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Agriculture in Transition Countries and the European Model of Agriculture

Agriculture in Transition Countries and the European Model of Agriculture Andrea Arzeni, Roberto Esposti, Franco Sotte Department of Economics – University of Ancona. World Bank – FRDV, Module 4 Zadar, 25-27 October 2001. OBJECTIVES.

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Agriculture in Transition Countries and the European Model of Agriculture

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  1. Agriculture in Transition Countries and the European Model of Agriculture Andrea Arzeni, Roberto Esposti, Franco Sotte Department of Economics – University of Ancona World Bank – FRDV, Module 4 Zadar, 25-27 October 2001

  2. OBJECTIVES • The main objectives of this presentation are the following: • Stressing the main new directions of the EU polices for agricultural and rural development • Understanding the major issues of agriculture in transition countries in this EU perspective • Approaching the local specific constraints/opportunities within the EU instruments European Commission - Agriculture Directorate-General - F3

  3. OVERVIEW • The presentation is based on three parts: • The European Model of Agriculture (EMA) and the Common Agricultural Policy (CAP) • Critical constraints in agricultural and rural development in transition countries and respective EU policies for applicant countries (SAPARD) • Hints on concrete programming for the two counties European Commission - Agriculture Directorate-General - F3

  4. THE EMA AND THE CAP The European Society has changed • Increase of income but demographic stagnation • Changes in food consumption behaviour • Less quantity and more quality • Typical products and food origin • Food safety issues • Non-food demand • Landscape and cultural heritage • Environmental safety • Non-food services (mostly common good)

  5. The New Role Of Agriculture • Food Function: competitive agriculture on the world markets; reduction of the market support (Common Market Organisations: CMOs) • Environmental function: high quality agriculturealso in terms of food safety and environmental safety • Rural function: maintaining the rural landscape and heritage in terms of cultural traditions of local communities

  6. e r m u a t l r u k c e i t r g s a e - r a v i r l t u u c r i t e c r g p x a e r - o E s a d r t u x c t E s d e p s r s o e d c u o c r t P Veget. s products Animal prod. s A e g c r i i v c r u e l s t u e r The multifunctional agricultural (rural) firm

  7. The New Challenge for the Common Agricultural Policy (CAP) • Defending and increasing the income and quality of life of farm families and rural population • Gaining higher acceptance by the European citizen by paying for the real non-market common goods: environmental and rural function • Becoming more easy and comprehensible and defining a clear distinction between what has to be decided in Brussels and what is on charge of the national and local institutions • Defining new instruments and institutions for increasing the CAP contribution to socio-economic cohesion among UE regions

  8. The two pillars of the CAP • Agenda 2000 (1998) re-designed the CAP according to two main pillars: the market policy (CMOs); the rural development policy (the “second pillar”) • The CMOs are expected to increasingly reduce the price support while income is guaranteed by compensatory direct payments. The first pillar is still 90% of the FEOGA (UE fund for agriculture) expenditure • The second pillar is here focused: • its share is expected to increase • It is going to be promptly extented to CEECs (SAPARD) • It is going to be re-nationalised

  9. The second pillar of the CAP? Total EAGGF (European Agricultural Guarantee and Guidance Fund) at2006 (Milions of Euros): After Agenda 2000 CMOs 43.670 Rural Development 4.940 Pre-accession programmes 600 Enlargement UE-6 3.900 Total UE-21 53.110

  10. Total RD funding: • over 100 bio € for the period or 14.3 bio €/year • of about which half EU, half national source • of the EU part Guarantee amounts to 4.6 bio €/year and Guidance to 2.5 bio €/year European Commission - Agriculture Directorate-General - F3

  11. AGRICULTURAL IN TRANSITION COUNTRIES • Critical aspects of RD in the accession countries: • Some general considerations • The economic and institutional transformation process in CEE has severely affected rural areas and livelihood of rural people • General and significant decline in output and employment in early stages • In most CEECs the rural economy is lagging behind in recovery and employment creation

  12. Critical aspects of RD in the accession countries: • The main aspects • Main weaknesses identified in the various SAPARD proposals by the accession countries (dealt with later on): • Weaknesses in the rural economy • Weaknesses in agriculture ..and • Constraints to re-allocation of rural labour

  13. Weaknesses in the rural economy: • Low incomes • Out-migration of young people and ageing rural population • Poor infrastructure • Low education level; lack of training for starting businesses • High structural unemployment • Lacking capital for investments and start-up of firms (credit market)

  14. Weaknesses in agriculture: • Differently from most Western European countries, agriculture is still the main sector (especially for employment) in most rural areas in the CEECs. The main weaknesses are: • Farm structure: small farms with fragmented plots (uncertain property rights) • Access to credit is difficult • Outdated farm technology (access to technical change and appropriate skills) • Weak market access organisation for farm products (associations, cooperatives, market institutions)

  15. Constraints in re-allocation of rural labour • Though agricultural structural weaknesses have still to be tackled, the main challenge for most rural economies in the CEECs is to reallocate labour from agriculture to other sectors • During the first five years of transition, great differences in agricultural employment decline • around –50% in Czech Rep., Slovakia, Hungary, Estonia • significant increase in Romania, Lithuania, Bulgaria • in the middle (-10-20%): Poland, Slovenia, Latvia • However: • Great differences among regions within CEECs • Be careful to numbers (especially unemployment figures)

  16. What happens to labour leaving agriculture: • Little and heterogeneous information on this. Consider Czech Rep. (OECD): • Farm workers declined from 533.000 in 1989 to 201.000 in 1997 • 150.000 and 30.000 respectively concerned non-agricultural activities • About 30% (120.000) of the decline (-332.000) is due to the separation of non-agricultural activities from farms • Of the rest (212.000) about 50% retired • …about 45% transferred to other sectors (75% moving to urban areas and 25% remaining in rural ones) • …about 5% became unemployed (mostly still in rural areas)

  17. Critical aspects in rural entrepreneurship: • Thefigures on other CEECs, if available, can differ significantly • In general terms, an higher proportion of workers originally employed in state-collective farms became unemployed. • Why did they not take up an individual farm or another individual business? The main constraints to self-employment refer to: • Human capital • Physical capital and finance • Market institutions • Policy environment

  18. EU RD policies and the SAPARD programmes: • All 10 accession countries have submitted a proposal under the the Special Accession Programme for Agriculture and Rural Development (SAPARD) to the European Commission in the spring of 2000 • The purpose, here, is to provide some general information about this instrument as a concrete example of the application of EU RD policies to transition countries

  19. Main characters of SAPARD: • SAPARD is an instrument to assist the applicant countries of CEE in making structural improvements to their agricultural and rural environment in the period 2000-2006 • SAPARD is also an exercise in practical institutional building. Creating structures and procedures which will be able also of facilitating accession • Differently from other pre-accesion instruments (PHARE-ISPA), under SAPARD the national authorities assume entire responsibility through fully “decentralised management”

  20. SAPARD programmes: • Support under SAPARD is to be granted on the basis of a single agricultural and rural development 2000-2006 programme per applicant country reflecting priorities established by national authorities. Total Financial support from the Community amount to over 0.5bio €/year in the period 2000-2006 • SAPARD programmesare to a large extend comparable with Member States’ agricultural and rural development programmes: the Commission co-finance the programmes • Before granting, a set of provisions covering aspects relevant to the proper use and accountability of funds have to be negotiated and agreed: Multi-annual Agreement between the Commission and any country • …Establishing in each applicant country an Agency capable of implementation of the SAPARD according to the agreement

  21. Actual content of SAPARD programmes: • Each national SAPARD proposals contains, among other things, a list of weaknesses to be targeted • The plan is divided in 15 measures similar to those available to EU Member States under the Community co-financed agricultural and rural development programmes • Only few measures eligible in the Member States are not eligible under SAPARD: setting-up of young farmers, early retirement, less favoured areas • Three measures are dominant in most countries (69% of EU funds): processing and marketing, investment in agricultural holdings, investment in rural infrastructure • Two measures (setting up farm relief and farm management services, establishing and updating land registers) have not been included in any programme

  22. Some general lessons for initiatives in our two counties: • Consider the EU as a reference point • We do not if and how the CMOs of the CAP will be extended • The SAPARD initiative indicates the direction • Agricultural measures will be referred to a wider RD strategy • Instruments and measures can be many but they have to be appropriately designed • Practical institutional building is crucial at both national and local level

  23. AGRICULTURAL/FISHERY PLANNING IN SIEBENIK-KNIN AND ZADAR The hyerarchy of the regional vision: Axes/measures/actions Objective of the working session: Identifing sector guidelines and actions through an excercise of partecipatory process • Axis • Measure • Action • Axis 2 • Measure 2.1 • Action 2.1.1 • Action 2.1.3 • Measure 2.2 • Axis 3 General orientation guideline Intervention action Cluster Intervention action (project sheet)

  24. Project proposal: structure Project Proposal • Proposal • Description • Actors • Features • Prerequisites • Indicators • Linkages and synergies

  25. PROJECT PROPOSAL (1) PROJECT PROPOSAL PRIORITY MEASURE ACTION DESCRIPTION BACKGROUND CREATION OF A TRADEMARK FOR LOCAL PRODUCTS: HAM/CHEESE OBJECTIVES THE LOCAL TRADITION IN HAM/CHEESE PRODUCTION BENEFICIARIES FITTING THE EU REGULATION FOR TYPICAL PRODUCTS ACTIVITIES OUTPUT ACTORS INITIATOR DECISION MAKERS INVESTORS PARTNER

  26. PROJECT PROPOSAL (2) PROJECTS FEATURES DURATION TARGET AREA INNOVATION RELATED TO THE AREA PREREQUISITES HUMAN RESOURCES INSTITUTIONAL HILL-MOUTANIN AREAS WITHEXTENSIVE BREEDING REGULATORY FRAMEWORK INDICATORS - MEASURES/ACTIONS ON RURAL TOURISM - ACTION ON IMPROVING AGRICULTURAL TECHNICAL CHANGE LINKAGES AND SYNERGIES

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