the market.
The agricultural market, with no interference from the state, is becoming the regulator of farm size. Although the Law on Turnover of Agricultural Land has not yet started to demonstrate an effect, it is clear that a concentration of the ownership of agricultural land will increase in the future. This may result in negative social consequences, reflected by growing poverty in rural areas. Policy mechanisms need to be developed to ensure sustainable income levels for current landowners.
Annuity rents need to be introduced for retirees and the elderly. One of the reasons that small businesses are not demonstrating the same growth as large businesses is that they lack access to finance. Commercial banks prefer to work with large borrowers, while family farms and individuals are unable to obtain development loans from either commercial or state lenders.
The introduction of mortgage mechanisms remains unresolved in agriculture. Without proper legislative support, and with uncertainty over an owner's ability to dispose of agricultural land, lending institutions are not confident enough to accept land as collateral.
SACPA Board of Directors
However, given the status of the economy, agricultural land does not have a sufficient market value to support farm production development. The growth trend in the individual farming sector, and the growing efficiency of large farms combined with almost unrestricted access to land and a freemarket environment characterized by an almost complete absence of farm subsidies, places emphasis on the need for professional farm management. With the privatization of agricultural land, the state is no longer able to interfere in the business activities of farms nor control the process of farm restructuring through administration.
In the long run, market forces will drive farm restructuring. In towns and cities privatization primarily affected lands occupied by private family dwellings and to a lesser extent by private business. In reality, the privatization of land located within city limits is subject to political decisions entrusted to municipal authorities.
Two basic reasons can be identified to explain why these authorities are reluctant to accept the idea of transferring land into the hands of individuals and legal entities. State and municipal land ownership has not been divided between federal, regional and local authorities.
The latter act as de facto owners of all non-private land located within the areas under their jurisdiction. Local authorities make decisions on how these lands should be managed or disposed of for development purposes. In a context in which land tax systems fall under federal jurisdiction and the setting of lease payments is the right of an owner, local authorities exercise better control of revenue collected from land-lease payments than land taxes. In the country is expected to introduce a new land tax system whereby taxable land values will be calculated based on mass valuation and local authorities will have control over the establishment of tax rates, providing they do not exceed an upper limit that will be set by federal legislation.
On the one hand, the introduction of this mechanism will provide local authorities with better control over land tax revenue, on the other, a marketbased land tax economy will put private businesses in a situation where they will be paying less if they become legal owners of the land they occupy. Massive privatization of land occupied by private businesses was expected in According to the Land Code and the Law on the Enactment of the Land Code , there are incentives for owners of privately held business and individuals with private homes to acquire private ownership of the land parcels they occupy.
Individuals who are currently using land parcels on the basis of perpetual useright, with the right to inherit this right, can freely acquire their land parcels. The law also states that private legal entities have the right to acquire the land parcels they occupy for a nominal price, or change their type of tenure to a lease arrangement. For businesses, has been set as a decision-making deadline. The government has been trying to introduce private land ownership as soon as possible, whatever the cost. Although private property in land has been declared in a range of laws, and transferring land from the state to individuals has been a policy priority, later developments have proven that the declaration of a private property institution does not in itself solve the problems that necessitated the reforms.
Efficient use of assets is subject to the availability of redistribution mechanisms that allow the further transformation of property rights into the hands of more effective owners. The introduction of land market mechanisms has proven to be a longer task than the declaration of private property. Without market tools being readily available to those who want to use them, privately held land continues to play as much of an economic role in society as it did before the reforms.
The constitution of the Russian Federation declares the right of people and legal entities in all parts of the country to hold land in private ownership. In practice, private land ownership is not found in a number of regions and republics located in the far north and the southern mountainous areas of the Russian Federation.
These parts of the country can be characterized by a set of common features. National minority groups that are native to northern areas do not have a tradition that could have supported the introduction of private land property as a concept. They have no history of the western concept that land can be treated like any other commodity. Land represents an integral part of their way of life that can easily be damaged if outsiders are allowed to take land away from native communities. The spread of western civilization provides many examples of how native cultures have been lost forever when land was acquired by settlers.
In the south, the situation is also complicated by lack of productive land in densely populated mountainous areas. Even before the Revolution, native people used a type of community land tenure in order to avoid potential land disputes. It is interesting to note that similar cultures and traditions can be found across the border in neighbouring Georgia, where the same problems associated with the introduction of private land ownership can be found. The risk of losing ethnic diversity through the introduction of a private property mechanism are high because most of these lands are rich with vitally important mineral recourses.
Oil and mineral companies are pushing for ownership of the land they currently occupy. With the new Land Code coming into effect there is not much to keep them from doing this. Under these circumstances the government needs to concentrate on recording and defending traditional community land-use rights of natives in the land cadastre and registry of rights in real estate. To support its reforms, the government has concentrated on developing the infrastructure of land market mechanisms. By the end of the s, the land cadastre system and the system for the registration of rights in real estate became operational throughout the country.
It was expected that the introduction of these mechanisms would foster the development of a land market. It was also expected that this infrastructure would support the development of mortgage mechanisms that would attract investment into the economy. Land markets are thought to be the best mechanism for the redistribution of lands into the hands of more effective owners. Land privatization is the necessary prerequisite for this process to start.
Wiley-VCH - Places of Possibility
It was perceived that once all these mechanisms were put in place the market would be characterized by a significant volume of buying and selling. However, this did not happen. The structure of land markets is influenced by the social, economic, cultural and legal customs and traditions of a country. The idea that land can be sold is still very much alien to the minds of Russian people, who for centuries were denied access to land. On the other hand, legal uncertainty and poor economic performance made landowners hold on to their property rather than dispose of it.
Places of Possibility
In , 5 transactions involved an area of 69 ha. Most of these were leases. To a large extent this reflects the land ownership structure of a country in which 92 percent of land is still held by the state at one level or another.