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Speech by Roy Chapin to Rectors and Leaders (100+) of the Retraining Academies of Russia Ministry of Food & Agriculture given in Moscow (Kocino-RAMA)

Good Morning!

Thank you for making room on your busy program for me to make some comments. It is a rare privilege for me to be able to speak with all of the Rectors of the Retraining System of the Russian Ministry of Food and Agriculture. Those of you with whom we've worked have become our friends as a result of our partnership and I value that. I look forward to getting to know more of you.

As many of you know, I'm the resident coordinator for Texas A&M University in our Russian - American Agribusiness Training Partnership (RAATP). The partners are Texas A&M University and the Agribusiness Retraining Academies and Institutes of the Ministry of Food and Agriculture in the Russia Federation.

The objective of the RAATP is to improve the decision making capabilities of professional managers in the Russian agribusiness sector working in a developing market economy. The ultimate objective for all of us is to help to improve the efficiency of agricultural production in Russia and thus to make it more competitive in the world market while supplying the citizens of Russia with a dependable supply of food and fiber.

Funding for our partnership is supplied by the United States Agency for International Development (USAID) based on matching funds from the Russian Retraining Academies and Texas A&M University, who are the partners. The International Research and Exchanges Board (IREX) administers and monitors this USAID contract. Our partnership is funded until 30 June 1997.

Dr. Golik's comments this morning on the respect that the world has for Russia's educational system are correct. One of the big attractions for me to live in Russia was my favorable impression of what the Russian "mind" did for mine after five trips to Samara starting in 1993. I also enjoy the world class culture here such as your operas, ballets and symphonies. Most importantly, I am challenged by the important work that we can all do together to help improve the efficiency of Russian agribusiness and thus to contribute to the improvement of the Russian standard of living.

As a bit of background as to the need for our partnership; Agribusiness worldwide is competitive and any one country is only a regional player on the world stage. If Russia is importing too much food, and Minister of Agriculture, Khlystin, says that Russia is importing 35 to 36% (over one third) of it's food, it is because other regional players are efficient enough to produce food in counties foreign to Russia, ship their agricultural products here and still compete with Russian agribusiness.

Russian agribusiness needs to focus on profitability and not just productivity. Our seminars, and Professor Jose Pena's section in particular, have stressed this and have shown you how to gather data, how to analyze it and how to make profit-oriented decisions. If you don't make a profit doing it, do something else that does make a profit. This is not misplaced capitalistic greed. The profit motive helps to allocate limited resources to satisfy unlimited wants in an efficient manner so as to maximize satisfaction.

Three opportunities that immediately come to mind as ways to help make Russian agribusiness more competitive are 1. Improving production efficiency, 2. Doing value-added processing and 3. Marketing. Business planning is important to achieve these objectives. At our more recent seminars we have increased our focus on marketing in response to requests from you. You can see that we also have tried to be responsive to the needs of the Russian market place.

It is a challenge to get rectors and their academicians and their students and eventually the agribusiness sector itself to open up their minds to accept and implement new ideas and methods to improve Russian agribusiness efficiency but we are encouraged by the progress that we are seeing. Being open to new ideas and implementing them is a world wide problem, not just a Russian problem. We face this challenge in the USA all the time, but by facing it and then acting on it, the United States has helped to make their U.S. agribusiness sector very competitive on the world stage. We encourage Russia to use competitive strategy to become more competitive.

Recently, Ivan and I attended a Tacis seminar for the leading teachers in the agricultural teknicum system. Dr. Smirnoff, the head of these teknicums in talking with his teknicum teachers, advised them to "Temporarily forget what you've learned and listen to new ideas. Next, combine the new information with what you already know to make improved decisions on how to proceed; But first open up your mind to new ideas." This is what our RAATP seminars have attempted to do. We have tried to challenge your thought processes to consider other alternatives, to use this information to make business plans and then to implement what you think will work here in Russia. We know that some free market concepts justifiably make you feel uncomfortable. We're not asking you to throw out everything you now do or to adapt everything that is proposed, but please consider alternative ways of doing things and then choose what looks like the most promising for Russia, and finally and very important, implement your plan.

Let's look at where we've been, where we are and where we hope we are going in the next six months.

  1. We have held six two week long seminars (Moscow, St. Petersburg, Krasnodar, Irkutsk, Barnaul and Kazan) with increasing numbers in attendance. Our protocol called for l20 and we had 160 total participants, which is a 33% increase. We have also had 19 Russian academicians, including the rectors or their deputies (and in addition, Dr. Shaitan and Dr. Medvedev from the ministry) for two weeks additional training in Texas. Counting the Russians traveling to Texas in February, we will have sent 30 Russians to the USA vs. the 24 called for in our protocol, which is a 25% increase. Our seminars became more focused, more effective and more efficient while our audiences became larger. We have also established e-mail capabilities with our six partner institutions plus the ministry of agriculture and have or will supply computers to our partners. Where possible, Internet capabilities have been installed. One of the main products of our partnership is a seminar work book, in the Russian language, that can be used to produce overhead transparencies and to teach decision making concepts.
  2. We are now in preparation for second generation seminars where our Russian key trainers that have been trained in our seminars, and particularly those that have traveled to Texas, will teach the classes themselves to Russians.
  3. During the next six months we will have:
    1. 2nd generation seminars held in the six original seminar sites
    2. A final RAATP conference in Moscow the first week in June for participating rectors, Russian key trainers, Texas trainers and leaders, representatives from similar projects and others.
    3. Because of the success of our original RAATP seminars, Timiryazev Academy has requested that we hold a seventh seminar there. We are investigating this possibility.
    4. The fourth and final group of Russians will travel to Texas in February. Dr. Lachuga will accompany them as will Ivan Perov, the RAATP deputy director for Texas A&M University.
    5. We are exploring additional ways for Texas A&M University and the Russian Ministry of Agriculture to cooperate.
    6. We need to obtain "success" stories from you and for you to show application and benefit as a result of the RAATP.
    7. We should work on possible programs that can be beneficial to Russia and then attempt to get USAID or other funding so that we can implement them.

Here are some concerns that I have!

How do we get the information presented during our seminars applied so that it helps the Russian agribusiness sector to improve it's profitability? Having the technology known only to teachers is not the objective. We want it applied and in use to increase the production of wealth in Russia agribusiness.

We all need to be continually open-minded to new ideas of how to improve the efficiency of management of the factors of production and how best to get the information to end users.

In the USA, when I was in school, the farm problem was also a social problem of trying to determine what to do with the people being replaced from their small inefficient farms. The trend in the USA continues to be the emergence of larger more efficient farms. Please do not jump to wrong conclusions here. Please be aware that this is an economic phenomenon that happens in a free market and it is not the result of a political decision. Big is not always better. We believe that the optimum economic size of various enterprises should be decided by competition in the free market place rather than resulting from the issuing of political decrees.

Also be aware that "big" and "small" are relative terms. Our RAATP students sometime jump to the wrong conclusions when they learn that American farms are getting bigger. These students have said that Russian collective farms are already big and therefore the American experience justifies Russia's large collective farms. Be aware, that most Russian collective farms are HUGE in relation to American farms. I feel that most collective farms in Russia are too large to be managed efficiently and that there is therefore an inefficient use of land, capital and particularly labor. I feel that privatizing, restructuring and reorganizing of most of the collective farms in Russia would improve the competitiveness of Russian agribusiness and would help improve the Russian standard of living. I am talking here primarily about the production part of agricultural. Cooperative efforts in processing, or value adding, and marketing can be very successful and competitive in the market place. Our experience shows that production is best done by private operaters.

In Russia, the discussion on the problems of making collective farms more efficient often centers on the social problems associated with collective farms and what happens to people, cultural centers, etc. if the operation is privatized. Russians need to separate the economic issues from the social issues and then decide what they're willing to give up in profitable productivity in return for satisfying social needs. Please remember that if your objective is to become competitive on the world market (and thus reduce Russia's reliance on agricultural imports) then you need to consider social and economic trade-offs in favor of increased profitability.

Minister Khlystin has suggested that no more than 20% of Russia's food should be imported with 80% being produced in Russia. That will happen only if Russia becomes more competitive on the world stage.

If we're honest with ourselves, we must admit that history has shown that collective farms are not the most efficient way to produce food and fiber. You only need to compare the agribusiness efficiency of Russia with those countries that have private farms to see the difference and you don't need to go far - such as just across the border to Finland, which I did recently. There are of course many other examples.

With this said, we should acknowledge that it is very important that we work with the existing collective farms and their joint stock company successors. The efficiency of collective farms can be improved and it needs to be as this is where a major amount of the food in Russia is produced presently and where it will be produced for years to come. Our Russian - American Agribusiness Training Partnership seminar material can be used to improve decision making on both collective & private farms.

I encourage you, however, to give private farm ownership a fair competitive opportunity so that whichever form of ownership proves to be the most efficient in Russia for producing agricultural products will be allowed to prosper. I don't object at all to discussions on how to improve the efficiency of collective farms, and in fact encourage them. I do object, however, to the closed minded approach that we sometimes encounter towards even considering privatization and allowing the "invisible hand" of the market place to decide 1. What is produced, 2. How much is produced 3. and at What price and 4. Who gets it? We from the West feel that this free market method of allocating resources will result in the maximum benefit for the consumers.

In order for private farming to succeed in Russia, there needs to be a major improvement in the development of the Russian agribusiness infrastructure so that private farmers have a competitive choice of suppliers, markets and financing. Which comes first? Realistically, private farming and the infrastructure that supports it will develop together but an objective of the Russian government should be to encourage the development of the Russian agribusiness infrastructure so that private farming can develop.

Perhaps the collective farms, with their greater resources, could be the supplier of some of the inputs that private farmers need and perhaps the collectives could even be an option for some value added processing and markets - and some cases vice a versa . There is no reason that collective and private farmers can not work together in those areas where they both feel that there would be a mutual benefit. Again, please understand that I'm talking about production agriculture being privately owned. Our experience in the West has shown that cooperatives can competitively process and market agricultural products.

I feel that an efficiently run sector of private farmers will manage resources more efficiently than a well run collective farm sector. I therefore feel that a well developed private farming sector, supported by a well developed and competitive infra-structure, would make Russia more competitive on the world agriculture market. Having private and collective farms competing in the production of agricultural goods would make both forms of ownership more competitive and efficient and therefore be to Russia's advantage.

Please understand what I've just said. I'm not against collective farms per se. In fact, rapidly converting them all to smaller "true" private farms by political decree would seem to me not to be in Russia's best interest. I am however encouraging you to let the competitive process of the market place decide what form of ownership and economic system will serve Russia the best in the efficient production of food and fiber.

Again, please remember that we're competing in a world market and Russian agribusiness needs to become more competitive. Please approach these two options of what kind of an ownership structure Russia uses to produce its agricultural products with an open mind. Letting both collective farming and private farming operate in a competitive environment with equal opportunities for both is my suggestion. That way the market place will make the decision. I predict that both well run collective farms and well run private farms will co-exist in Russia for years to come but that private farms will gradually replace the collective farm system; but please let the free market place decide this question. Poorly managed farms in both sectors will and should be allowed to fail with their assets then becoming available for use by better managers. This benefits Russia.

Here are some ideas on projects that could take place after our partnership ends on 30 June 97:

  1. Establish an applied agribusiness decision making program where Russian agribusiness managers bring in their data, put it on a spread sheet, analyze it, make business plans, do strategic planning, consider competitive strategy, etc. so that managers can make decisions and implement changes that will improve the profitability of their enterprises. This would be working with Russian reality as this would use real live Russian data being used by Russian managers in Russian agribusiness to improve the production of wealth in Russia. We encourage the Russian professors trained by the RAATP to develop these kinds of applied programs. Having Texas A&M University's help for another year to support and implement this would be ideal. We are experienced with these types of applied programs in the USA. All we need is to get the funding. Your inputs and requests could help.
  2. Establish new classes to teach business turnaround strategy. Turnaround managers are often different from regular managers. It takes a special kind of person to wade in when an enterprise is failing and to get it turned around and returned to economic health. Turn around managers come in when a company is in financial trouble, determine what needs to be accomplished for survival, implement these changes (many of which will be unpopular with someone) and then when the company is turned around and profitable, usually leave and are replaced by a more conventional manager. Turn around managers are used regularly in the USA. This idea of filling a Russian need by training turn around managers should be credited to Rector Malakhov and his professor, Dr. Vladimir Surovtsev, both of whom we visited recently in St. Petersburg.
  3. We hope that the professors of the retraining institutes continue to teach their own seminars on agribusiness management. The RAATP second generation seminars are our first start on this. We expect these types of seminars to be a sustainable product of our partnership. We also hope that in supplying and conducting these management seminars that the Russian retraining academies and their professors can find sustainable employment. Your survival is critical for the continuing transfer of this technology.

This is a good place to say that the Western assistance programs taking place in Russia are temporary and have the objective of helping Russia to "jump-start" its own economic engine so that Russia can become self-sufficient. You can survive on loans and grants in the short run but this assistance is not designed to and cannot continue indefinitely. (USAID is scheduled to be out of Russia by the end of this century and USAID's agricultural development office is scheduled to close by 1998.) In the long run the only thing that is sustainable is that which Russia produces itself. We therefore must focus our partnership time, our energies and our money on what will help Russia to become self-sufficient. Diverting partnership time and assets to other uses will not be in Russia's best interest.

On airplane flights, during their pre-flight instructions, you are told that in case of a loss of cabin pressure, you are to put on your own oxygen mask first and then to put on masks for children, as it won't do you much good if you don't get yours on in time for you to survive and then to be able to help others. The same analogy can be made for getting the economic engine of the retraining academies going so that you can survive and thus be able to continue to transfer agribusiness management technology that can be used to help in the modernization of the Russian agribusiness sector.

We hope that the technology that we have shared with over 160 of you at our six seminars, and also our other activities, will all be beneficial in helping the retraining academies and some of the teknicums to keep their own economic engines going strong so that you will be available to share this information with agribusiness end-users who can then use it to improve the functioning of their own economic engines. If we have helped you accomplish that then we know that we have helped Russia.

In conclusion, we're interested in what ideas you have on how to improve the efficiency of Russian agribusiness.

What ideas do you have on where the retraining academies and institutes can play a vital role in the development of Russian agribusiness and thus make a place for yourselves while helping Russia?

What are your ideas on how Texas A&M University can help the efficiency of Russian agribusiness? What needs do you have that we can help fill? What proposals can we present to USAID in the hopes of getting funding?

We look forward to continuing our partnership between Texas A&M University and the Retraining Academies of the Russian Ministry of Agriculture and Food, at least until the 30th of June 1997, in its present form. Both partners are looking at ways to cooperate after that date in some form or another.

I would like to thank Dr. Shaitan for being our host here and for supplying us with the best office in Moscow. And I might add, the best working environment also. We enjoy working with our partner and his associates.

I also want to thank Ivan Perov for his excellent assistance as our deputy director. Besides allowing me to communicate, he keeps the office running.

We have our first RAATP newsletter and a brochure on Texas A&M University to hand out to you during the break. I hope that I can talk with many of you personally during this three day seminar.

If we all work together, the next six months can be the most effective months of our partnership to realize our partnership goal of improving the decision making capabilities of Russian agribusiness managers. This will leave a sustainable product within your retraining academies that can be used for a long time into the future to help improve the competitiveness of Russian agribusiness.

Remember that while you're getting more competitive, your competitors won't be standing still either. It is a never ending race. You and your professors are in an excellent position to leverage the technology that you now have by transferring it to others, including other teachers, government officials and agribusiness managers responsible for making decisions on both collective farms (Joint Stock Companies) and private farms.

Thank you and best wishes.

Roy Chapin, Resident Coordinator for Texas A&M University
Russian - American Agribusiness Training Partnership

 
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