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1 Agricultural Economy in Transition /,amf I STUDIES OF ECONOMIES IN TRANSFORMATION Food and Agricultural Policy Reforms Public Disclosure Authorized in the Former USSR An Agenda for the Transition Country Department III, Europe and Central Asia Region FILE COPY Report No.:11271 Type: (PUB) Title: FOOD & AGRICULTURAL POLICY REFl tAuthor: WORLD BANK Public Disclosure Authorized TH XExt.: O Room: Dept.: / / / / / / BOOKSTORE SEPTEMBER 1992 A m_; ~~~~~~~~~~~~~~ ----- --- -f - --- - -- --- -- -------"""" -------------- ------- ---- Public Disclosure Authorized T TXT T <~~~~~~~~~\ tW Xt~~~~~~~~~--V-------- Public Disclosure Authorized THE WORLD BANK STUDIES OF ECONOMIESIN TRANSFORMATION PAPERNUMBER 1 Food and AgriculturalPolicy Reforms in the FormerUSSR An Agendafor the Transition Country Department III Europe and Central Asia Region The World Bank Washington, D.C. Copyright C) 1992 The International Bank for Reconstruction and Development/THEWORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing September 1992 Papers in the "Studies of Economies in Transformation" series present the results of policy analysis and research on the states of the former USSR. The papers have been prepared by World Bank staff and consultants and issued by the World Bank's Europe and Central Asia Country Department III. Funding for the effort has been provided in part by the Technical Cooperation Program of the World Bank for states of the former USSR. In light of the worldwide interest in the problems and prospects of these countries, dissemination of these findings is encouraged for discussion and comment. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. Any maps that accompany the text have been prepared solely for the convenience of readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank, its affiliates, or its Board or member countries conceming the legal status of any country, territory, city, or area or of the authorities thereof or concerning the delimitation of its boundaries or its national affiliation. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy portions for classroom use is granted through the Copyright Clearance Center, 27 Congress Street, Salem, Massachusetts 01970, U.S.A. The complete backlist of publications from the World Bank is shown in the annual Index of Publications,which contains an alphabetical title list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is available free of charge from the Distribution Unit, Office of the Publisher, Department F, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'Iena, 75116 Paris, France. ISSN: 1014-997X Libraryof Congress Cataloging-in-PublicationData Food and agricultural policy reforms in the former USSR: an agenda for the transition / Country Department III, Europe and Central Asia Region. p. cm.- (Studies of economies in transformation ; paper no. 1) Includes bibliographical references (p-. ISBN 0-8213-2261-3 1. Food supply-Former Soviet republics-Congresses. 2. Food supply-Russia (Federation)-Congresses. 3. Agriculture and state- Former Soviet republics-Congresses. 4. Agriculture and state- Russia (Federation)-Congresses. I. International Bank for Reconstruction and Development. Eurcipeand Central Asia Region. Country Dept. III. II. Series. HD9015.F67F66 1992 338. 1'9'0947-dc2O 92-32834 CIP Foreword Policies of the last seven decades in the former sector from central planning to reliance on mar- USSR weakened incentives, created highly cen- ket principles. The policy reform agenda for the tralized and inefficient food production and dis- short term focuses on a strategy to ensure an ade- tribution systems, and distorted retail food prices quate supply and distribution of food, appropri- and consumption patterns. Since the mid-1960s ate price, subsidy, trade, and credit policies dur- sustaining these policies required increasingly ing the transition, and initial steps needed for larger budgetary subsidies and resulted in severe land reform and privatization. The policy reform structural imbalances in the food and agricultural agenda for the medium term outlines a strategy sector. The combination of rising macroeconomic aimed at restructuring farms and enterprises and instability, breakdown in the food procurement establishing the necessary conditions for a well and distribution system, balance of payments functioning market system. This agenda includes problems, and rapid decline in interstate trade reform of trade policy, development of a diversi- culminated in the food crisis of fall 1991. fied rural credit system, and appropriate institu- In November 1991, the government of the tional and infrastructure support from the gov- former USSR invited the World Bank to assem- emient. The report also outlines an agenda for ble a team of international experts to develop an the international community to provide neces- action plan for food and agricultural policy re- sary financial and technical assistance in trans- forms, in collaboration with the Commission on forming the food and agricultural sector. Technical Cooperation with the World Bank, The study is intended for policymakers and which was specifically established by the gov- their advisors in the Russian Federation and other ernment for this purpose. The European Bank states of the former USSR. All those who are inter- for Reconstruction and Development (EBRD), ested in the leading role of the food and agricul- the European Community (EC), the Organiza- tural sector in facilitating a successful transition to tion for Economic Cooperation and Develop- the market economy should find the study useful. ment (OECD), and the International Monetary Fund (IMF) were invited to participate in the study. This report is based on a collaborative ef- fort by a team led by the World Bank. The study reviews the state of the food and ag- ricultural economy, outlines policies needed to Russell J. Cheetham prevent its total collapse and foster an early re- Director covery, and develops guidelines and an action Country Department III plan for transforming the food and agricultural Europe and Central Asia Region iii The initial missions for this project were led by D. Gale Johnson. Richard Burcroff II was the Bank Coordinator for the project and a major contributor. Mohinder S. Mudahar was the Task Manager for the project and prepared the final version of this report. We are grateful to Victor Dmitriev and Michael Dmitriev from the Commission for Technical Cooperation with the World Bank for their valuable contributions. This report is based on the background Working Papers prepared jointly by the World Bank and the Commission. We grate- fully acknowledge the support provided by the European Bank for Reconstruction and Develop- ment (EBRD), the European Community (EC), the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund (IMF). An interim version of the report was discussed at an international conference chaired jointly by Aleksandr Shokhin (government of the Russian Federation) and Wilfried Thalwitz (World Bank). Valuable contributions by Edward C-ook and by Karen Brooks, Csaba Csaki, and Michael Gould from the World Bank are gratefully acknowledged. Valuable contributions were also made by the authors of the background Working Papers whose names are indicated in the references section of this report. The report was reviewed by Hans Binswanger, Joseph Goldberg, and Odin Knudsen (World Bank). Data processing support was provided by Brenda Manuel and Sivaguru Balaku- mar. This report was edited by Meta de Coquereaumont. Secretarial support was provided by Peggy Bonnell and Tracy McTernan. We also wish to acknowledge the advice and valuable comments received from Claude BlanchLi, Jonathan Brown, Bernard Drum, Gershon Feder, Prem Garg, Wafik Grais, Parvez Hasan, Manuel Hinds, John Holson, Jane Holt, Yukon Huang, Gordon Hughes, Lars Jeurling, Adil Kanaan, Daniel Kaufmann, Timothy King, Harinder Kohli, Robert Liebenthal, Millard Long, Constantine Michalopoulos, Michel Petit, Enrique Rueda-Sabater, Jit Srivastava, Everardus Stoutjesdijk, Jacques Toureille, Paulo Vieira da Cunha, Dennis Whittle, Kevin Young, and K. Tanju Yurukoglu of the World Bank; Clell Harral of the EBRD; Knud Munk of the EC; Julian Berengaut of the IMF; and from Dale Adams, Martin Evans, Ken Gray, S. S. Johl, Stanley Johnson, Alexander McCalla, Harold Riley, Stefan Tangermann, and C. Peter Timmer (consultants). Contents Glossary xii Acronyms and abbreviations xiv Overview 1 Objectives 1 Major economic problems and needed policy reforms
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