The overall finding of this report isthat much agricultural policy is made at the regional level,and here the explicit price, and trade policy distortionsare significantly worse than at the federal level. Theresult is patchwork of inconsistent policies, that hasfragmented the Russian national market. The most seriouspolicy issues at the federal level, are in the legalframework, the continued state domination of some markets,and, the administration of limited subsidies, in ways thatundermine market development. A major problem is that largefarms face soft budget constraints, with tolerance ofnon-payment of debt, resulting in an increasing debt burden,little incentive for true restructuring, and an unevenplaying field with respect to the private sector. Thegovernment recently addressed the issue of farm insolvency,through the Resolution on Agricultural Debt Restructuring,and, a fundamental approach to this problem is beingelaborated in the draft Law on Financial Rehabilitation ofAgricultural Enterprises. But the key to giving enterprisesan incentive to participate in real restructuring, will beto enforce sanctions - including bankruptcy procedures, andforeclosure - if enterprises fail to comply with the terms,and measures developed by creditors, and investors, as partof the restructuring procedures. A supportive environment ofprivate individual farming, and private market developmentshould be created, by revamping agricultural supportpolicies, that halt public procurement at federal, andregional levels; that administer all subsidies to producers,by some incentive-neutral mechanism, not dependent on inputusage, or output; and, where input, or credit subsidiescontinue, if administered by private channels on acompetitive basis, not through state-owned, or monopoly suppliers.
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