Understanding the process of decollectivisation and agricultural privatisation in transition economies: The distribution of collective and state farm assets in Latvia and Lithuania

Abstract

IN THE TRANSITION ECONOMIES1 of the former Soviet Union (FSU) the term 'agricultural privatisation' refers mainly to the allocation of both legal ownership rights and effective property rights to individuals and/or private institutions. Restitution refers to the type of privatisation policy pursued to return property rights to 'legitimate' owners. Often the restitution of assets may be limited by the fact that these assets no longer exist. This article is primarily concerned with the transformation, namely the restructuring and conversion of state (sovkhoz) and collective (kolkhoz) farms and agro-processing units (agro-industrial complexes) into market-oriented private enterprises. This transformation requires both a clear legislative framework within which the process may take place and also, in many cases, significant structural and organisational change. The viability of the eventual enterprises that emerge from the formerly Soviet-style farms will be crucial to the future prospects of the agricultural sector. A useful extension of the term transformation, to include what Pryor (1992) defines as 'the break-up of large scale farms, organised either as co-operatives or state enterprises, into individually operated farms and their creation as autonomous production units independent of the government' is decollectivisation; the creation of individually owned firms. Throughout Central and Eastern Europe (CEE) and the FSU, farms have tended to reorganise as relatively large units, though with some downsizing. In many transition economies the former sovkhozy or kolkhozy often remain intact, functioning in their traditional way but simply under a new name, usually as a joint stock company (JSC) or a limited liability partnership. Two additional forms of agricultural organisation have emerged out of the process of transformation in the FSU: (i) the separation of a multi-village enterprise into several village-based enterprises, whilst retaining the control and management of collectively owned assets and land; and (ii) as is increasingly popular in the Baltic states, the complete dismantling of the former kolkhozy or sovkhozy into small family farms, where all physical assets and land are distributed among members. In some instances, producer-based agricultural associations formed by private farmers are emerging out of the large-scale farms. Indeed,