"Privatization Not For Slavs"

C O N F I D E N T I A L SECTION 01 OF 02 MINSK 001075

SIPDIS


SIPDIS

DEPT PLS PASS TO DEPT OF AGRICULTURE

MOSCOW FOR FAS

E.O. 12958: 09/07/15
TAGS: EAGR PGOV ECON BO
SUBJECT: "Privatization Not For Slavs"


Classified by Charge Constance Phlipot for Reasons 1.4
(B,D)

Refs: A) Minsk 923, B) 04 MINSK 1280


1. (C) Summary: On August 19, Lukashenko opined that
Slavs are not mentally ready for privatization and,
therefore, private farms have no future in Belarus.
According to Lukashenko, the state collective is the
best option and must be preserved. The president's
statements drew sharp criticism from independent farmers
and specialists who blamed the GOB's agriculture policy
for the slow development of private agricultural
enterprises. Poloff visited two private farmers on
August 20 who explained that their biggest problems were
government interference and employee laziness; not the
farmers' inability to understand privatization.
However, despite the obstacles, these private farmers
continue to out-perform neighboring state-controlled
collectives. End Summary.


2. (U) During a tour of the "Battle for the Harvest"
campaign in the Grodno region on August 19 (Ref A),
President Lukashenko criticized private land ownership
and privatized farms, claiming it had no future in
Belarus. Lukashenko opined that the Soviet collective
farm system better suited the mentality of Slavic people
because Slavs were "psychologically" not ready for
privatization. Unlike Russia and Ukraine, Belarus did
not "rush to divide and sell" the collective farms, thus
saving the country.


3. (U) Agro-economist and academic at the Belarusian
National Academy of Sciences Ivan Nikitchenko dismissed
Lukashenko's statements, claiming Belarusians were
psychologically competent and more than ready to develop
private farming. Referring to a survey conducted in the
early 1990s, Nikitchenko noted how thousands of
Belarusians wanted to become private farmers. According
to Nikitchenko, it is the GOB's bad agriculture policy
and not the Slavic mentality that hinders the
development of private farms.


4. (SBU) On August 20, Poloff visited two privatized
farms. Vladimir Chapelle, an agronomist with a degree
from Grodno Agriculture University, has owned his 2,500-
hectare farm for only four years, but lived and worked
on the farm all his life when it was a state collective.
Normally, a Belarusian farm this size employs at least
100 people, but Chapelle is managing with 40. When the
GOB allows people to acquire farms, it usually
"suggests" to the new owners to retain the farm's
original workforce. Much to the authorities'
disapproval, Chapelle has been hiring and firing as he
chooses. However, the threat of losing a well-paying
job (USD 150 per month) has improved Chapelle's
workforce efficiency, minimized alcohol abuse, and
eradicated theft, which continue to be large problems
for both state and private farms.


5. (SBU) Chapelle took Poloff to watch his harvest
campaign, which had been delayed due to inclement
weather. The previous week's windstorm had lowered
Chapelle's barley yield by 200 kg per hectare and his
rye fields were still too wet to cut. However, he is
still out-performing the region's state farms in
productivity and his profitability is 25 percent, which
is better than all the regional state farms combined.


6. (SBU) Poloff then visited a newly privatized farm 100
km north of Minsk, owned by Anatoly Artihovsky, a
wealthy Minsk businessman and the owner of the country's
largest bottling company. Artihovsky, who has no
agricultural experience openly told Poloff that the
government forced him to purchase the farm or risk
losing his private business. He acquired ownership of
the farm in 2004. Artihovsky explained that the GOB
carefully scrutinizes his bookkeeping to ensure the
government receives USD 7 million a year from him in
taxes. President Lukashenko's orders to plant and
harvest upon request, regardless of the weather, have
mentally strained him and his farm managers. While
Poloff and Artihovsky were watching a field being
harvested, a member of the regional committee arrived to
make sure Artihovsky and his employees were not standing
idle.

MINSK 00001075 002 OF 002




7. (C) Artihovsky has invested USD 1 million into the
farm's infrastructure and workforce. However, much like
other Minsk businessmen's farms (Ref B),his farm
buildings are still crumbling, his combines and tractors
are antiques, employee wages are low and infrequent, and
his employees spend most of their time smoking and
drinking. Artihovsky said that his biggest problem was
that his 100 plus employees, spoiled by the Soviet
system of labor, have forgotten how to work. That said,
Artihovsky noted that although his farm's profitability
is negative 17 percent, it is still much more profitable
than the surrounding state farms.


8. (C) Comment: President Lukashenko's disdain for
private entrepreneurship is unambiguous. The
President's recent statements that Slavs are not ready
for private farms also reflect his low expectations of
his own people. The owners of the private farms do have
the mentality to make agriculture a profitable business,
but the government is hindering this sector's
development. Chapelle, a trained specialist who knows
more about farming than the members of the control
committee, can get by with ignoring their
recommendations, but talented businessmen like
Artihovsky, who have no agricultural experience, must
rely on the government's "suggestions," whether bad or
good. It is not the Slavs, but the country's leadership
that is psychologically unprepared for farm
privatization.

PHLIPOT