The Role of Agriculture in the Translation Process in Lithuania

The return to a market economy by Central and Eastern European countries after the failure of forced experiment of centrally planned economy that had lasted over half a century is a complicated economic phenomenon. Economists from different countries have been observing and analyzing it both from inside and outside. The return of Lithuania to a market economy exhibits its own peculiarities. The article will tend to analyze the role of Lithuanian agriculture in the transition following the plan suggested by organizers. the role of overviewed. In of agriculture in transition are impact of economy-wide transition strategy on the agriculture the contribution of the general process of transition.


Introduclion
The return to a market economy by Central and Eastern European countries after the failure of forced experiment of centrally planned economy that had lasted over half a century is a complicated economic phenomenon. Economists from different countries have been observing and analyzing it both from inside and outside.
The return of Lithuania to a market economy exhibits its own peculiarities. The article will tend to analyze the role of Lithuanian agriculture in the transition following the plan suggested by organizers.
In Part I the role and functions of Lithuanian agriculture on the eve of transition to a market economy are overviewed. In Part 11 features and problems of agriculture in transition are analyzed. Part III is devoted to the impact of the economy-wide transition strategy on the agriculture sector and the contribution of agriculture to the general process of transition. Conclusions follow at the end.
I. Role and functions or agriculture in Lithuania berOl'e the transition In Lithuania, as weIl as in Latvia and Estonia the Soviet rule period lasted for fifty years. It was long enough to restructure the economy of Baltic countries on the basis of centraIly planned economy and incorporate it into the unifonn economics system of the fonner USSR. Actually, it was during the post-war period that such unifonn economic system had been shaped.
The Sovietization of the economy has greatly influenced demographic processes in the Baltic countries. Migration of population that initially was of forced character has increased. Hundreds of thousands of the Baltic natives had been exiled. Alongside, the arrival of Russianspeaking people here was stimulated.
Internal migration within the republic has also increased. Socialist restructuring of agriculture forced rural inhabitants to leave the countryside for towns. Number of people with no land tenure origin came to live in the countryside. On the other hand, these people for years had been enriching agricultural sector through their hard and poorly rewarded work. Thus, this period witnessed not only the reduction of rural population but also changes in their composition from the point of view of their property relations to land (See Table 1). Economic restructuring in the Baltic countries had also influence the sectorial structure of the economy. For example, agricultural production throughout 1940-1990 increased by 2,4 times while the increment of industrial growth made 88 times/I: p.6; 2: p.22/.
Rapid development of industries based in towns not only promoted urban growth but also contributed to the russification of cities. lnunigrants from other republics were invited under the forged assumption that Lithuania lacked specialists for newly created industries.
It was at that period that the plan for distribution of industrial enterprises and urban development was worked out and implemented. It aimed at slowing down the growth of large cities in Lithuania alongside with construction of new plants in smaUer towns.
Such strategy followed twofold objectives. This industrial distribution policy slowed populations migration from other republics and resulted in low population growth at that period, as shown in Table 1 (it amounted to 27 %, while in Latvia and Estonia it was 42% and 50% re-spectively). In 1990 Lithuanians accounted for 78% of total population, Estonians for 61 % and Latvians 52%.
Such enterprise distribution policy provided jobs to local inhabitants in smaller towns and stimulated migration from countryside to towns. Over this period the share of rural population in Lithuania dropped from 77 to 31 % (i .e., by 46 points), in Latvia from 65 to 29%, in Estonia from 66 to 28% and in Belorussia from 79 to 33%.
The Baltic republics are comparatively poor in natural resources. The greatest wealth they have is their settled local population admirable for their great love of country, diligence and honesty. Therefore, the USSR industry and other sectors head institutions were interested in constructing new enterprises in these republics, where production and economic results were comparatively higher than in other republics. New enterprises were usually closely linked with other republics: they used to receive raw materials for production of parts and semifinished goods as well as completing components for final assembly, whereas the final products used to be taken back. After Baltic republics regained Independence the cooperative links were disturbed and all industrial enterprises found themselves in a critical situation: great problems arose in alXJ.uiring inputs and completing units as well as marketing final goods. Eastern markets were lost and Western markets were almost unattainable because of the inferior quality of goods and outdated technologies.
Besides, industrial sectors involved in processing domestic inputs into final products were also being developed. These were food and light industry sectors although they were also supplied by import inputs. On the eve of Independence the share of food industry in total production amounted to 21 % and that of the light industry to 22%.
Among other industrial sectors machine building sector's share was the highest and accounted for 27%. Other sectors were much more modest and produced 5% and less each /2: p.134/.
Thus, the above suggests the conclusion that although agricultural output increased by 2,4 times over 1940-1990 its share in GDP has dropped.
In 1993 B. Bolotin published "Soviet Union: a Farewell Statistical Portrait of the 15 Former Republics" n: p.141/. I would like to make use of this report to show the place of agriculture both in the economy of Lithuania and in the fonner USSR agricultural sector.
In GDP per capita Estonia ranked in the first place among 15 soviet republics (10,6 thou rb), The second and third places were shared by Lithuania and Latvia (9,5 thou rb each) and Belorussia was in the forth place (8,4 thou rb). Distribution of GDP by sectors of economy is provided in Table 3.
In terms of GDP per capita produced in agriculture Lithuania occupied the first place among 15 former Soviet republics, exceeding the average USSR level by 48%. Estonia and Belorussia shared III-IV places and Latvia and Kirgistan VII-VIII places. Finally, there is one more measure, labour efficiency, calrulated as average GDP per one employed. In average, the share of GDP per one employed in all sectors of Lithuanian eoonomy amounted to 18,7 thou rb, 19,IJ thou rb in Latvia, 20,3 thou rb in Estonia and 16,8 thou rb in Belorus.'iia.
Distribution of places in the line of former republics from the point of view of labour efficiency in agriculture was very similar: in Estonian agriculture GDP per one employed was 25,9 thou rb, in Latvia 23,1 thou rb, in Lithuania 22,4 thou rb and in Belorussia 19,7 thou rb.
In 1990 the productive capital in Lithuanian agriculture (less land value) totaled 12376 mill rubles, or 3640 rb per 1 ha of agricultural land. The corresponding figure in Estonia was 3 259 rb in Latvia 2 947 rb and in Belorussia 2 900 rb.
Consequently, the level of capital allocation in agriculture was good relative to other former soviet republics. In Lithuania 3/4 of land in want of reclamation were improved and drainage systems installed, irrigation systems covered 43 thou ha, meadows and pastures were cultivated, rotation systems introduced, necessary stock of agricultural machinery formed, new livestock buildings constructed, livestock herds formed, new rural settlements with vital social, cultural and public service facilities were built. Collective and state farms were not only centers of agricultural production but also rural social and cultural development centers.
Lithuanian agriculture, as well as Latvian, Estonian and Belorussian had been specialized towards beef and dairy cattle breeding and bacon, pork-and-Iard type pig breeding. This agricultural region was allotted the role of basic meat and milk domestic supplier and exporter.
It is nearly impossible to follow the export structure, volume and directions in the Soviet statistics. Only two basic parameters used to be calculated: state procurement of agricultural products and deliveries to allunion fund. The all-union fund was administered by the all-union government. The remainder of state procurement fewer deliveries to the allunion fund was left at the disposition of the republican governments. Domestic demand used to be satisfied from this remainder fund. The aUunion fund was used to satisfy the demand of major cities, to accumulate state stocks and for export. Table 4 shows the share of this region in state procurement and deliveries to all-union fund by some agricultural prod-ucts. It also provides data on all-union market share. For comparison'! sake data on area, population and agricultural land are added.
Thus, within 1986-1990 Lithuanian agriculture used to deliver 36,8% of milk products and 32,8% of meat products totally produced. The deliv· eries occupied the following segments off all-union market: milk producl!i accounted for 8,2% and meat for 7,3%.
Before the transition Lithuanian agriculture was based on state ownership of all natural resources, including land. The state allotted free land to all its users. Collective farms occupied the largest area and employed the largest number of workers. This was influenced by a large farm number in prewar Lithuania and many rural labour resources.
By the end of 1990 there were 882 collective farms with approximately 3 554 ha land each, including 2 563 ha agricultural land, of which 1682 ha arable. Moreover, collective farms occupied 48% of the total republican area, they had 64% of total agricultural land at their disposition, whereas arable land accounted for 65%.
Collective farms employed 227,9 thou collective farmers and 0,9 thousand hired wage workers. In 1990 one collective farm-member worked 241 day on farm and his daily wage amounted to 15,04 rb, while his monthly wages made 303 rb, the average monthly wages being by 7% higher than the average republican salary and corresponding to the average wages in industry.
State farms made another group of agricultural enterprises. This group included state farms with mixed production and special purpose state farms, such as pilot farms of research institutions, training farms of agricultural education institutions, specialized horticulture and vegetable farms, poultry farms, large green house farms, etc. Official statistics included all these farms in one group.
In 1990 there were 253 state farms with approximately 4296 ha land each, including 3119 ha agricultural land, out of which 1967 haarble land. It made 17% of the total area, 22% of total agricultural land and 22% of arable land.
State farms employed 94,3 thou workers, who worked similar number of days as collective farmers. Wages were a little lower and made 14 rb per day and 274 rb monthly.
Shortly before the transition there were peasant farms already but they did not play any major role in agricultural production. They were allotted 40,8 thou ha land, including 35,4 thou agricultural land, out of which 26,9 thou ha arable. They were presumed to do the function of medium-scale production that had been neglected before (2: p.37, 152, 169,171/.
Small-scale production was represented by household plot farms of collective and state farm members as well as kitchen gardens of urban inhabitants and collective gardens of urban population, most often living in multi-storied buildin~. These plots were usually cultivated as leisure time activity by family members, pensioners and children.
The structure of household plot fanns of rural and urban population tended to be different. Rural household fanns were usually larger. Beside household plots the collective and state farmers used to be allotted additional pasture land, they grew a part off odder in common rotation plots. Milk, meat (beef, pork and mutton) and wool production predominated in such farms. Furthermore, this sector also produced a lot potatoes, field vegetables, fruits and berries. Collective and state fanns had special interest in promoting livestock production in such farms, as most often livestock products used to be marketed through their marketing chain and they could include these numbers in their sold product balances and receive bonuses for sales more than a moving average of past years.
The size of urban population's household plots was strictly limited by law. City dwellers could rely only on own labour and investments. Collective gardens were usually situated far away from homes. Small cottages used as summer houses were built there and horticultural activities and flower growing predominated.
AgriGUlture was relatively well provided with productive capital. For example, in 1990 the share of basic productive capital (at primary value, excluding land value) per one collective farm member was valued at 28195 rb and that per one state farm member was valued at 30918 rb f2: p.170, 171/. The stock of agricultural machinery, tractors and automobiles allowed the farms to do all agricultural activities in time, productive buildings satisfied farm demands.
The only difficulty in acquiring productive assets was to get the order that used to be administered by communist party and soviet institutions. There was no problem of financial capital as it was possible to get free credits administered, as a rule, not by banks but by party and soviet administration. There was always a possibility to have debts written off.
There were also difficulties with the quality of newly get technical inputs. Sometimes new agricultural machinery had to be repaired immediately. Mineral fertilizers contained high amounts of ballast ingredients, some fertilizers were inefficient. The effectiveness of other chemicals was also much lower than that in the developed countries. All these chemicals and technical inputs increased environmental pollution. This factor was additionally aggravated by the productive buildings, especially livestock buildings in which waste treatment equipment was not operating. Unfortunately, farm managers and specialists had little choice. In the situation characterized by great technical input shortages it was most important to get order and buy it out. The technical input order was usually accompanied by supplementary commodity order. To get a better commodity one usually had to buy another in a bunch, most often worse and unnecessary.
Agriculture was managed by administrative planning and economic methods, the first being most important. All public farms had to make five-year and annual plans in coordination with regional party and administrative bodies, districts prepared consolidated plans which were confirmed by the Ministry of Agriculture and State Planning Committee, and these institutions, in their turn, had to coordinate them with all-union institutions.
The fulfillment of confirmed plans made an important assessment criterion for the activities of farm managers, higher management authorities and farm specialists. As a rule, farm managers and chief specialists were communist party members supervised by party bodies. Successful fulfillment of plans was extremely important for their future career.
For the purpose of marketing fanns were attached to particular processing enterprises. In such way the resource zones of processing plants were fonned. Processors had to procure and transport primary products from farms.
The agrarian policy was aimed to form economic to farms in different natural conditions. From this point of view Lithuanian system of leveling economic conditions was positively evaluated within the former USSR.
The system was based on evaluation of farming conditions the major indicator being soil quality. Other factors taken into consideration were factors either increasing or diminishing production costs, as well as fann location respecting roads, distance from marketing institutions, warehousing facilities. In view of these factors point system was applied and fanns were divided originally into four and later, five groups. State procurement prices used to be constantly (at least every five years) reviewed and increased. Thus, the procurement price included two basic components: base price, the same for all farms and price bonuses differentiated in view of farming conditions. Consequently, price increases for each fann group used to be different.
Since alongside with procurement price differentiation the planning system was also in force it allowed to eliminate selling products produced under better farming conditions in zones of worse conditions.
Price differentiation included only staple agricultural products, such as milk, cattle and pigs. Efficiency of price differentiation by fann groups in Lithuania is shown in Table 6. Price differentiation system allowed to take into consideration farming environment of each farm and guarantee profitable performance for normally operating farms.
Farm product prices belonged to the competence of the communist party. Price changes were debated on the highest level of the CPSu.
Therefore, farm didn't face marketing problems. Marketing as well as supplies used to be planned. Foreign agricultural trade was the domain of all-union institution.'i. Consumer cooperatives of the republic had the right to export but it mainly applied to non-planned commodities, such as wild berries, mushrooms and game.
The economic development further specialized agricultural sector engaged in crop and livestock production. Agricultural production was being further separated from agroprocessing while developing meat and milk processing, grain. sugar and flax primary processing, canning industries, etc.
It was only over the last decade before Independence that agro-industrial integration was promoted and it was attempted to bring processing nearer to agricultural production. Establishment of agro-industrial farms and amalgamations was started with the aim to transfer a part of processing industries' profit to farm production and increase product quality and diversity.
One more feature peculiar to administrative planning economy was its ability to maintain constant shortages. Distribution of additional funds, material and technical input orders, limits upon construction activities were the competence of communist party authorities. Very often farm performance dependent greatly on good relations between farm managers and republican and all-union administration.

Fealures, achievements, problems and prospects in the agriculture transition
It was immediately after Independence that Lithuania started preparation of the legal framework for the economic reform.
In June, 1991 the Law on Order and Condition of Restoration of Citizens' Ownership Rights on Survived Real Estate was enacted, followed by the Law on Agrarian Reform and Law on Privatization of Agricultural Enterprises' Assets in July.
Earlier, in May 1990 the Law on Lithuanian Enterprises was adopted that enacted the following types of enterprises: sole proprietorships, general and limited partnerships, joint-stock companies and close joint-stock companies, state enterprises and agricultural companies. Later, additional laws were passed: Law on State Enterprises (September, 1990), Law on Partnerships (Oktober, 1990), Law on Joint-Stock Companies (July, 1990), Law on Agricultural Companies (April, 1991). Besides, in February, 1992 the Government adopted Regulations on privatizing agricultural companies through signing shares.
Assessment of first steps of agricultural transformations is not easy as the process bore political orientation rather than economic.
The agrarian reform was aimed at rapid dismantling of the inherited system and reviving private family farming through restitution of land to its former owners or their heirs. Although the legislative framework has been formed the agrarian reform failed to take in consideration the following.
First, the agricultural land acreage had curtailed by 881 thousands ha, or 20%. Therefore, not all former owners or their heirs could restore their land in kind.
Secondly, there were no land owners capable to start farming activities as no old farming basis remained and the economic environment to start this business anew was highly unfavourable. Most of heirs lived in towns and had other sources of income. Restitution of land meant only additional income from leasing out or selling land. Only a few wanted to return to the countryside and start farming.
Thirdly, for years a lot of people with neither land tenure claims for finances to purchase land been working in the countryside. Taking land away from them would mean loss of jobs and sources of subsistence.
Fourthly, collective and state farms were not only production centers but also provided social facilities for rural population. After dissolution of farms and asset privatization quite a lot of social facilities were ill-privatized, while municipalities were not ready to take over rural population's social services.
The agrarian reform enacted peasant farms, which had been established in accordance with the previous Law on Peasant Farms. This law foresaw that land was allotted free of charge irrespective of the fact that these plots might be subject to restitution claims. This fact introduced some confusion. There hade been established 5 205 peasant farms, that occupied 88,3 thou ha. The average farm size amounted to 17 ha. In September, 1991 this law was suspended. Peasant farms and land under their cultivation made an insignificant share of all farms and land. Peasant farms of 10-15 ha accounted for 31 %, farms from 5 to 10 ha and from 15 to 20 ha made 17% each. The remainder is farms less than 5 ha.
Since 1991 family farms were established only because the agrarian reform laws, i.e., through restitution of land ownership rights. Often several heirs claimed for land. Where they themselves couldn't come to an agreement land used to be parceled to all claimants. Within the first year 60,4 thou farms were restored and 529,5 thou ha land restituted. The average farm size made only 8,8 ha.
In this way the area of large-scale farming was followed by small and supersmall-scale farming. Land privatization failed to be linked with setting farms with good future prospects, instead, farms initially doomed to bankruptcy were legalized.
Another incomprehensible law having introduced much confusion was law on allotment 2-3 ha land. This law enacted the ownership of former household plots of collective and state farmers and other rural inhabitants. These plots used to be allotted near places of residence irrespective of the existing owners or heirs and their claims. In 1994 such household plots numbered 404 thou and the land acreage totaled 862,2 thou ha, including 860 thou agricultural land, out of which 736,7 thou ha arable.
Furthermore, gardeners' associations numbered 217,8 thou urban inhabitants with 21,9 thou ha land. Gardeners were offered the right to buy out their land, irrespective of claims from former owners and their heirs.
In October, 1991 the Government passed the decree granting agricultural enterprises the status of enterprise under liquidation and suppressing the activities of all collective management bodies and appointing interim administration instead. The requirement obliged formation of productive units on the basis of each farm asset. To privatize these units' farmers could use different-type vouchers.
The splitting of farm into production units and the requirement that these units should be capable of complete operation was ruinous. Fanns which categorically refused the splitting (there were 250 such fanns) and were privatized as a unit could better revive their activities and were more successful in performance. The over-splitting of some farms into numer-ous production units shortened their existence. The more many were production units spun off one fann the sooner it ceased its existence.
By early 1994 there were 3194 agricultural companies that used 1 524 thou ha land, out of which 1 156 thou ha arable.
The agrarian refonn legislation foresees that land may be instated or private ownership. It can't be owned by legal persons. This provision aggrieved the perfonnance of agricultural companies as the land could be either in the ownership of company members or leased from the state or private owners. The ambiguousness of land issue impeded preparation of fann development progranunes and limited investments.
Some law provisions have been amended by the Resolution of Lithuanian Parliament (Seimas) on Basic Directions of Land Reform. It allowed restitution of land to the owner who is not going to engage himself in farming provided he agrees to lease out his land through private leasehold agreement on set conditions to operating agricultural company. If the fonner land owner refuses to do it he is suggested other forms of compensation for land. The three-year results of the agrarian refonn may be sununarized as follows. Approximately 500 thou claims for restoration of land in rural area have been received, of which 50-60 thou claimed compensations. By August I, 1994 130 thou claims for restitution have been surveyed. Land surveyors are able to survey only 40-50 thou land plots annually. The pace of this survey work depends greatly on the speed of processing archival documents and problems related to plot planning. The majority of land plots will be privatized by 1998, whereas equivalent compensation will be finished by 2000. Privatization of household plots will take nearly the same stretch of time f3: p.27, 29/.
According to land management specialists, the land reform will not ensure rational transformation of land tenure. Most probably, it will create mosaic land tenure of private land plots with the size varying from 0,5-2 ha near settlements and towns to 6-15 ha on the remaining area. Approximately 30% of larger parcels will belong to owners living in towns, who won't cultivate land themselves, up to 40% will be distributed in the distance from land owner's house, usually in a settlement or small town, and only 150 thou land plots will form a single parcel adjacent to the farmstead. After the survey work is finished a new stage of land reform will begin, i.e., consolidation of private plots, reallocation of plots, making boundaries more exact. This process may take decades and last till the restructuring of rural settling system stabilizes.
Is the process speedy or slow? The pre-war land reform in Lithuania that was not so complicated both from economic and social points of view continued till the forced incorporation of Lithuania into the Soviet Union. Methods of the present reform leave desirable. The inherited material basis of agriculture has been partly plundered and destroyed during the refonn The newly established farms are too small, lack production facilities and have poor future prospects. Large-scale production assets suit them insufficiently, if at all. After agricultural companies were set instead of former collective farms the production basis is undersized. Consequently, agricultural companies have excess production assets while family farms experience shortages. These disproportion's can't be balanced through physical transfer of assets from large-scale to small and medium-scale production. Therefore, another problem arises, the problem of credits to family farms.
Banking and agricultural credit system transformation towards market economy proceeded rapidly. The bank reform was begun in 1988 already through establishment of specialized banks and permit to establish commercial banks. In 1990 the Law on the Bank of Lithuania was enacted and regional branches of Soviet banks were nationalized. In 1993 the banking system included the Central Bank. there specialized state banks. the Agriculture Bank, Savings Bank and Commercial Bank as well as 25 private commercial banks.
By early 1994 Agriculture Bank assets amounted to Lt 800 mill. Its privatization was begun in mid -1993 through signing shares by public. Approximately 2f3 of loan portfolio were allocated in agriculture to finance primary production, agro-processing and agricultural trade. Shortterm loans prevailed while long-term loans made less than 10%.
State Commercial Bank, in possession of larger assets is interested in expanding its operations in agriculture sector. Out of its total loan portfolio of Lt 421 million credits for agriculture made only Lt 19 million.
The Savings Bank of Lithuania with the largest network of branches and agencies is in the process of transforming from a depository of population's savings to a universal commercial bank. The Savings Bank of Lithuania is now focusing its activities on direct lending to small and medium-size enterprises.
By the end of 1993 credits granted to agriculture amounted to Lt 500 million (USD 125 million). The sum consisted mostly of short-term credits as well as credits to finance agro-processing, crop purchase and trading, etc. Unfortunately, bank credits are almost unavailable to most private farmers. Currently the average debt per one beneficiary amount to USD 1200. However, extremely low prices at which former collective farms sold their assets should not be forgotten.
By the end of 1993 the largest budgetary allocations in agriculture were specialized funds of Lt 50 mIn and Lt 80 mln for spring planting and purchase of diesel fuel. Budgetary allocation to finance rural infrastructure development amounted to Lt 34,6 mln. 40% of total amount went to rural roads, 35% to electrification. In 1994 the Agriculture Support Fund was established which was provided Lt 120 mIn from the state budget.
From the short financial policy overview it follows that privatization activities in the banking and crediting systems were significant. To ensure further development towards market-based economy bad loans should be refused as well as extremely high interest rates, partial covering of interest by the state, direct links between banks and agricultural enterprises should be promoted.
There has been a significant progress in the pricing system Over 1991-1993 price regulation for consumer goods and producer subsidies were being gradually removed. Therefore, current prices reflect the equilibrium of supply and demand in the market. In 1992 the retail price control was totally refused. In 1993 the Government set interim profit margin limits for milk, meat and grain processing enterprises. Seek-ing to compensate at least partly for this limitation the Government provided soft credits to finance acquisition of inputs. Prices for raw farm products were negatively influenced by different tariffs, licenses, bans, etc. Debts of processors to producers because of delayed payments for purchased farm products also pose a great problem Several months delay makes a kind of additional financing for processors at the expense of producers.
The producer price policy has also undergone changes. Transformation of agricultural procurement prices was begun already in 1990 on the basis of the foUowing principals: uniform prices over the Republic, costeffectiveness under most unfavourable farming conditions, price adjustment in view of rising input prices.
Pressing financial situation together with inflation didn't aUow the Government to compensate rising input prices, therefore, the policy of support prices was introduced. Contractual prices for farm products are in effect and they are regulated only if they drop for one reason or another and do not guarantee producers at least minimal income.
The level of such prices is lower than the world price level. However, input prices are coming to the world level. For example, in 1993 food grain price in USD/t terms in Lithuania was 74, while the world price was 146, sugar beet price was 30 and 60 respectively, flax straw prices 220 and 625 respectively, high grade cattle price 460 and 1620, I category pigs 690 and 950 respectively, grade A milk price 92 and 220/4: p.55/.
The above comparison of producer prices clearly indicates that Lithuanian price level is lower and do not cover production costs in many farms. Therefore, proposals to establish a state not-for-profit market institution,that which would engage in agricultural procurement in accordance with set quotas and prices and organize its processing, storing and marketing both in domestic and external markets have been forwarded.
Agricultural price reform wiU proceed further. Alongside state regulation wiU be given up. Lithuania has already achieved progress in subsidy reduction. Consumers have adopted the necessity of higher food prices. Retail prices and market prices have leveled already, for some products prices in the marketplace are even lower.
Another issue of importance is taxation in agriculture. The taxation reform was initiated in 1991 and is stiU in progress. The foUowing taxes are being applied in agriculture: legal person's profit tax, payroll tax, property tax, excise and value added taxes. In 1991 taxes accounted for 33% of gross income (payroll and profit taxes). In 1992 total taxes and payments accounted for hardly 2% of the state budget returns and 13% of gross agricultural income. The fact proves that taxes did not play major role either from flScal or income regulation points of view.
Taxes in agriculture should perform regulatory functions. Thus, it is necessary to develop further legal person's profit tax through substituting proportional tax by a progressive one. Similar principal should apply to farmers, i.e., natural persons. Land tax should also be improved. For example, in 1992 agricultural companies paid as a land tax per 1 ha only one per cent of profit. In 1993, however, land tax increased by 60 times and amounted to nearly 25% of profit. Analysis indicates that this rate is highly regressive, i.e., farmers in less-favourable conditions bear higher ta'Xes. Not only land but also other agricultural assets should be taxed, while farms should be exempt from value added tax.
The agrarian reform caused the decrease in agricultural production volume and shifted the share of different-type farms in it (table 8).
Thus, total agricultural production dropped by 39%. In 1993 agricultural companies and state farms produced only 31 % of total output evidencing the largest decrease. Meanwhile, population's household farm production didn't drop and family farms increased production. In 1993 there were 48% of cattle, 66% of cows and 44% of pigs in the private sector. This sector sold 38% of livestock and poultry, 66% of milk, 53% of grain, 60% of vegetables and 87% of fruit and berries. It proves that the essential shift has already occurred, i.e., private sector has occupied the dominant role both in agricultural production and marketing.
The fall of agricultural production mostly pertained to the livestock sector. In 1993 comparing to 1989 crop production dropped by 27,5%, while the decrease in livestock production amounted to 44,8%. Crop production decrease was partly influenced by structural transfonnations as the land restored to private owners remained unseen the first year. Besides, crop yield fluctuations were influenced be weather conditions. The decrease of livestock production was influenced by the return to livestock breeding based on own feed as well as the curtail of livestock numbers due to changes in fann organization structure.
The shift of gross agricultural output per capita is set out in Table 9.
The following table provides comparison of agricultural output per capita in the neighbouring countries (see Table 10).
Agriculture in the above countries develops in different economic and social environment. Lithuania, Latvia and Estonia are to the greatest degree involved in economic transfonnations, including the agrarian refonn. Poland is coming to the final stage of this process although its agriculture has evidenced least transfonnations, as family fanning had prevailed here. Eastern Germany has been refonning its agriculture with strong financial support from Western Gennany. Belorussia has not yet started reforms. Denmark and Finland represent old market economy countries. Besides, Denmark is a country whose agriculture served an example for the pre-war Lithuanian agriculture development. Alongside with the curtail of agricultural production marketing has also been diminishing. For example, in 1993 relative to 1989 only marketing of grain increased by 25%. This was the direct outcome of the agrarian refonn as fanners having had their land restored and unable to organize complete chain of fann production chose to sow cereals and sell the harvest in autumn. Marketing of other fann products dropped as follows: potatoes by 91 %, vegetables by 83%, sugar beets by 25%, flax fibre by 87%, livestock and poultry by 67% (live weight), milk by 49%, eggs by 57%. Marketing of fruit and berries increased by 18% as a result of good harvest in 1993 /5:p. 16/. Lately marketing channels have been changing with larger share of products being sold in market places, private shops, etc. In 1993 22% of totally produced potatoes, 20% of vegetables, 16% of livestock and poultry, 4% of milk were sold through private chain.
The commodity nature of agricultural produce has dropped, however. In 1989 92% of livestock and poultry, 92% of milk, 43% of vegetables produced were sold, whereas in 1993 the respective figures were 72,77 and 27%. It is understandable as farm consumption has increased. Import and export made quite an insignificant share in agriculture. In accordance with 1993 Food Balances import of meat and its products accounted for 0,3% of total resources, milk and its products for 0,7%, grain for 3,1 %, vegetables for 0,5%, melon~ for 0,2% and fruits and berries for 0,5%. Export of meat and meat products amounted to 24,4%, milk and milk products to 31,1 %, eggs to 0,8%, grain to 0,3%, potatoes to 0,1 %, vegetables to 1,0%, fruit and berries to 20,4% /6: p. 62/.
Production of all fann products, except green-house products, was profitable. However, income and expenditure accounting in family and household farms have not been recorded. Therefore, only the results of agricultural companies and state farms are available. The production cost and prices of their commodity products indicate that in 1993 profit in grain sub-sector made 41 % in price structure, potatoes 23,5%, field vegetables 25,3%, flax straw 56%, sugar beets 42,9%, gain of younger cattle 37,5%, milk 28,4%, younger pig gain 31,6%, em 25,8% /6:p.48-50/.
Consequently, market prices provide incentive to fanners to produce all fann products. There is another problem, however. Purchasers, mainly processing industries, delay payments to fanners. Although inflation has slowed down it is still prominent and fanners suffer huge losses. Moreover, when fanners buy inputs they have to guarantee immediate payment. Thus fanners, although in a strained situation themselves provide working capital to processing industries free of charge as processors do not pay fines.
Agriculture sector provides nearly no income to the state budget. All taxes and payments in agriculture so far make less than 2% in the state budget. Meanwhile, subsidies for agriculture sector amount to some 10% of state budgetary expenditures. The Government efforts to support agriculture should include the following: preferential crediting system based on special fund and allocation of soft credits from it should be developed; credits should be available both to family farmers and agricultural companies on equal terms, granting preferential credits should be based on business plans; subsidies should be allotted to finance not only economic but also social activities to guarantee at least minimal subsistence for employees of bankrupt enterprises as well as free retraining system for them On the way to join the EU there is a requirement to abandon custom duties. In order to refuse it agricultural subsidies should be increased considerably (the sum would make Lt 1-1,5 billion) if we want Lithuania agriculture to be competitive with Western producers. Thus, joining the EU and lifting duties would be possible provided Lithuanian agriculture is subsidized at the level as it is in old European member-countries.

Inter-relation of the economy-wide transformalions and agrarian reform
The example of Gennany proves that large investments are necessary to create new fann structures. Unfortunately, Lithuania failed to take this fact into consideration. The agrarian rcfonn was primarily aimed at rapid dismantling of the former farming system and returning back to prewar agriculture.
Meanwhile, the economic background for economy-wide transition was highly unfavourable.
To begin with. high inflation was place, as shown in Table 11. Prices and tariffs jumped suddenly after the Government announced price liberalization in November, 1991. In 1993 inflation rate amounted to 188,7% The main reason for this sudden rise was price increase for inputs imported from Russia (fuel and energy resources). Input prices were rapidly coming to the world price level. Another reason was the policy of Vagnorius Government adding to inflation rise in hope that goods from former soviet republics will flood Lithuania. Other Governments were neither successful in taming inflation significantly. The comparison of inflation rates in the Baltic countries, set out in Table 12  to 1989 marketing of all basic food products curtailed: meat and meat products by 66%, butter by 32%, sugar by 50%, bread products by 32%.
Consequently, the domestic market for farm products has been curtailing dramatically and posed marketing problem to farmers. The problem was aggravated additionally by the flow of imported food products.
Thirdly, agriculture had been heavily supported by the state. This support used to include free reclamation works, cheap energy, free veterinarian services, differentiation of procurement prices in view of farming conditions, etc. Meanwhile, following Independence state support has been reduced significantly.
Fourthly, the diminishing demand for farm products, delayed payments to farmers on the side of processors impeded the development of material basis in agriculture.
Above, the impacts of economy transformations upon agriculture sector have been listed. On the other hand, the agrarian reform, in its turn, aggravated the overall situation in the RepUblic.
The principles of the agrarian reform were prepared hastily, irrespective of rural population's opinion, they introduced hostility between people and doomed the country-side to years of stagnation.
As it was mentioned already, restitution will be finished by 2000. Only then can a true economic reform begin, i.e., farm consolidation, capital farm establishment, etc. Thus, the agrarian reform pushed the countryside to a long road of organizational transformations.
The agrarian reform caused considerable reductions in production volumes. Consequently, processing industries' capacities were underused, they lack capital for reconstruction and renovation.
The agrarian reform failed to create new jobs in rural areas. Agricultural company members are under employed, often their wages are lower than pensions.
Processing enterprises can not anticipate investments from farmers as the latter are cash-poor and not inclined to buy the shares of processing enterprises. Meanwhile, the development of agricultural export will be possible provided processing industries undergo essential restructuring and master new products in line with Western standards.
Today traditional trade links have been disrupted. Western Europe producers have entered Eastern market. It means that requirements regarding quality and competitiveness will be raised there either, reducing the difference between Eastern and Western markets the latter being more reliable. However, the demand is much higher in the East and this market is familiar, some links have remained.

Conclusions
The return to a market-based agriculture after half a century of centrally planned economy is a complicated process. The transition strategy left behind some social and economic issues, it tempted to cross out the whole fifty-year period as non-existent, no future model of efficient agriculture was borne in mind.
The transition methods crossed out all production assets irrespective of the fact that some were quite modern. As a result, formation of new structures is time and investment consuming process. The overall economic situation is characterized by shortages of investment resources and expansiveness of loan capital. Foreigners are not interested to invest in Lithuanian agriculture because of low profit here and excess farm products in Europe.
To accelerate transformation of agriculture sector the following steps should be taken: land titling procedures should be speeded up, all bureaucratic hindrances refused, legal person's land ownership enacted, land purchase and sale procedures simplified, all farm structures with good performance prospects should be supported on equal terms.
Transformation of agriculture sector is a heavy burden on the economy the latter being unable to support the reforms. It turned out that it wasn't the agrarian reform that had to lead the way, quite the opposite, the agrarian reform had to follow the economy-wide transformations. The old farming system might have remained and be gradually restructured.
The agrarian reform aggravates overall transition process. Agriculture has poor prospects to absorb labour. Present unemployment in the countryside is quite prominent. Alongside with input price increases production costs are increasing either. So far producers have been protected from import of cheaper products through import duties.
However, the going social and economic transformations in spite of difficulties and problems mentioned above direct all the sectors of economy, including agriculture to a market economy. They guarantee that agriculture will regain its importance in Lithuanian economy.