The directions of support for development of multi-branch farming enterprises in Uzbekistan

Establishment of multi-branch production at the farming enterprises based on the special characteristics of the agricultural production is scientifically grounded. In the first place, it is the process that is performed to ensure the economic effectiveness of the production process at the farming enterprises.

From institutional and economic point of view, we think that multi-branch production at the farming enterprises has the following nature. The production activity, that is determined as a specialization, is considered as a main branch of the farming enterprise. It is usually specifically determined in the long-term land rent agreements between the farming enterprises and the khokim (head of local government body in Uzbekistan) of a district. The directions of the specialization of the farming enterprises are determined when establishing the enterprises, because, according to the law, the rented land size depends on the specialization (Law of the Republic of Uzbekistan “On farming enterprises”). For example, farming 1

enterprises that are specialized in cotton and grain production start with the area of minimum size of 30 ha, wine and horticultural farming enterprises – 20 ha, vegetable growing farming enterprises – 5 ha.

Farming enterprises specialized in cattle breeding shall be established with the minimum number of cattle of 10 heads, and the minimum sizes of the areas are determined to be 0.45 ha in the Republic of Karakalpakstan and Khorezm province, and 0.3 ha in the other provinces of Uzbekistan.

Thus, the main branch of the farming enterprises is a production specialization that is determined in the land rent agreement upon the establishment of the enterprise. Furthermore, besides the main branch, additional branches, that are necessary for the main branch, are established in the farming enterprises. For example, cattle breeding farming enterprise may grow fodder crops and grain. In this case, grain and fodder crop production are not additional branches, but they are considered as an activity necessary for the main branch. From the economic point of view, the important feature of this activity is the absence of commodity value and consumption of the manufactured product as working asset in the main branch.

Without demand by the main branch, farming enterprises may have production in small quantities in other directions of agriculture for its own needs. For example, they may practice vegetables, melons production, or horticulture, livestock production as well.

However, the production not connected with the main branch should not be considered as an additional branch when its outcome does not have commodity value and the outcome is used for internal consumption. From this point of view, the branches that have marketable outcome and can bring financial profit for the farming enterprise by commercial exchange should be considered as additional branches.

Thus, the economic entity with the production lines, that are able to manufacture at least two marketable products and are not connected as a need to the main production branch, should be considered as a multi-branch farming enterprise.

In this case, the additional branches should have contribution to the annual profit (not lower than 1%) of the farming enterprise. The branch, with the profitability lower than that (relative to the main branch), will not have economic feasibility, and as economic incentive of the farming enterprise to develop the additional branch decreases, the additional branch production may become unstable.

It is advisable to prioritize “the branches connected with the main branch” in promoting the development of multi-branch production at farming enterprises by organizational, economic and legal ways (Figure 1).

On the other hand, the development of multi-branch production at the farming enterprise should be implemented with the help of special government programs. The branch that is established as an additional branch at the cattle breeding farming enterprises (even if the main production is cattle breeding, it may vary) should meet the following criteria:

• -    raw materials base necessary for the additional branch production should cover not lower than 70% of the annual production capacity. It should be possible to source the other 30% of the demanded raw materials from the producers who are located in the vicinity (in the radius of 3-4 km) of the farming enterprise;

• -    it is advisable that the land site, buildings and other facilities, and equipment, necessary for the additional branch to be established, are available within the territory of the farming enterprise and owned by the farming enterprise;

The aspects to be promoted by the government in the development of the multi-branch farming enterprises1

Figure 1

• -    farming enterprise should have a sufficient amount of qualified work force to establish an additional branch, or (if necessary) it should be possible to hire the demanded agricultural labor force locally;

1Source: Developed by the author.

• -    finished products produced by the additional branch should have a real consumer in the region where the farming enterprise is located. It would be appropriate to have agreements (agreements - verbal, written) with the identified consumers when additional branch products (not lower than 80%) are sent outside the regional market;

• -    the head of the farming enterprise and the planned workers for the established additional branch should be familiar with the technology (equipment) to be used in the additional branch or should have the possibility to quickly develop the skills (local development through training seminars, short-term training courses, refresher courses, recruitment of training staff).

The implementation of the above-mentioned basic requirements may result in stable profits from the operation of the additional branch by farming enterprises. These requirements are the most important and irreplaceable in establishing the production and, therefore, considered to be the necessary economic basis for multibranch farming enterprises. However, additional requirements may be put for some branches. For example, the water supply issue should be solved beforehand for the cattle breeding farms that plan to establish production in the horticulture. Similarly, the features of other any planned production branch should be considered.

The above-mentioned measures shall ensure the payback of investments in the additional branch, and give opportunity for farm managers and specialists not to be distracted from the main branch by the additional branch or from the additional branch by the main branch throughout the year (during the critical agricultural seasons), preventing lack of attention to the additional branch, and organize proportional operation of the main and additional branch.

«Экономика и социум» №2(33) 2017