Farm Restructuring in Transition: Land Distribution in Russia

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Case Study #7-7 of the Program: ''Food Policy For Developing Countries: The Role Of Government In The Global Food System''
The agrarian reform of the 1990s in Russia was targeted at transforming the formerly state-owned and centrally planned agriculture sector to a market-oriented one. The reform dramatically changed farm structure and land tenure in rural areas. The preconditions of the reform prohibited land restitution, as took place in many Eastern and Central European countries in transition. Instead, the major instrument of Russian reform was land sharing based on the allocation of conditional land shares, which were not indicated on the ground, to the rural population. This fragmentation of landownership was not coupled with the fragmentation of farming operations: the big farm enterprises were preserved but had to rent small land shares from their holders. Moreover, in the late 1990s huge agribusiness companies entered Russia's agricultural sector and rented hundreds of thousands of hectares for cultivation. Agricultural growth started to recover after 1998, but a severe contradiction between the system of fragmented land tenure and the prevailing largescale farm structure remained. For agribusiness investors, the process of gaining access to land had become costly and prolonged, hampering the growth of investment, and consequently, growth in the agrifood sector. The complicated systems of land registration laid a foundation for rent-seeking activity in land administration across the country, aggravating the problem of high transaction costs in the farmland market. On the other hand, the land share system provided the millions of rural dwellers with an additional source of income that was crucial given the severe fall in living standards stemming from the reforms in the countryside. The objective of increasing the efficiency of agriculture by consolidating land ownership thus contradicts the objective of protecting the civil rights of millions of land shareholders who were allotted their shares in the early 1990s. Around this problem four groups of stakeholders were formed. Domestic and foreign agribusiness investors are interested in consolidating land shares in farm enterprises and simplifying the land registry system. The land shareholders are also interested in reducing land transaction costs, but most of them have benefited from the possession and disposal of shares. The private firms that offer consulting and land engineering services are profiting from the existing land registry system, land transactions, and plurality of parties in farmland transactions. The land bureaucracy has a strong background of rent seeking in existing land tenure arrangements. Policy makers are debating several political options, some of which have already been introduced. The political challenge raised here is a typical one for the policy-making process—the contradiction between efficiency and social justice. The challenge is to find a compromise political decision that would balance the objective of economic growth in agriculture, which may require consolidating farmland in the hands of producers (which are mainly large in scale), with the objective of protecting the property rights of land shareholders, for many of whom these shares provide an important source of income. Your assignment is to find a political solution that will (1) make agriculture attractive for investors (domestic and international) by simplifying land transaction procedures, and (2) secure the rights of rural dwellers who received land shares through the reforms. Take into account the farm structure and land tenure systems that emerged in Russia after the agrarian reforms of the 1990s, current stakeholders' interests and the distribution of political forces in Russia, and the possible opposition to change by rent seekers in the land registration system.
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10 pp.
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Cornell University Division of Nutritional Sciences
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Eugenia Serova (2007). Case Study #7-7, ''Farm Restructuring in Transition: Land Distribution in Russia''. In: Per Pinstrup-Andersen and Fuzhi Cheng (editors), ''Food Policy for Developing Countries: Case Studies.''10 pp.
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