Resource information
The overall finding of this report is
that much agricultural policy is made at the regional level,
and here the explicit price, and trade policy distortions
are significantly worse than at the federal level. The
result is patchwork of inconsistent policies, that has
fragmented the Russian national market. The most serious
policy issues at the federal level, are in the legal
framework, the continued state domination of some markets,
and, the administration of limited subsidies, in ways that
undermine market development. A major problem is that large
farms face soft budget constraints, with tolerance of
non-payment of debt, resulting in an increasing debt burden,
little incentive for true restructuring, and an uneven
playing field with respect to the private sector. The
government recently addressed the issue of farm insolvency,
through the Resolution on Agricultural Debt Restructuring,
and, a fundamental approach to this problem is being
elaborated in the draft Law on Financial Rehabilitation of
Agricultural Enterprises. But the key to giving enterprises
an incentive to participate in real restructuring, will be
to enforce sanctions - including bankruptcy procedures, and
foreclosure - if enterprises fail to comply with the terms,
and measures developed by creditors, and investors, as part
of the restructuring procedures. A supportive environment of
private individual farming, and private market development
should be created, by revamping agricultural support
policies, that halt public procurement at federal, and
regional levels; that administer all subsidies to producers,
by some incentive-neutral mechanism, not dependent on input
usage, or output; and, where input, or credit subsidies
continue, if administered by private channels on a
competitive basis, not through state-owned, or monopoly suppliers.
