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Rural Development
July 16, 2007

Tackling the Twin Problems
The break-up of the Soviet Union left Russian farms in a sorry state. Now the
government is finally ready to tackle the twin problems of rural poverty and low
agricultural output through a national program to develop the agro-industrial sector
in 2008-2012.

The Ministry of Agriculture played the main role in designing the project, and other
relevant departments, including the Economic Development and Trade and the Finance
ministries, have also taken part in drafting it. Regional authorities, economists, trade
unions and associations of agricultural producers also made a contribution.

Minister of Agriculture Alexei Gordeyev says that the government has adopted a new
approach to agriculture in the last few years, and is now treating it as a promising
and potentially high-tech industry. One example of this is the launching of a
priority national project to develop the agro-industrial sector two years ago and
the adoption of a federal law on agricultural development last spring. The current
program is called Agricultural Development and Regulation of Agricultural Produce,
Raw Materials and Foods for 2008-2012.

This document will have a big impact on the lives of the majority of Russians.
Agriculture and food processing employ over seven million people, accounting for
almost every 11th job in the economy and supporting another 30 million family
members. Everyone else consumes what is being produced by farmers and workers in the
food-processing industry. Judging by polls, Russians prefer domestic produce to
imports, but the latter's share of national consumption is still high - 33%,
according to estimates by the Ministry of Agriculture, which exceeds the threshold
of food security. But the country's potential is enormous - with a mere 2.2% of the
world's population, Russia possesses 8.9% of its arable land, one fifth of its fresh
water and 8.3% of its chemical fertilizer production. Nonetheless, the agriculture
and food industry's share of GDP stands at a regrettably low 8.5%.

The reasons for this situation are obvious. Agriculture was hit the worst by the
decline of the 1990s, which affected all spheres of the Russian economy. Its
consequences are still taking a toll. Half of all rural dwellers live beneath the
poverty line, but they themselves are hardly to blame for this. Production
facilities and equipment are ageing, and millions of hectares of land have been
bought by new owners but not put to good use. Yet there have been some positive
changes -agriculture has registered a small amount of growth for more than seven

The new program is designed to speed up this progress. Its predecessor - the Soviet
Food Program - was devised a quarter century ago and collapsed in 1990. The Soviet
Union failed to provide the population with food using non-market methods, and some people joked that in order to feel well-fed everyone should read the Food Program three times per day.

The planned figures for 1990, which look quite meager to modern consumers, still
remain the goal for rural workers. The 1990s targets were reached only in plant
cultivation and grain production. Livestock production has only been restored to
half of its previous level, despite the rapidly growing demand.

Increasing amounts of imported food are compensating for the shortfall. The overall
purchase of foreign foods and agricultural raw materials (save textiles) went up by
2.9 times between 2000 and 2006, reaching $21.6 billion. The share of imported meat
and dairy products is particularly high. Local producers are finding it very hard to
compete with imported foods, especially when they arrive at dumping prices. In the
main exporting countries, farmers enjoy huge amounts of government support,
whereas levels of assistance in Russia are among the world's lowest.

According to estimates by the Organization for Economic Cooperation and Development (OECD),
 which brings together 30 advanced countries producing two thirds of the world's commodities and
services, the average aggregate assistance given to rural producers (including market price support,
irect subsidies, tax breaks and other benefits) by the organization's members is twice as large as in Russia.
We cannot match this level for the time being, but the government is increasing the help it gives to the
countryside - in the next five years it will total $21 billion. This is not a big sum, but it is almost twice the
current amount of funding.

Direct financial aid to the countryside is not the only goal of the new program. It
also pays a lot of attention to creating equal conditions for competition on the
Russian food market. A mechanism of indirect support through private-public
partnership should facilitate this task. It is also important to encourage
investment in the agro-industrial sector.

What results will the program help to achieve? According to tentative estimates, it
will bring the agro-industrial growth rate to four percent, and livestock breeding
to five percent. This will increase the share of Russian food on the domestic market
to 70%, and 80% in milk and dairy products. Some 400,000 hectares of idle land will
be put to use, investment in the agro-industrial sector will grow, agricultural
equipment will be upgraded, and farms will be better supplied with energy. But we
must make sure that the program does not remain just an elaborate plan.
By Vasily Zubkov for RIA Novosti
The opinions expressed in this article are the author's and do not necessarily
represent those of RIA Novosti.

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