In the Central and Eastern European countries, land has not been bought and sold for more than 50 years. In many New Independent States, a land market has never really existed. Advocates of market-oriented reform have stressed the importance of creating land markets by permitting mortgages to facilitate structural adaptation. Creating a land market that permits land to be used as collateral, however, will not by itself lead to a functioning system of agricultural finance. Education and institutional development, such as the establishment of an efficient banking sector, will also be needed to stimulate a private agricultural credit market.
Financial institutions play a crucial role in the development of the agrofood sector.
In order to enhance the establishment of functioning institutions, many countries provide incentives for bank recapitalization and implement prudential regulation measures and privatization. Some modest success has been achieved in the Central and Eastern European countries, whereas in the New Independent States financial sector reform has barely begun. Privatization in the upstream and downstream sector Progress with the restructuring of upstream and downstream agrofood industries has been very mixed, but is in many cases lagging behind the privatization of the agricultural sector. In spite of this, a large number of food processing industries have now been quite successfully privatized in the more advanced Central and Eastern European countries. The availability of foreign capital is another important determinant of the progress in privatizing up and downstream industries.