Palm | Kelapa Sawit

The CIS countries began their economic transition in 1989-1990 based on the common institutional and organizational heritage in agriculture. In the past, there was no land ownership, and most land was cultivated in the form of large-scale collective farms sized at thousands of hectares. Each farm employed hundreds of workers.

Product markets and input supply channels were largely controlled by state organizations under the command economic framework with virtually no budget constraint. This was the Soviet model of socialist agriculture that dominated the region since the early 1950s. The inefficiency of socialized agriculture was a result of the command economy, which curbed the farms from the contact with market economy, set central targets with no consideration of consumer preferences, and allowed farms to function under soft budget constraints without proper profit accountability.

The missing of market signals resulted in inefficiency in the agricultural marketing and food processing industry. Agro-processing industries, or simply agro-based industries, can be described as industries that add value to agricultural raw materials, both food and non-food, through processing them into marketable, usable or edible products, while enhancing the income and profitability of the producers (UNESCAP, 2003).

During the economic transition, the lack of investments and serious budget constraints affected development of agriculture and agro-industry. While recent successful land reform processes in the countries were positive steps toward market-oriented agro-industry, suboptimal input use, such as low fertilizer, chemical supply and old machineries, is still problematic.