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Conduct of Privatization

57. People are generally pleased with the outcomes of privatization where the process has been completed in a clear, transparent manner and proceeds have been distributed efficiently. Small holders think that privatization enabled them to own land for the first time in their lives and now they are free to cultivate. On the other hand, in rayons where privatization is not yet complete and the process not transparent, there are significant complaints about inefficiencies and corruption of the process. Even though land privatization and distribution are at a rather developed stage in the surveyed rayons, privatization of state assets is not complete in any of them, seriously disrupting people’s ability to effectively utilize the privatized land (figure --: level of privatization, land and property ownership and livestock activities differ from one rayon to the other).

Land Privatization

58. Land distribution process is unevenly completed outside the Pilot Project’s scope. There is low trust in the procedures and outcomes of farm restructuring in areas where privatization is not yet complete (figure --: trust is lowest where privatization is slowest – change the title). In some areas, households received their land share and an identifiable plot; in others the land shares are not yet given out. While people strongly support the notion of private land ownership and the distribution process, delays in the completion of the privatization process is raising skepticism. The insecurity of ownership, on the one hand, and the inability to trade land, on the other, is hindering people’s ability to expand the scope of their agricultural activities.

59. Focus group in Barda indicates that everybody received his or her land shares in the pilot project village and there is little demand for additional land. Until now, nobody has cultivated yet since land distribution took place only a short time ago, however, people are preparing to cultivate this year. In pilot area of Salyan also everybody received his or her land shares. However, the participants in the focus group complain that the most fertile lands of the former kolkhoz are not distributed in privatization. They also mention that their current land entitlements are too small to be operated independently. In Udjar, 500 families were reported to receive land, distributed according to expert opinions in the amount of 0.61 ha of productive or 1.04 ha of unproductive land per person. In Khachmaz, people received their land shares and are waiting to receive their machinery and equipment shares. In the villages outside of the pilot area of Barda, Udjar and Khachmaz rayons land privatization is complete, in other rayons, there are varying degrees of privatization.

60. Land distribution procedures differ between and within rayons with important social and economic implications. In some communities, care has been given to maintaining the integrity of the extended family; as such people have social capital on which to pool their financial, labor and technology resources. However, the lottery method has been used in most areas to ensure equity and transparency. Although this method has proven effective, it caused excessive fragmentation of family labor and hindered ability of families to pool resources ¹⁸. People attempt to overcome this by forming production associations and through other community arrangements, although such activities are still rather ad-hoc and immature in their establishment and organization.

61. The household survey confirmed the qualitative assessment that the lottery method of land distribution was considered to be fair in most areas. Less than 10 percent of the respondents imply that the lottery was unfair and corrupt; most of these complaints are from the Lenkeran rayon. Most households reported to have received titles to their own land; about 8 percent, however, say that they have not acquired any land after privatization. About 70 percent of those who received land indicate that the size of their land is adequate while the rest think they need to combine lands to operate them efficiently.

62. There are rayon-specific complaints about the way in which privatization was conducted. For instance, in Lenkeran, 45 percent of the respondents indicate that wealthy people received the best portions of land while in other rayons this complaint was minimal. Connected with this, people also think that the lottery was not conducted fairly and 63 percent also think bribery was involved in distribution of these lands. Many small holders are also not clear about the function of so-called “municipal land allocations” which sometimes occupy half of the agricultural land available in rayons. Most local accusations focus on the quality of land distributed and favoritism in land allocations, which are somewhat subjective and appear arbitrary to people due to lack of clear specifications. Despite the current difficulties, there is a general desire among small holders to be involved in agricultural activities more intensely and operate private farms (figure --: there is high willingness to cultivate the land ….). Nonetheless, small holders are aware of the potential limitations and threats, therefore, they believe a minimum set of conditions is necessary before they can successfully undertake such operations.

63. The most important factor for independent farmers to cultivate is the availability of machinery and equipment and appropriate agricultural credit. The credit, according to people, does not need to be in cash; rather, small in-kind credits such as easy access to seeds, fertilizers, and pesticides are favorable among individual farmers. As main production problems are solved, market conditions are likely to become more important. Households currently consume most of their produce and sell only the surplus from their consumption in the market. In the short term, for most households, having access to money, inputs, and equipment to increase production is significantly more important than creating ideal local marketplaces.

64. In the four rayons except Lenkeran, villagers see the most important benefit of privatization as their acquisition of titles to land and becoming free farmers.¹⁹ However, in Lenkeran, majority (95 percent) of those who say that privatization is done in their village say they have not acquired anything through privatization. Connected with that, these villagers demand the property of former kolkhoz / sovkhoz to be justly divided among all rural population, not the privileged few who already have better access to land and machinery. Apparently, in Lenkeran, machinery and equipment were distributed only to former kolkhoz/sovkhoz heads (as indicated by 85 percent of the respondents), therefore, this distribution did not benefit independent small holders.

65. Even though land shares have been distributed to people with the exception of Lenkeran, people do not actively trade land yet. Only in Salyan, about 7 percent have acquired more land by leasing. In other rayons, land is neither sold nor leased. Partnerships are slowly starting to form; 15 percent in Salyan indicated that they took partners to their land shares while 8 percent in the same rayon said they gave their land away to partnerships.

66. Majority of those who received land is currently satisfied with the size of their holdings. Only in Salyan rayon, which has significant agricultural activity, the majority (87 percent) thinks their land size is too small. There is significant entrepreneurial potential in rural areas; the most important advantage of having land is seen to be the opportunity to obtain profits through cultivation. People are also aware of the potential problems with crop production. They identify the most important problem as potential damage to crops in bad weather (29 percent). Twenty-two percent are concerned about potential sales of their products and 20 percent say they are likely to face irrigation problems. Another 15 percent mentioned problems with agricultural services as an important concern.

Formation of Cooperatives and Associations

67. Privatization enhanced the tendency among small farmers to combine resources with relatives and neighbors through establishing associations. Focus group discussions indicate that in the pilot village of Barda rayon, there are 38 joint farms established by several families pooling their resources together. Ex-managers of former state and collective farms sometimes take the lead in such activities; this causes accusations of corrupt practices and forceful management. Nonetheless, many independent small holders agree to have their lands cultivated in a collective manner for simple efficiency reasons. Individual land plot allocations are too small to be operated efficiently and profitably (figure --: some people think the allocated land plots are too small to be efficiently used). Lack of farming know-how among the previously non-technical, non-agricultural rural residents is another important reason for the re-emergence of collective forms of agriculture. Inadequate access to resources to farm independently is also a strong incentive to join forces. Older and sick people are usually unable to cultivate in their land, so they contribute their share to a group or a cooperative. There is need to better understand the formation and operation of these associations and identify mechanisms to facilitate their access to appropriate advisory and credit services.

Interest in Private Initiatives

68. There is a high level of interest in private initiatives among the independent small holders in rural areas. Farmers favor private investments in agriculture and they also welcome local and foreign private investors. Small holders are especially interested in learning more about possible range of agri-businesses they can be involved in at the household level such as income generation through small livestock and poultry raising. Another area of interest with respect to private sector activity is in the management and provision of farm supplies and machinery. Current localized arrangements of placing farm assets under the management of ex-farm managers create cynicism; there are proposals that the management of these assets might be transferred to a private entity or an association of independent farmers.