37770 ECSSD Environmentally and Socially Sustainable Development The World Bank Working Paper No. 37 June 23, 2003 The Agrarian Economies of Central-Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress in 2002 Csaba Csaki Alan Zuschlag The ECSSD unit distributes this technical report to disseminate findings of work in progress and to encourage the exchange of ideas among Bank staff and all others interested in development issues. This paper carries the name of the author and should be used and cited accordingly. The findings, interpretations and conclusions are the author's own and should not be attributed to the World Bank, its Board of Directors, its management, or any member countries. Contents Foreword ........................................................................................................................................v Preface ...........................................................................................................................................vi Executive Summary .....................................................................................................................vii A. Overall Analysis ......................................................................................................................1 I. Agricultural Resource Base and Overall Features of the Rural Sector ...........................1 II. The State of Agriculture.................................................................................................3 III. The Reform Process in the Rural Sector.....................................................................13 IV. Uneven Reform Progress in Central Eastern Europe and the CIS .............................20 References.....................................................................................................................................26 B. Policy Matrices.......................................................................................................................27 Fast Reformers .............................................................................................................................27 Czech Republic..................................................................................................................29 Slovenia .............................................................................................................................37 Estonia ...............................................................................................................................44 Hungary.............................................................................................................................46 Latvia .................................................................................................................................52 Slovak Republic.................................................................................................................56 Poland ................................................................................................................................63 Lithuania ............................................................................................................................70 Bulgaria..............................................................................................................................76 Moderate Reformers ...................................................................................................................81 Albania...............................................................................................................................83 Romania.............................................................................................................................86 Croatia................................................................................................................................91 Armenia .............................................................................................................................94 Macedonia..........................................................................................................................97 Azerbaijan........................................................................................................................100 Kyrgyz Republic..............................................................................................................106 Serbia and Montenegro....................................................................................................110 Moldova ...........................................................................................................................113 Bosnia and Herzegovina ..................................................................................................118 Georgia ............................................................................................................................122 iii Slow Reformers ..........................................................................................................................127 Ukraine ............................................................................................................................129 Kazakhstan.......................................................................................................................134 Russia...............................................................................................................................141 Tajikistan.........................................................................................................................146 Uzbekistan.......................................................................................................................152 Turkmenistan...................................................................................................................154 Belarus .............................................................................................................................156 C. Statistical Annex: Food and Agriculture in Central and Eastern Europe and the CIS .......................................................161 Table 1: Cereals ...............................................................................................................162 Table 2: Wheat.................................................................................................................163 Table 3: Course Grains ....................................................................................................164 Table 4: Maize .................................................................................................................165 Table 5: Oil Crops ...........................................................................................................166 Table 6: Rape and Sunflower Seed..................................................................................167 Table 7: Sugarbeet...........................................................................................................168 Table 8: Milk ...................................................................................................................169 Table 9: Ruminant Meat..................................................................................................170 Table 10: Pork..................................................................................................................171 Table 11: Poultry.............................................................................................................172 iv Foreword The agrarian economies of Central and Eastern Europe and the Commonwealth of Independent States continue to undergo systemic change and transformation. The World Bank has been supporting this process with both policy advice and financial assistance since the beginning of the 1990s. The Bank involvement in the region's agricultural transition has been supported by the continuous monitoring of the transition process in the individual countries and in the region as a whole. The Bank monitoring process provides unique benchmark information for studying problems of this difficult transition in Central and Eastern Europe and for the development of specific agricultural projects in the individual countries of the region. This year marks the sixth time that the Bank reviewed the situation of agriculture and agricultural policy reforms in the ECA region. Our assessment is based on country-specific analysis prepared by the World Bank staff members most intimately involved in agricultural reforms in these countries. To evaluate the status of reforms, a special methodology was developed at the World Bank to compare agricultural reform performance across all the countries in Eastern Europe and Central Asia. The general overview and the country-specific assessment presented in the form of policy matrices is supplemented with an aggregated statistical database derived from the FAO agricultural database. June 23, 2003 Laura Tuck Director, ECSSD v Preface This volume is a compilation of a year's work analyzing the problems of the rural sector at the regional level. The study is focused on agricultural outputs, trade, and related policies. Although we recognize the importance of the social and natural resource management aspects of the agricultural transition, these issues are not addressed in this report. The work presented in this paper was managed and coordinated by Csaba Csaki, who is the main author of the overview as well as the creator of the methodology used to compare agricultural reform performance in the individual countries. He was assisted by Alan Zuschlag in compiling the country-specific policy matrices into a consistent framework. Country-specific matrices were prepared for all the countries of the region except Cyprus, Malta, and Turkey. The individual country policy matrices were prepared by the following Task Managers: Albania (F. Jungbluth), Armenia (G. Schrieber), Azerbaijan (T. Sampath, J. Bucknall, K. Fock), Belarus (M. Bakanova), Bosnia and Herzegovina (R. Jaisaard), Bulgaria (H. Gordon), Croatia (A. Nacev), Czech Republic (T. Doucha, C. Csaki), Estonia (G. Schreiber), Georgia (I. Shuker), Hungary (I. Feher), Kazakhstan (E. Cook, B. Utkelov), Kyrgyz Republic (G. Schreiber), Latvia (H. Kim), Lithuania (W. Meyers), FYR Macedonia (R. Jaisaard), Moldova (H. Kim), Poland (M. Lundell, H. Gordon), Romania (H. Gordon, G. Ionita), Russia (V. Matusevich, I. Shuker), Serbia and Montenegro (R. Jaisaard), Slovak Republic (G. Blaas), Slovenia (S. Rogl), Tajikistan (T. Sampath), Turkmenistan (M. Lundell), Ukraine (I. Shuker, A. Kaliberda), and Uzbekistan (M. Lundell). Laura Tuck provided valuable comments and suggestions throughout the study. Alan Zuschlag provided editorial assistance and compiled the Statistical Database used for this study. vi Executive Summary This paper provides a brief overview of agricultural economies in the ECA region between 1999- 2002. It updates the information presented in the World Bank Discussion Paper no. 3871, ECSSD Working Paper no. 13,2 ECSSD Working Paper no. 243, and ECSSD Working Paper no. 32,4 and ECSSD Working Paper no. 365 and identifies the current status of the agrarian economies of Eastern Europe and Central Asia today. Although we recognize the importance of the social and natural resource management aspects of the agricultural transition, these issues are not addressed in this report. The agrarian economy of the region was characterized in the early 1990s by a considerable drop in production. The decline in agricultural output did not stop until the second half of the 1990s in the CIS countries and, for most of them production levels stabilized at roughly 60% of pre- reform levels. In contrast to the CIS, output declines in the CEE were halted somewhat earlier. In most cases this stabilization occurred at 70% to 100% of the pre-reform levels, while in Estonia, Latvia, and Croatia, current production appears to have stabilized at 40% of pre-reform output. Compared to the previous few years, a significant increase in crop production was recorded in 2001 and 2002 in key CIS countries, particularly in Russia and Ukraine. Agricultural output also increased in the Kyrgyz Republic, Kazakhstan, Turkmenistan, and Azerbaijan. The Kyrgyz Republic is the first country in the CIS where agricultural output exceeded the 1989-91 levels. In the CEE countries, two different groups can be observed when viewing overall agricultural performance. First, there is a group of countries where agriculture has begun to grow steadily and continuously. This group includes Albania, Slovenia, and Croatia. In Albania and Slovenia agricultural output is already 130% and 110% of the pre-reform levels respectively. In the rest of the countries agricultural output remains more or less stagnant, although some of these countries show some moderate signs of recovery in crop production. Our analysis for 2002 indicates a further differentiation between CEE and CIS countries in the pace of agricultural reform. · In the leading CEE countries, the reform process is close to completion. In several EU candidate countries the agriculture and agro-processing sectors now resemble those of a market economy and are experiencing very dynamic growth. Notably, in the Czech Republic, Hungary, Slovenia and Estonia, the degree of private ownership and investment in the sector, supported by a liberal policy framework and the prospect of EU accession, has led to significant developments in the efficiency of agricultural production in recent years. These 1Csaki, C. and Nash, J. The Agrarian Economies of Central and Eastern Europe and the Commonwealth of Independent States: Situations and Perspectives 1997, June 1998, the World Bank. 2Csaki, C. and Fock, A. The Agrarian Economies of Central and Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress ­ 1998, April 1999, the World Bank. 3Csaki, C. and Fock, A. The Agrarian Economies of Central and Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress ­ 1999, April 2000, the World Bank. 4Csaki, C. and Kray, H. The Agrarian Economies of Central-Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress ­ 2000, May 2001, the World Bank. 5Csaki, C. and Nucifora, A. The Agrarian Economies of Central-Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress ­ 2001, May 2002, the World Bank. vii countries have benefited from a substantial influx of fresh capital, mainly foreign, which has contributed to renew the capacity and performance of the sector. As a result, their agricultural sectors now look increasingly competitive on the European and world markets. · The possibility of EU membership has accelerated reforms in those countries that were lagging somewhat behind the leading EU accession candidates, most notably in Lithuania and Latvia. The agriculture policy agenda in the CEE is characterized by efforts to complete the transition, to cope with increased social problems in rural areas, and to adjust to the evolving CAP. Unfortunately the task of facilitating increased competitiveness has often been stymied by farm lobby demands to provide immediate protection in the agricultural sector and to provide income transfers to farming populations. · In the CIS countries the reform process has generally proceeded at a much slower pace, although there are positive exceptions. Distortions continue in the production, pricing, and marketing of "strategic" products, and the system of institutions and instruments of the planned economy has not yet been fully dismantled in most countries. Only moderate progress in agricultural reforms has been achieved in the core countries of the CIS (Russia, Ukraine, Kazakhstan), although recently government intervention has been significantly reduced. Some of the smaller countries in the CIS such as Armenia, Azerbaijanand Georgia, which had accelerated the reforms in the previous few years, have not taken further steps in 2002. At the lower end of the reform scale, Uzbekistan and Tajikistan also made measurable progress, but slowed somewhat in 2002. On the other hand, nearly a decade after the beginning of the transition, Turkmenistan and Belarus have still not started any significant reforms. viii A. Overall Analysis 1. Over ten years have elapsed since the process of transition from the socialist system started in the early 1990s. During this time, Central and Eastern Europe and Central Asia have undergone profound structural change with wide variation in the amount of transformation in rural areas. In retrospect, it can be seen that the countries that chose to transform their socialized agriculture into a private-ownership and market-based system experienced the most positive economic performance. Given the developments of the past decade, however, it is clear, that the initial expectations for the transformation were overly optimistic and the transition process in agriculture is far more complex than originally envisaged. It is widely recognized, for instance, that the importance of functioning institutions was underestimated at the outset of the transition. Increased social problems and alarming signs of increasing poverty and inequality have also added a new, unexpected, dimension to the transition process. 2. In the early 1990's, ECA developed a strategy to assist the transformation of the region's rural sector to the new economic reality. Subsequent developments, and the urgent need for sectoral recovery and for the implementation of effective policies to reduce rural poverty, have led to adjustments and revision of our initial strategies and support programs. These were presented in a rural strategy paper the year 2000 (Csaki and Tuck, 2000). I. Agricultural Resource Base And Overall Features of The Rural Sector 3. Agriculture, and the rural sector in general, play a more important role in the economy of the region than they do in more developed market economies. While the bulk of the population in the region lives in urban areas, a significant portion of the population still lives in rural areas. Of the 412 million citizens in the 27 ECA countries (excluding Turkey), 143 million, or 35% are classified as living in rural areas. Six countries have particularly large rural populations, accounting for slightly less than two-thirds of the total rural population within ECA. These are: Russia (the largest contributor, at 24%), Ukraine (11%), Uzbekistan (11%), Poland (9%), Romania (7%) and Kazakhstan (5%).1 In several countries, and particularly in the least developed countries of Central Asia, (Albania, Bosnia and Herzegovina, Kyrgyz Republic, Moldova, Tajikistan, Turkmenistan, Uzbekistan), the majority of the population live in rural areas, reaching as much as 72% of rural population in Tajikistan. 4. The share of agriculture in employment and national income in ECA countries is far greater than the average for western developed countries. However, there are very substantial country- to-country variations in the relative size and importance of the agricultural sector (Figure 1). In 1999 the agricultural sector contributed about 9% of GDP for the transition region as a whole, ranging from 29% of GDP in the Caucasus countries to 6% in the EU accession candidate countries and 23% in Central Asia.2 Similarly, the proportion of the labor force employed in agriculture was 22% on average, but this varied from as little as 3%-5% in some EU accession 1Source: WDI, 2002. 2Source: WDI, 2002. 2 The Agrarian Economies of CEE and CIS: countries (Czech Republic, Estonia, Figure 1 Hungary, Slovak Importance of Agriculture in ECA countries in 1999 Republic) to about Labor force in agriculture (% of total) Agriculture in GDP (%) 13% in European CIS % countries (Russia and 60 50 Moldova) to 30%- 40 40% in the Caucasus 30 and Central Asia and 20 10 as much as 48% in 0 Turkey.3 Total ECA EU Other Euro CIS Caucasus Central Turkey (CEE + accession CEE Asia CIS + 5. In relation to the Turkey) region's share of world's agricultural ECA country groups: resources, the role of CIS: Caucasus (Armenia, Azerbaijan, Georgia), Central Asia (Kazakhstan, Kyrgyz agriculture in the Republic, Tajikistan, Turkmenistan, Uzbekistan), Euro CIS (Belarus, Moldova, Russia, Ukraine); CEE: EU Accession (Bulgaria, Czech Republic, Estonia, transition region Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia), Other appears to be Central Europe (Albania, Bosnia, Croatia, Macedonia FYR, Yugoslavia FR); relatively small. As Turkey. of 1999, the transition countries comprised 13% of the world's area suitable for agricultural production and 20% of the world's arable land Table 1: Percentages of Arable Land and World Population (Table 1). The region makes a % of World % of World substantial, yet less than proportional, Arable Land Population contribution to world output in Total ECA 20.2 8.0 practically all of the main agricultural Total CEE 3.4 2.2 products. On average, this contribution Total CIS 15.1 4.7 Source: WDI 2002 is around 10%. The importance of ECA countries in world agricultural production decreased in the early 1990s as a result of the transition. Until now only crop production has regained its former share of world production, while the share of livestock production has been falling throughout the 1990s (Figure 2). 6. Similarly, when compared to its natural resources, the region plays a significant, yet less than proportional, role in world food trade (Figure 3). With 20% of the potential resources but only 8% of the world's population, it is clear from a global perspective that the East European and Central Asian region is perhaps the one area where a good deal of the substantial new global demand for food forecast for the first half of this century can be met without the risk of causing serious harm to the natural environment. However, serious improvements in performance and efficiency still have to take place in these countries. The gap between global agricultural development and regional performance remains very large, particularly with respect to the levels of efficiency in OECD countries, as indicated by an international comparison of cereal yields (Figure 4). This gap is particularly large when considering CIS countries, but also applies to 3Source: WDI, 2002, and Prof. Zvi Lerman, based on official country statistics (http://departments.agri.huji.ac.il/economics/lerman-main.html). An Update on Status and Progress ­ 2002 3 some of the CEE countries, as indicated by the levels of yield well below world averages and considerably lower than in the EU. Agricultural productivity in CEE countries has started to grow since the mid 1990s and is expected to increase further with EU accession both because of the economic conditions that will have to be fulfilled and because of the improved access to capital, technology and know-how as a result of the enlargement. Nevertheless there is no consensus about the speed and extent to which these increase in productivity will materialize. Figure 2 Production of ECA Transition Countries in Comparison to World Production 1992 1995 1998 2001 35 30 dl 25 20 wor of 15 %10 5 0 Cereals Coarse Wheat Maize Oilcrops Rape and Sugar beet Milk Ruminant Pigmeat Poultry grain sunflower meat Source: WDI 2002 II. The State Of Agriculture Figure 3 ECA Transition Countries' Trade in % of World 7. In the 1990s the Trade, 1992, 1997 and 2000 agrarian economy of the %18 region was characterized 16 1992 1997 2000 14 by a considerable fall in 12 10 production that resulted 8 from the collapse of the 6 4 socialist system. The 2 negative impact of the 0 institutional disruption was compounded by the otal Cereals Wheat Maize meat al Meat impact of a wide variety of changes, including Sugar,T lk EquivalentPig Meatultry Meat Po Tot Mi Ruminant simultaneous reductions in Source: WDI 2002 agricultural producer subsidies and in food consumption subsidies, price liberalization, declining input use and deteriorating machinery stock, reduced domestic demand due to falling incomes and reduced foreign demand due to the collapse in traditional export markets and the internal "Eastern Bloc" 4 The Agrarian Economies of CEE and CIS: trading system (CMEA). As a Figure 4 result of these combined events, the introduction of the reforms in Cereal Yields in ECA countries, 1999-2001 agriculture was accompanied by 6 dramatic reductions in the terms 5 of trade of agriculture4 that led to 4 Ton/Ha 3 very significant reductions in 2 agricultural output. However, Metric 1 although agricultural output 0 declined across all the transition Total CEE Total CEE Total CIS European OECD World + CIS Union (15) countries, the paths of output recovery have diverged strongly. Source: WDI 2002 8. Agricultural production in transition countries as a whole continued to decline from the early 1990s until 2000. (Table 2). In most of the CIS countries the decline in agricultural output did not stop until 2000, and production levels stabilized at roughly 60% of the pre-reform levels (Figure 5). In the Kyrgyz Republic, Uzbekistan and Turkmenistan, however, agricultural output stabilized at a much higher level and now exceeds the pre-reform 1989-91 levels. In contrast to the CIS, in most of the CEE countries output declines were halted by the mid 1990s and in most cases this stabilization occurred at 70% to 100% of the pre-reform levels. In Estonia, Latvia, and Croatia, however, agricultural production continued to decrease throughout most of the 1990s and now appears to have stabilized at 40% of pre-reform output (Figure 6). Table 2: Net Agricultural Production Growth Rates for CEE and CIS Countries (%) Year Agriculture Crops Cereals Livestock 1992-6 -5.1 -3.3 -6.0 -7.2 1997 1.4 7.9 32.5 -5.1 1998 -6.7 -14.1 -27.2 -0.1 1999 0.5 2.4 6.9 -2.5 2000 -0.1 2.6 -3.5 -1.0 2001* 5.9 13.4 34.2 1.1 *preliminary Source: FAOSTAT, 2003 9. As is also indicated in Table 2, some interesting changes in sectoral performance have taken place in 2001 and 2002 with respect to the previous few years (Figures 5 and 6). In the CIS countries, a very sizeable increase in production of arable crops took place in Russia and Ukraine in 2001, and remained at this higher level in 2002, while the decline in livestock production appears to have halted. Similarly, the Kyrgyz Republic, Kazakhstan, Turkmenistan, and Azerbaijan, also showed significant improvements in agricultural output in 2000, 2001, and remained at these relatively high levels in 2002, for both in crop and livestock products. As a result of these increases, mainly in crop production during the last two to three years, the trend in agricultural production in many CIS countries appears to have finally turned around and has begun to increase. 4 Macours and Swinnen (2000) estimate reductions of 40% to 80% in the terms of trade of agriculture for the countries they analyze. An Update on Status and Progress ­ 2002 5 Figure 5 Agricultural Production Indices CIS, 1992-2002 relative to 1989-1991 140 120 100 1992 80 1995 60 2001 40 2002 20 0 Crop Production Indices CIS, 1992-2002 relative to 1989-1991 180 160 140 1992 120 100 1995 80 60 2001 40 20 2002 0 of aigro oni s rula of Kyrgyzstan Uzbekistan erbaijan,zA rmeniaA Ge Russian Be Ukraine Republic Kazakhstan Federat Tajikistan Moldova, Republic Turkmenistan Livestock Production Indices CIS, 1992-2002 relative to 1989-1991 160 140 120 1992 100 1995 80 60 2001 40 2002 20 0 Source: FAO, 2003 note: data for Uzbekistan in 2002 was not available at time of publication 6 The Agrarian Economies of CEE and CIS: Figure 6 Agricultural Production Indices CEE, 1992-2002 relative to 1989-1991 160 140 120 1992 100 1995 80 2001 60 40 2002 20 0 ani ai en balA aina ehT y ro ai ak dna ani ain ai ovlS moR a,ni pR dnal ar & eg hce cil airagl ov ainau to doeca guYr Po nguH aib Se entno Cz pubeR ovlS atiaorC Bu ains tvaL eg Es M Bo rzeH thiL M Fm Crop Production Indices CEE, 1992-2002 relative to 1989-1991 120 100 80 1992 1995 60 2001 40 2002 20 0 Livestock Production Indices CEE, 1992-2002 relative to 1989-1991 200 180 160 140 1992 120 1995 100 80 2001 60 40 2002 20 0 Source: FAO 2003 note: data for Slovenia and Slovakia for 2002 was not available at time of publication An Update on Status and Progress ­ 2002 7 10. In the CEE countries, two different groups can be observed when viewing overall agricultural performance. First, there is a group of countries where agriculture has begun to grow steadily and continuously. This group includes Albania, Slovenia, and Croatia. In Albania and Slovenia agricultural output is already 130% and 110% of the pre-reform levels respectively. In the rest of the countries agricultural output remains more or less stagnant, although some of these countries show some moderate signs of recovery in crop production. 11. As mentioned above, the gap between global agricultural development and the performance of the transition countries remains very large. In some CIS countries, notably Russia and Ukraine, yields have picked up dramatically during 2001 and 2002. However, in many CIS countries there is still a declining trend in major grain yields (Figure 7). In EU accession countries yields have begun to grow again, though they remain significantly lower than EU levels. In non-EU accession CEE countries ("other CEE"), grain yields have shown a stagnating trend in the last five years with much less annual variation than the CIS countries. Figure 7 C ereal Yields in Transition C ountries, 1992-2001 4.0 3.5 Total CE E Total CIS 3.0 2.5 Ton/Ha 2.0 1.5 Metric 1.0 0.5 0.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Change in Cereal Yield in Transition Countries: 1992-1995 relative to 1998-2001 3.5 AVG 92-95 AVG 98-01 3.0 2.5 on/HaTc 2.0 1.5 Metri 1.0 0.5 0.0 Total CEE + EU Other CEE Euro CIS Caucasus Central Asia W orld CIS accession Source: WDI 2002 12. Agricultural technology levels did not improve in recent years and are still well below pre- reform levels. In general, the decline in the terms of trade and the reduction in agricultural output prices led to dramatic reductions in input use in agriculture. For the region as a whole, the use of fertilizer inputs has remained more or less unchanged at only about 20% of pre-reform 8 The Agrarian Economies of CEE and CIS: levels. A gentle upward trend can only be observed in CEE countries. A wide and growing divergence between CIS and CEE countries can also be observed in the availability of agricultural machinery (Figure 8). Figure 8 Fertilizer Consumption in Transition Countries, 1992-1999 Total CEE + CIS Total CEE Total CIS 100 land 80 arable 60 of 40 hectare/ 20 Kg 0 1992 1993 1994 1995 1996 1997 1998 1999 Agricultural Machinery in Transition Countries, 1992-1999 7 Total CEE Total CIS 6 Land 5 Arable of 4 3 Hectare 2 per 1 actorsrT 0 1992 1993 1994 1995 1996 1997 1998 1999 Source: WDI 2002 13. The regional participation in international trade of agricultural products has undergone very significant changes during the transition: · Despite the decline in production, the region's share in world trade did not shrink significantly, and it even increased for some products. This was in large part a result of both the reduction in domestic consumption and the disintegration of the Soviet Union. An Update on Status and Progress ­ 2002 9 · In some countries there has been considerable change in the composition of agricultural trading partners. The region's agrarian trade was historically determined by the Council of Mutual Economic Assistance (CMEA) and basically built on internal relations. It has now given way to a wide opening towards other parts of the world. The source of imports and destination of exports have also changed. However, in most CIS countries growth is seriously constrained by the collapse of traditional markets and the failure to develop alternatives. · The structure of trade has also changed dramatically. The position of the transition economies in trade in cereals and dairy products has recently increased to that of net exporter (Figure 9). Perhaps the most significant structural change is that the CIS countries, and Russia in particular, have become net exporters of grains. In place of the massive grain imports characteristic of the Soviet period, notably in Russia, the region has recently become one of the world's biggest meat importing regions. Meat imports rose dramatically during the mid 1990s, and, although they have significantly declined since 1997 and 1998, they remain high by historical levels. This is quite clearly a more favorable solution from an economic viewpoint since the large quantity of grain purchased in earlier decades by the Soviet Union was used in animal husbandry with very low efficiency. · The magnitude of exports in pork and beef has also begun to increase in recent years and the region's position as a net importer of livestock products has improved somewhat (Figure 9). Specifically, the dramatic short-term increase in livestock imports during the 1990s is now beginning to fall back reflecting the recovery of livestock production in most countries. · While the structure of the region's agricultural exports and imports has changed considerably as a result of declining consumption, the balance of agricultural trade for the region as a whole has not deteriorated. Overall, the region as a whole continues to be a net importer of agricultural products, although the deficit is declining. Specifically, the significant decline in the negative trade balance of the CIS countries has been partially offset by the increased deficit in the CEE countries (Figure 10). · Trade within the region continues to be of great importance for practically all countries. However, the competition with higher quality imports is making it increasingly difficult to sell products at CMEA standards within the region. Some of the countries of Central-Eastern Europe are having increasing success on the markets of the developed countries, but for the majority of countries in the region, selling within the region remains practically the only possible direction for the export of their agricultural produce, often in the form of special barter deals. 10 The Agrarian Economies of CEE and CIS: Figure 9: Trade in major agricultural products in Transition Countries, 1992-2001 (1000 US$) Cereals Trade, 1992-2001 10,000,000 8,000,000 $ SU 6,000,000 Imports 4,000,000 Exports 000 2,000,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Wheat Trade, 1992-2001 6,000,000 5,000,000 $ 4,000,000 SU Imports 3,000,000 Exports 000 2,000,000 1,000,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Maize Trade, 1992-2001 1,500,000 $ 1,000,000 SU Imports Exports 000 500,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Sugar Trade, 1992-2001 3,000,000 2,500,000 $ 2,000,000 SU Imports - Val (1000$) 1,500,000 Exports 000 1,000,000 500,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: FAO 2003 An Update on Status and Progress ­ 2002 11 Figure 9 continued: Trade in major agricultural products in Transition Countries, 1992-2001 (1000 US$) Milk Trade, 1992-2001 1,000,000 800,000 $ SU 600,000 Imports 400,000 Exports 000 200,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Pork Trade, 1992-2001 700,000 600,000 $ 500,000 US 400,000 Imports 300,000 Exports 000 200,000 100,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Poultry Trade, 1992-2001 1,400,000 1,200,000 $ 1,000,000 SU 800,000 Imports 600,000 Exports 000 400,000 200,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Beef Trade, 1992-2001 800,000 $ 600,000 SU Imports 400,000 Exports 000 200,000 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: FAO 2003 12 The Agrarian Economies of CEE and CIS: Figure 10 Net Agricultural Trade, 1992-2000 Total CEE Total CIS Total CEE + CIS 5 0 $ -5 US -10 Billion -15 -20 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source: FAO 2002 · Another important change is the growth of higher quality processed products in the region's agrarian trade, and together with this, a rise in the region's share of food imports from developed countries, especially the European Union and the USA. · Agricultural trade between the EU and CEE has increased substantially, with a dramatic expansion in net exports from the EU. While EU agricultural imports from the CEE countries have doubled, EU exports to CEE have increased almost tenfold. As a result the net trade balance for the EU has improved from negative 1 billion to a positive 2 billion. The composition of trade has also changed, with exports of processed products from the EU to CEE countries increasing significantly more than exports of primary products. For the future, accession to the EU will dismantle the remaining barriers to trade and will further intensify trade relations between the EU and the CEE. EU accession, and joining the CAP, is also likely to cause an increase in agricultural production and in net exports of agricultural products from CEE countries, leading to potential conflicts with the WTO agreements (and with the EU's budgetary constraints). 14. On the whole, the region's agrarian trade is becoming steadily integrated into the agrarian trade of the world and the European region. This process is most advanced in the case of the countries of CEE where the CEFTA offers further, but not problem-free, possibilities for regional co-operation. In the great majority of the countries concerned, a liberal agrarian trade policy is also assisting in the integration of the countries of the region into world agrarian markets. Most of the CEE countries are members of the WTO, or their admission is pending. The obligations accompanying the anticipated EU membership for most of these countries are also having a growing influence on their trade policies. An Update on Status and Progress ­ 2002 13 III. The Reform Process in the Rural Sector 15. The relative inefficiency of agriculture is one of the most important challenges facing the countries of the former Soviet Union and Central and Eastern Europe. During the socialist era, agriculture and food production were determined by government planning, without regard to efficiencies or comparative advantage. Input provision was often dominated by a few state- owned firms, in a monopolistic position. Similarly, a few inefficient state buyers with strong monopsonistic power dominated marketing channels. The large-scale livestock and crop cooperatives were unsuited to market-based private agriculture. Creating viable private farming based on private ownership of land, and allowing market signals to determine levels and types of production have been some of the most difficult tasks of the transition period. Current Status of Agricultural Reform in the Region: Remarkable Progress in CEE - Reform Fatigue in CIS 16. In 1990-91 the region set out on the path of creating market economies based on private property. In all countries the most important basic elements of the reform process have been: · the liberalization of prices and markets, the creation of a market-compatible system of conditions in the macro agrarian economy; · the privatization of land and transformation of the inherited economic structure; · the de-monopolization and privatization of food processing and trade in agricultural products and capital goods; · the creation of a functioning rural bank system; and · the establishment of the institutional structure and system of state administration required by market economies. 17. There has been little difference between one country and another in terms of what needs to be done. However, there are quite big differences when it comes to the pace of realization and the manner of implementation. A summary of the progress achieved by individual countries in the path of creating a market economy is summarized in Table 35. Our analysis intentionally emphasizes "on the ground" results as opposed to pure policy reforms (which are often legislated but not implemented). 18. Our analysis of the reform performance for individual countries in 1997-2002 indicates a further differentiation between CEE and CIS countries in the pace of agricultural reform. Due to 5The description of the status of reforms for each country matrix was compiled by the World Bank staff most familiar with that country's agricultural policies. Numerical ratings were then assigned to each of the five reform categories in accordance with the criteria listed in Table 4. These ratings were then revised in several review sessions to improve consistency of rankings. An earlier version of this analysis was presented in Csaki and Lerman, 1997. 14 The Agrarian Economies of CEE and CIS: the adoption of more comprehensive transition policies, the transformation of agriculture is most advanced in Central Europe and, in particular, in the EU candidate countries. In fact, in the leading CEE countries, the reform process is close to completion (Figure 11). The possibility of EU membership has accelerated reforms in those countries that were lagging somewhat behind the leading EU accession candidates, most notably in Slovakia, Lithuania, Latvia, and to a lesser degree Bulgaria and Romania. The agriculture policy agenda in the CEE is characterized by efforts to complete the transition, to cope with the increased social problems in rural areas, and to adjust to the evolving CAP. 19. In several EU candidate countries the agriculture and agro-processing sectors now resemble those of a market economy and are experiencing very dynamic growth. Notably, in the Czech Republic, Hungary, Slovenia and Estonia the degree of private ownership and investment in the sector, supported by a liberal policy framework and the prospect of EU accession, has led to significant developments in the efficiency of agricultural production in recent years. These countries have benefited from a substantial influx of fresh capital, mainly foreign, which has contributed to renew the capacity and performance of the sector. As a result, some of these countries now look increasingly competitive on the European and world markets. Other EU candidate countries, although on a smaller scale, have made similar progress. Several issues, however, remain to hinder the competitiveness of these countries. The results of our analyses agree with the EU evaluation in finding that further reforms are needed, principally in the area of the institutional system and in the financing of agriculture. 20. In the CIS countries, the reform process has generally proceeded at a much slower pace, although there are positive exceptions. Distortions continue in the production, pricing, and marketing of "strategic" products, and the system of institutions and instruments of the planned economy has not yet been fully dismantled in most countries. Only moderate progress in agricultural reforms has been achieved in the core countries of the CIS (Russia, Ukraine, Kazakhstan), although recently government intervention has been significantly reduced. Some of the smaller countries in the CIS such as Armenia, Azerbaijan and Georgia, which had accelerated the reforms in previous years, slowed their progress in 2002. At the lower end of the reform scale, Tajikistan and Uzbekistan have also made measurable progress. On the other hand, nearly a decade after the beginning of the transition, Turkmenistan and Belarus have still not started any significant reforms (Figure 11). 21. Beyond these broad patterns, a few major qualifications can be made regarding the general experience of the transition process so far. Overall, the results of the reforms have not yet met original expectations. The relatively rapid growth of production that characterized the Chinese reforms has not occurred. This has been both because the transformation of the economic structure has proved to be a far more complex than originally envisaged and because in most countries the pace of reforms has been, at best, uncertain. Specifically the following can be stated: 97 7 6 5 - 8.2 8.4 7.8 8.6 7.6 7.4 7.6 5.4 6.4 5.8 7.4 6.4 5.8 8.5 - 6 6.2 5.4 5.8 3.8 2.2 1.8 1.8 5.5 98 .68 .28 8 9 .28 .67 .87 .67 .86 .46 .85 .66 .47 .66 6 .66 - 4.6 .85 .85 .25 .45 .65 4 2 .61 .26 - 99 6 6 2 Score 8.6 8.2 8.4 8.8 8.4 7.6 7.8 7.6 7.6 6.8 6.6 6.6 7.2 6.6 6.2 6.4 5.8 5.4 5.6 5.6 4.2 1.8 6.1 00 9 .88 9 9 9 8 .28 8 8 .27 7 7 .47 .66 .46 .26 .63 4.6 .85 .26 .85 .65 .65 .64 .81 .81 .56 Total 01 9 9 8 8 8 7 6 6 9.2 9.2 9.2 8.2 7.6 7.4 7.4 6.6 6.6 6.2 4.8 6.2 6.6 5.8 5.8 4.8 4322.3 2 1.8 6.7 02 9.4 9.4 9.4 9.2 9.2 8.8 8.4 8.2 8.0 7.6 7.6 7.4 7.4 6.8 6.6 6.6 6.4 6.2 6.0 6.0 5.8 5.8 5.8 4.8 3.8 2.0 1.8 7.1 97 8 9 9 8 8 7 8 7 5 5 4 6 8 6 4 5 - 4 - 6 3 5 5 5 4 3 1 5.5 - 98 .95 - 2002 99 5.9 of 00 233 .26 end Institutional 01 9988 08881 9999 9988 9988 8777 8888 9888 8876 7655 7655 8888 6678 7777 5555 5566 54 4555 5555 5555 4444 5555 5555 4444 3333 2 1111 6.4 the 02 10 10 10 9 9 8 8 9 8 7 7 8 6 7 5 6 7 4 5 4 4 5 5 4 3 2 1 6.6 at reforms 97 8 8 7 8 7 8 6 6 4 3 6 6 7 4 4 6 - 5 - 6 5 5 6 3 1 1 2 5.1 - e 98 9 7 8 9 8 8 7 6 5 3 5 6 7 4 5 7 5 6 6 5 6 5 2 1 1 2 .55 - 99 9 7 8 9 8 8 7 6 6 5 6 6 7 4 5 6 5 6 6 5 6 5 2 1 1 2 market 5.6 Countries financla 00 9 8 9 9 9 8 7 7 7 6 6 6 7 5 5 6 3 6 6 6 6 6 5 2 2 1 2 6.1 Rur 01 9 8 9 9 9 8 7 7 7 7 7 6 7 5 6 6 3 6 6 7 6 6 5 3 2 1 2 CIS 6.3 02 9 9 9 9 9 9 7 7 7 7 7 6 7 6 6 7 5 7 6 6 6 6 5 3 3 1 2 6.6 and completed 98 9 8 - CEE = gnissec 10 .36 10 - 99 9 8 10 6.5 in rop 00 10 10 10 111 .07 ro-gA 01 10 10 9988 10 9988 9988 9998 8888 8887 8888 8876 7777 8877 6677 6665 6666 53 6667 6666 5555 7766 7666 8777 5554 4311 2 2222 7.2 02 10 10 10 10 10 10 10 9 9 8 8 8 8 6 6 6 6 6 6 5 7 7 8 5 4 2 2 7.5 Reforms economy 97 8 9 6 9 9 7 8 8 7 8 7 5 8 7 6 6 - 6 - 7 5 5 5 2 1 2 1 7.5 - 98 m .56 - planned for 99 6.7 Re 00 333 .37 Agricultural Land of 01 9988 9999 9986 9999 9999 8888 8988 9988 8888 8888 8887 7766 8888 7777 8888 7777 55 7877 7666 7766 6665 5555 5555 6655 4422 3 2221 7.2 centrally 02 9 9 9 9 9 8 9 9 8 8 8 8 8 7 8 7 7 7 6 6 6 5 5 6 4 3 2 7.3 Status =1 - - 97 9 8 10 9 7 7 9 7 6 8 7 6 7 7 6 6 7 7 7 7 7 4 4 2 3 6.4 3: et 98 9 9 9 9 8 7 8 8 8 8 6 6 7 8 7 7 - 8 6 7 6 5 6 5 3 2 2 6.7 rk - tesa Ma 99 9 9 9 8 9 7 7 8 9 8 7 6 7 8 7 7 7 6 8 6 6 6 5 3 2 2 6.8 Table & 00 8 9 9 8 9 8 8 8 9 8 7 7 8 8 8 7 3 7 6 8 6 6 6 6 3 2 2 7.1 Estim ce Pri 01 9 9 9 9 9 8 8 7 9 8 7 7 8 8 8 7 6 7 7 9 7 6 6 6 4 2 2 7.4 02 9 9 9 9 9 9 8 7 8 8 8 7 8 8 8 7 7 7 7 9 6 6 6 6 5 2 2 Bank 7.5 rldo rytn W: Rep y Rep ia anj Cou a peRzygr HG istan rb&M Czech Slovenia Estonia Hungar Latvi Slovak Poland Lithuan Bulgaria Albania Romania Croatia Armenia Macedonia Azerbai Ky Se Moldova Bosnia Georgia Ukraine Kazakhstan Russia Tajik Uzbekistan Turkmenistan Belarus AVERAGE Source kr lic mewo fos .y gniru pubd edr ethno local eructurst elihwd dna, Fral ructut sed and nsions ngi public agriculture.e tion onom ructstre ant ec enm .sn res ntale .sn ntemn . stitu desto rtly seucofren cu exte,h fosn privat Institutiona In.2-1 M ern tio Pa rnm tio veroG besinoi zedni Efficient tio of 4. command 3- govfo bee stituin 6. 5- gove stituin 8. gar 7- has researc educat reo 9-10. stituin needs le ; la , la . stems emst soeth edcud gnitsixe ergence . -orga, nci Syla sy as" . ing nafi nci peyt nel troin em, banks nancififoe services nkab et 3 Final oviS anhcgn gnkin mmercial ba co emst . riculturega and "Agro nci weN aresn latio noro g.nik ofgnriuctursteR sygnik ercial ergenc servsn entcifi for Em tio ltureu 2. Table Rura 1- with nafi 4. le 6. comm 8. 3- regu litt ban 5- ban of 7- stituin Ef.01 stem agric 9- sy industries, in t la Used pu In fo stage. fo nis seri ly,p ework d state gn ation an ram dustni directng supt Ratingsla foniot onita ro-ga ng listic ous og frama ent forei puni ternin po ocessi neant ssamdna desini oni oni tationnem pr ed ess. with and en ple empl oni . y ofytrioja for atizedv Pri ies ovrp atiza pro Numeric to Priv Agr Suppl Mono.2-1 es.ristudnid poS im ne 4. zatiatv zatiatv im Im 6. zatiatv ressgo M .ntem 8. atizedv str ow 3- pri pri early 5- pri pr 7- pri conducive nvesti 9-10. duin etitivpm with co Key 4: by r , fok farm ed dnal Table edatni ch of ton ed lly large-scale is atized shi eructu phirs s. place, ing arkets.m m dom rmfa ewormraf andn launn agest priv fin futon but ur not for Re emst atizatio ingn tatio nced ndla gal lete.pm land st isg rketam strginm newoeatvirp Sy Le 2. 4. privd Land 1- large-scale 3- lan restructuri enmlepmi recently vadA 6. atization,v restruct co lly only 5- pri farm fu Mo.8-7 titlintub landd .gnnioi Far. ond active nct an fu 10-9 base and ets d. in r,e licyoP of no with arkm of ove are wev fully ho on n.oi seta rol ht wi contetast pricedna NTB absence gininamreem cimon rem not dnaed eco tra and ectot are rketsam pr Estimk oniat es, cantif eralized so WTO, the licy.ope are liciesope Conforming rect etk Di rkets.amdna s.rtop lib onsi licies, Ban pric ly trad with po gulreeD gnisi;s ex byd andn tradd etitivep stedom ors on ndammocl rketsam an ce d. conforming ral World: rol 2. 4. port Mar Environment 1- prices 3- indicative cont im Main.6-5 etitiopm ls Com ltu rotn Al entvretni et estic ope anht 8. constraine co co 7- peyt lianpm ricu Mark co dom devel 9-10. market ag reom urce So An Update on Status and Progress ­ 2002 17 · The transformation of the economic structure has been difficult. This is due, largely, to the incomplete creation of the basic element of farming, the private farm. In the CIS, to a large extent, the inherited large-unit structure has survived the changes. · The introduction of the legal and institutional framework needed for the smooth operation of markets has also proved to be a highly complex and politically difficult task, and arguably still constitutes one of the largest obstacles to the growth of the sector. It is widely recognized that the importance of functioning institutions was underestimated at the outset of the transition. This problem has had implications well beyond the transformation of the agricultural sector. · Many issues related to land markets remain unresolved, particularly in CIS countries, and this compounds the sluggishness of the process of change in agricultural structures. · Surprisingly, the biggest progress has been achieved in the price and market liberalization, while there is a substantial lag in solving the financing problems of agriculture, the liberalization of agroprocessing and input supply, and in the area of institutional reforms. · In all countries the process of agricultural reforms has been strongly influenced by day-to- day politics. Very often, politics have been and still are determining the pace and extent of reforms, at the expense of economic rationality. In general, there is a lack of a carefully considered, long-term strategy, and an objective and realistic evaluation of the economic consequences of the different possible solutions. As a result, the short-term economic costs associated with the process of transition have been greater than necessary, even in the most advanced countries. Generally, the best progress has been achieved in countries that have reformed radically and rapidly rather than gradually, despite the short-term adjustments difficulties. In most cases, the appeals for a gradual approach appear to be a sign of the lack of will; this is especially the case in the CIS countries. · More generally, the pace of transformation of the agrarian sector and the rural economy is lagging behind the rate of changes in the economy as a whole. As in western countries, the farm lobby has often successfully stymied the task of facilitating increased competitiveness in the agricultural sector, by pressing for the provision of immediate protection to the agricultural sector and for income transfers to farming populations. 22. In addition, the following lessons can be drawn from the analysis of the experience of the countries leading the transformation: · The general economic upswing will likely assist governments to undertake agricultural reforms. The greatest progress has been made in transformation of the sector by those countries where the general economic recovery has also begun. · Development in the non-agricultural segment of the rural economy is of key importance to the recovery of agriculture. In the great majority of the countries most advanced in reform, it has been the upswing of the rural economy surrounding agriculture that has made possible a 18 The Agrarian Economies of CEE and CIS: substantial reduction in the numbers of people employed in agriculture, and at the same time, an improvement in the efficiency and competitiveness of agriculture itself. · An important factor in the degree of success of the reform process is the consistency in the introduction of the reforms and the combined implementation of parallel steps in areas related to reforms. · The degree of progress in the reform of the overall economy has strongly affected the agricultural transition, because of the improvements in the stability of the reform process, increase in access to capital, technology and know-how, and stimulating private initiative and the entrepreneurial climate. 23. The diverging progress in reforms is reflected in the agricultural performance of the various countries. In general, the decline in the terms of trade and the reduction in agricultural output prices were accompanied by dramatic reductions in input use in agriculture. For the region as a whole the use of agricultural inputs initially decreased by almost 80% compared to pre-reform levels, and has not significantly increased since, although a gentle upward trend can be observed in CEE countries since the mid 1990s (see Figure 8 above). In contrast land use has remained relatively stable throughout the transition. At the same time, the trends in agricultural labor use have diverged significantly across countries. Notably, labor employment in agriculture declined dramatically in several EU-accession countries, while it remained constant or even increased in core CIS countries and Central Asia. Such differences have reflected the deep divergences in the chosen paths of reforms, and have had major implications for agricultural productivity and rural incomes, as improvements in labor productivity have been strongly correlated with the outflow of labor from agriculture. 24. Reductions in labor use have been closely interrelated with farm restructuring. In general, food security concerns and farm management practices have constrained labor outflow in slow reforming countries, notably in the CIS. At the same time in those CEE countries where individual farming was already dominant or became dominant as a result of the reforms, such as in Poland and in Romania, there was also a preservation or even an inflow of labor in agriculture. On the other hand, in faster reforming CEE countries the liquidation and effective restructuring of state and collective farms have caused strong outflows. Reformed collective and state farms with independent company management have laid off a large amount of workers, but many of these workers subsequently found other employment in rural areas. In most of these countries, the allocation of small land plots to former workers acted as a social safety net for subsistence and minimum income during the transition. 25. Reflecting these observations, the varying extent of progress in reforms is clearly manifest in the dynamics of change in value added, agricultural productivity and the agricultural labor force in the various country groups. Three very distinct patterns of reform can be identified (Figure 12). An Update on Status and Progress ­ 2002 19 Figure 11: Reform Trends Fast Reformers 10.0 9.0 8.0 02 7.0 01 Score 6.0 00 5.0 rmo 4.0 99 98 Ref 3.0 2.0 97 1.0 0.0 Czech Slovenia Estonia Hungary Latvia Slovak Poland Lithuania Bulgaria Rep Rep Moderate Reformers 8.0 7.0 02 6.0 01 Score 5.0 00 4.0 3.0 99 98 Reform 2.0 1.0 97 0.0 ia a ia a a jan HG gia Alban ani Rep b&M a Rom Croat Armeni Macedoni Ser Moldova Geor Azerbai Kyrgyz Bosni Slow Reformers 7.0 6.0 02 5.0 01 Score 4.0 00 3.0 99 2.0 98 Reform1.0 97 0.0 raine ssia larus Uk Kazakhstan Ru Tajikistan bekistan Be Uz Turkmenistan Source: World Bank Estimates 20 The Agrarian Economies of CEE and CIS: 26. In the fast reforming countries there has been a significant increase in agricultural labor productivity (as measured by value added per worker), which has allowed the labor force to shrink (by about 30% on average) while maintaining relatively stable output, thus reflecting tremendous improvements in sector efficiency. Notably, value added per worker in the fast reforming countries has increased by an average of 50% between 1992 and 1999 (the most recent year for which reliable data on labor employment in agriculture is available), and there is reason to expect that the gains have grown even larger in the last few years. It is interesting to highlight that within the "fast reformers" group there is a first cluster that started the reform process as early as 1994, and has achieved very large gains in efficiency, and a second cluster that started the reforms a few years later around 1996, and is following a similar path of development with a lag. In both of these clusters the recovery has been driven by the productivity increases, as reflected both in increasing yields and in higher labor productivity, that have resulted from the successful introduction of the reforms. 27. A second group of countries has proceeded much less decisively in the reforms toward the market system. This group includes some relatively "slow reformers" from CEE countries, the CIS countries and several countries of the former Yugoslavia. These slow reformers exhibit the same process experienced by the fast reformers, but its extent is much less dramatic, with an average 10% reduction in agricultural labor and the increases in value added per worker reaching 20% on average between 1992 and 1999. 28. The third group is comprised of countries that stalled agricultural reforms and countries that never started the process of serious reforms. In this group of countries there has been overall stagnation ­ neither significant increases nor declines took place in any of the indicators. In fact, in some countries agricultural output has increased, while in others it has been falling, compared to the start of the transition. In general the extent of the output recession appears to have been much more prolonged, but agricultural output has begun to recover since the late 1990s. Although agricultural production is about the same or has even increased in some countries, the efficiency of the sector has not improved at all, as indicated by the stagnation or decline in labor productivity (agricultural value added per worker). Further, they are seriously behind their neighbors in the process of change towards a competitive agricultural sector. IV. Uneven Reform Progress in Central Eastern Europe and the CIS 29. Progress in the main areas of transformation has been uneven throughout the region. The most visible phenomenon, however, is the continuing differences in the progress of reforms between CEE and the CIS. a) Liberalization of market and trade policies has been implemented to a much greater degree in CEE countries compared to the CIS countries. An Update on Status and Progress ­ 2002 21 Figure 12: The Three Paths of Reform Fast Reformers First Cluster Second Cluster 150 150 e 125 125 valu 100 1993fo 100 75 % sA 75 50 50 1992 1993 1994 1995 1996 1997 1998 1999 1992 1993 1994 1995 1996 1997 1998 1999 Slow Reformers Third Cluster 150 Agriculture value added per w orker (constant 1995 US$) 125 100 Agriculture, value added (constant 1995 US$) 75 Labor force in agriculture (persons) 50 1992 1993 1994 1995 1996 1997 1998 1999 Minimal and Non Reformers Fourth Cluster Fifth Cluster 150 150 e e 125 125 valu valu 1993fo 100 1993fo 100 % % sA 75 sA 75 50 50 1992 1993 1994 1995 1996 1997 1998 1999 1992 1993 1994 1995 1996 1997 1998 1999 1st Cluster ­ Czech Republic, Hungary, Slovenia, Estonia, Latvia 2nd Cluster ­ Slovak Republic, Bulgaria, Poland, Lithuania 3rd Cluster ­ Albania, Armenia, Romania, Croatia, Azerbaijan, Georgia, Macedonia 4th Cluster ­ Bosnia, Kyrgyz Republic, Moldova, Ukraine, Kazakhstan, Russia 5th Cluster ­ Tajikistan, Yugoslavia FR, Uzbekistan, Turkmenistan, Belarus Note: Clusters refer to rankings in Table 1 Source: Data on agricultural labor have been provided by Prof. Zvi Lerman, based on official country statistics (http://departments.agri.huji.ac.il/economics/lerman-main.html); data on Value Added are from WDI 2002. 22 The Agrarian Economies of CEE and CIS: · In most CEE countries, the macro-economic environment for agriculture that is characteristic of market economies has been developed. The prices and the system of regulations are open, more or less, to world market influences. Agricultural policy developments are fully determined by the eventuality of EU membership. The EU has recently made a detailed offer as to the type of CAP it intends to offer the new entrants, but the strategy that the countries preparing for EU membership will select in introducing the EU's CAP remains to be seen. In many countries the EU accession has been used as a justification to increase support to agriculture. Much intervention focuses on price and income support to farms, rather than being targeted to improve the structural efficiency and the competitiveness of the agricultural sector to allow it to take full advantage of the access to the EU market. In fact, most candidate countries are currently unable to fully exploit their tariff-free access quotas to the EU. · State intervention in both price formation and trade policy remains much more direct in the majority of CIS countries. It is noteworthy that in most of these countries, agriculture is still net-taxed and suffers serious losses as a result of the current set of price policy and trade restrictions (especially export controls and taxes), which prevent it from competing in world markets. This is in spite of the frequent proclaims of support for agriculture. It would appear that governments are trying to make agriculture continue to bear the burden of providing cheap food for the urban population. There has been significant progress on movement toward a more liberal agricultural policy in Russia. In Ukraine the interfering of regional authorities in the functioning of the agricultural sector, which had been significant a few years ago, has now been substantially reduced. b) Privatization of land and the related reorganization of the large farm units have almost been completed in most Central European countries. Land reform and land ownership continues to be the subject of heated debates in practically all CIS countries, however there has been measurable progress, even in the core of the CIS. · In the countries of Central-Eastern Europe the privatization of land based on some form of restitution is largely approaching completion. A varied mix of small and large units characterizes the new farm structure. Almost all the agricultural land has been privatized and a significant portion is used by individually managed smaller farms. The remaining state owned units from the socialist period are also increasingly undergoing change and adapting to market economy conditions. The legal settlement of land ownership relations is not yet completed, and the establishment of land registries and the emergence of a market for land are still in the initial stages. In a few countries, a heated debate is ongoing regarding the ownership of land by companies and foreign nationals. · Although land ownership in the key CIS countries (Russia, Ukraine) has formally been transferred into private hands, the larger farms still remain intact. An increasing number of large corporate farms, based on leased land have emerged, especially in Russia and Ukraine. In these countries the role of independent private farming remains relatively small, not least because of the deterrent effect of the undeveloped market relations. Often, the policy climate in these countries openly discriminates against individual private farms. Due to the high political and economic sensitivity of land reforms, radical changes have been carried out in An Update on Status and Progress ­ 2002 23 only very few countries of the former Soviet Union. This is the case for Armenia and Georgia where independent private farming now dominates. Here, the distribution of land carried out on the basis of family size resulted in very small farm sizes and this has gone together with a steep decline in agricultural production for the market. Since the mid 1990s Moldova and Azerbaijan have made significant progress in land reform. In Uzbekistan and Tajikistan private ownership of land is still prohibited by the constitution and the current leasehold arrangements add additional uncertainty. c) While initial privatization has been accomplished, the technological modernization of agroprocessing has yet to take place in most of the countries. · In Central-Eastern Europe, with the exception of the Baltic States, privatization of the agricultural environment has been carried out in keeping with the principles of the privatization in general, and for the most part is nearing completion. A lag can be observed in Romania, Bulgaria and the countries of ex-Yugoslavia. In several of the EU candidate countries, and especially in the fast reformers (Hungary, the Czech Republic and Estonia), significant inflows of foreign direct investment have gone into modernizing the agroprocessing sector (Figure 13). The share of total FDI going to the agro-food sector is around 15% on average, with the vast majority of the agro-food FDI going into agro-industry rather than primary agriculture. Investments have been attracted by the relatively cheap labor costs and the prospect of integration in the EU market, but also by the extent of liberalization and transition to a market economy. A special mention is deserved for Hungary, which as a result of the liberal privatization process and thanks to substantial foreign investment now has perhaps the most developed food industry of the region. Together with the privatization of the agroprocessing industry there has been a significant increase in vertical sectoral integration. This process, which has often been the result of the influence of foreign investment, has taken various forms and has brought about improved access to capital, inputs and technology for farms. Agribusiness firms in an effort to ensure a regular flow of high quality raw materials, have introduced a number of arrangements to encourage farmers to greater production and better marketing and to overcome constraints which have hindered economic activity since the onset of the transition. Foreign companies have played a leading role in the development of these arrangements. · In most of the CIS countries a less effective solution was adopted for the privatization of the food industry and agricultural input suppliers. In the course of privatization, unlike the other areas of the economy, priority was given to agricultural producers, giving them majority ownership of these branches, on special terms or entirely free of charge. Contrary to expectations, this solution did not result in new, well-capitalized owners and more favorable conditions for agricultural producers. In fact, the technological decline of the food industry accelerated and because of the complicated ownership structure it became extremely difficult to involve foreign capital. In the last few years, however, progress in the privatization and demonopolization of the agroprocessing industry has resulted in restructuring and increased efficiency of the food-processing sector, and a recovery has been taking place especially in Russia and Ukraine. 24 The Agrarian Economies of CEE and CIS: d) Lack of agricultural financing continues to be one of the most serious constraints to agricultural growth · This is still a major problem both in Central European and CIS countries. In the CEE countries, the financing of agriculture has improved considerably since 1994, but still remains very weak. The new private institutions are still managerially weak and financially vulnerable. This is partly the result of the reforms in the banking system, and partly the result of the credits extended to still relatively weak food industry and the agricultural input suppliers. The creation of an agriculture-oriented rural banking system has also been progressing, resulting in the establishment and increasingly active operation of agricultural credit co-operatives and financial institutions specializing in rural areas. Figure 13 Foreign Direct Investment in Transition Countries 1992-2000, US$ per capita 2500 2000 capita 1500 per 1000 500 US$ 0 blic ia R ia lic e n ech RepuHun blic arytonia n gEs Croa PolandLatviavenia thuzakhAzerbaijaulgar tia ania stan onlarus is B Romania , FYGeorg ratiBe nialdovapubUkrain tajikistankistan Slova Slok RepuLiKa onia Fede ArmeMoz Re rgy Uzbe Cz TurkmenTa Maced Ky Russian Note: No data for Albania, Bosnia and Herzegovina, and Serbia and Montenegro. Source: WDI 2002 · In the great majority of CIS countries the rural financial system is not yet fully adjusted to the needs of a marked based privatized agriculture similar to that in developed countries. The emerging private banks, however, provide an increasing amount of financing to the agricultural sector. The beginnings of a system of agricultural credit co-operatives have appeared in the countries most advanced in the transformation of agriculture, namely Armenia, Georgia and recently also Moldova, and the credits extended by the processing industry are also growing. An Update on Status and Progress ­ 2002 25 e) Institutional reforms are proceeding much slower than all other areas of reform throughout the region. · Institutional reforms have accelerated in Central-East Europe since 1995, stimulated by the challenges of EU accession. Despite these tangible developments, the institutional system of agriculture requires substantial further transformation in these countries. The implementation of EU standards grading quality assurance methods represent the most pressing priorities. In addition to the modernization and reform of state administration, further qualitative development is required in practically all areas of the institutional systems for market agriculture, including consulting, training, and research. · In several CIS countries a vaguely restructured institutional system of the former centrally planned economy continues to operate and to hinder the transformation of the sector. In other CIS countries, the state has not taken a different role, but merely withered away and, due to the general economic recession and disruption, has been unable to fulfill some of the key roles for the development of a market economy. As a result there have been fundamental disorders in the operation of the institutional system, including in enforcing the rule of law and in collecting taxes and establishing the basic conditions for macro-economic stability. Underpaid and unmotivated state bureaucrats often strive to supplement their incomes through corruption. Training and research centers are suffering from severe financial problems and in some countries they receive little or no financial support from the government budget. However, the overall stability, accountability and efficacy of the institutions in the region appears to be improving, and significant improvements can be observed in some individual countries. 26 The Agrarian Economies of CEE and CIS: References Brooks K., Lerman Z., 1994, Land Reform and Farm Restructuring in Russia, World Bank Discussion Paper No.233, The World Bank, Washington D.C. Csaki C., Lerman Z., 1997, Land Reform and Farm Restructuring in East Central Europe and the CIS in the 1990s: Expectations and Achievements after the First Five Years, European Review of Agricultural Economics, Volume 24(3/4): 431-455. Csaki C., Lerman Z., 1997, Land Reform in Ukraine: the first five years, World Bank Discussion Paper No.371, The World Bank, Washington D.C. Csaki C., Tuck L., 2000, Rural Development Strategy: Eastern Europe and Central Asia, World Bank Technical Paper No. 484, ECSSD Series, The World Bank, Washington D.C. Csaki et al., 2002 Forthcoming, Food and Agriculture in the Slovak Republic: The Challenges of EU Accession, The World Bank, Washington D.C. FAO, The State of Food and Agriculture 2002, Food and Agriculture Organization, Rome, Italy Macours K., Swinnen J., 2000, Causes of Output Decline in Economic Transition: The case of Central and Eastern European Agriculture, Journal of Comparative Economics, 28 (1): 172-206. B. Policy Matrices Fast Reformers (countries with a ranking score 8.0 or above) Czech Republic Slovenia Estonia Hungary Latvia Slovak Republic Poland Lithuania Bulgaria 27 28 CZECH REPUBLIC Total Population 10.18 mil.1) Food and agriculture GDP Agricultural output in 2002 as percentage Rural Population 25 %2) (2002)4) 7.2 % of 1989-91 average level 68.6 % Food and agriculture in active Livestock production in 2002 as Total Area 7.9 mil ha labor (2002)4) 6.8 % percentage of 1989-1991 level 64.9 % Agriculture area: 4.3 mil ha Food and agriculture Share of livestock in agriculture (2002) 55.4 % Arable land 72% in exports (2002) 3.6 % Agricultural area privately owned (2002) 82% Orchards 1 % in imports (2002) 5.2 % Share of individual private farms in total Forested 33% Traditionally net importer of arable area (20025)) 26 % agricultural products: animal Share of private sector in total agricultural feed, various food preparations, output (2002) 99% (tropical) fruits and vegetables. 1) Czech Statistical Office, related to September, 9, 2002. 2) Municipalities to 1999 inhabitants, by the General Census 2001. 4) Agriculture + food industry according to the System of National Accounts of the Czech Statistical Office, all figures for 2002 preliminary, GDP in current prices! 5) Based on Agrocensus 2000, Czech Statistical Office. ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic After initial success, the highly industrialized Distortion free market and incentive system. Framework for Agriculture Czech economy ran into recession, but since 1999 Distortion is linked with the implementation of the situation has been improving (1999-2002 ­ (1999 ­ 2002) CAP-like market systems (eg. for milk and estimate): real GDP 1999-2002: 0,5; 3,3; 3,3; 2,7 sugar since 2000-2001). %. Inflation 2,1; 3,9; 4,7, 1,8 %, unemployment 9,4; 8,8; 8,9; 9,8 %. Support to agriculture rose to `average central European' level, reaching to 16,5 % PSE in 2000-2001 in average). 29 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS A. Prices/Subsidies · Prices have been liberalized in 1990/91, but some · Revision of support programs to focus on distortions persist through government support. efficiency enhancement rather than price and export subsidies. · Budgetary expenses on agro-food sector increased considerably in 1999, reaching 443 million · The various instruments of government ECU (504 mil. ECU in 2000; 616 mil. ECU in 2001 and intervention in the sector, especially the various 575 mil. Eur in 2002 ­ preliminary), of which farm support programs, need to be integrated into a sector (without export subsidies) 357 mil. ECU (394 more consistent and predictable framework, mil. ECU in 2000; 516 ECU in 2001 and 398 mil. Eur in following EU systems.. 2002 ­ preliminary). · Changes in the Czech agricultural policy · Price support measures with "guaranteed" prices framework need to take into account the evolving for the main commodities. Since 2000 milk quota nature of the institutes, instruments and system with minimum farm-gate milk prices and requirements of the CAP as a "moving target" since 2001 sugar quota system with minimum sugar- reflecting possible reforms of the CAP). beet and sugar prices have been implemented · The full adjustment of support to EU levels following some EU principles. Price support should be postponed until the actual accession. measures also include export subsidies and supports on storage, reaching 41 mil. ECU in 1999 · Social measures in the rural areas need to be (28 mil. ECU in 2000, 41 mil. ECU in 2001 and 82 mil. separated from the major instruments of Eur in 2002 ­ preliminary). agricultural policy aimed at improving efficiency and competitiveness. · Financial support for the establishment of new private farms and for investments in the agro-food sector (since 1999 reduced due to lack of finance). Some measures to reduce the "transformation" indebtedness of farms. · Direct (per hectare and headage) payments or compensation to farmers in less favored areas, and areas with special features. Since 1999 income support has been extended also to all farmers, but since 2001 payments in LFA has been granted only to grassland. . New measures for input subsidies (e.g. oil) and emergency (compensation) payments owing to floods and drought (2001 - 2002). · Support for socially desirable farming practices, such as the transfer of arable land into meadows and pastures and other production extending or environmentally friendly practices is developing. . During 1999 ­ 2002 supports which could be linked with positive effects on environment (including supports on renewable sources of energy) have increased significantly (134 mil. ECU in 1999; 179 mil. ECU in 2000, 162 mil. ECU in 2001 and 200 mil. Eur in 2002 - preliminary). 30 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · Relatively liberaltrading regime, governed by a · Maintain the generally liberal trading regime number of multilateral and bilateral agreements. and fully comply to all WTO commitments. · Border measures are, to a large extent, conditions · Avoid early adoption of EU protection levels. imposed by WTO commitments (Czech Republic · Export subsidies and non-automatic licensing became a founding member of the WTO on January should be phased out. 1, 1995) and also by agreements with the EU and under CEFTA. However, the CEFTA agreements are stagnating (except for the Custom Union with Slovakia). In 2001, the "double-zero" option was implemented in the trade relations with the EU. The "double-zero" option has been extended to the "double-profit" option to start in 2003. · Most tariffs are considerably below EU equivalents (2.5 times lower on average for all tariffs), except for poultry, pork, potatoes, and oilseeds. · Export subsidies were at relatively low level in 1995-97, as well in 1998 ­ 2002 (see part A; the major part of subsidies are going on dairy products); new indirect export subsidies in effect since 1997 (interest subsidies of credits for trade firms and for selected commodities, e.g. sugar), stopped in 2000. · Automatic export and import licensing for registration purposes; non-automatic export licensing is occasionally applied when world market prices are significantly higher than domestic prices (cereals, rape seeds 1996 ­ 1997). Since July 2000 only two items, pharmaceutically important, have remained under a strict non-automatic export license regime. Export license system was released especially for grains and oilseeds. 31 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS C. Taxation · Farmers are subject to land and property tax, as · Limit tax exemptions for agriculture for a more well as personal income or corporate tax. They efficient allocation of resources. usually pay land tax for landowners. Special income · The taxation system and the provided tax and corporate tax concessions for farmers are about concessions need to be harmonized with EU 9 mil. ECU per year. Since 2000, a special excise tax practices and requirements. concessions for farmers (as "green oil") have been implemented (about 35 mil. ECU in 2001, as well in · The support on bio-energy (bio-oil) needs to be 2002). adjusted to the EU system. · Tax preferences (excise tax and VAT concessions for biofuel and small breweries): 34 mil. ECU in 1999; 40 mil. ECU in 2000; 29 mil. ECU in 2001 and 52 mil. Eur in 2002 ­ preliminary). However, excise tax concessions for biofuel were abolished by the Parliament in 2001 and the form of support in this field has been changed (direct support to biofuel producers). · Low tax payments especially due to low profitability of farming. 32 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm First phase of transformation has been completed Efficient, internationally competitive private Restructuring to a large extent. However, the state land remains to farms and an active land market. be privatized, debts are hampering the sectoral · Further "second" transformation of collective performance and it still takes time for the farms, involving the restructuring of ownership, emergence of efficient and competitive enterprises. management, entrepreneurial activities, and labor. · By 1998, 80% of agricultural land was in full (a) · Quick settlement of farm debts private ownership (81,4 % in 1999), more than 90 % and strict enforcement of of restitution cases had been resolved (93,3 % in bankruptcy laws. 1999), land use was almost fully in private hands. (b) · Speeding up sale of remaining · 800,000 ha of agricultural land still remains state- state owned land and land owned. Privatization of the state land (500,000 ha) consolidation in cadastres. has started in 2000, but with very slow progress by 2002(many administrative obstacles), in spite of a · Enhance the evolution of land market and the relatively high demand particularly in west border acceptance of land as collateral. regions. The majority of privatized land is a compensation for restitution claims at present. · Dominance of large-sized farms (5,6 % of largest farms operates on 76,4 % of agricultural area). · Following their legal transformation, most cooperatives have barely restructured operations. · Large-scale farms, in particular cooperatives, carry large debt overhang; total indebtedness of agricultural sector is estimated to be about 1.7 bn Euro, slightly decreasing after writing-off the part of state interest free-loans for farmers from 1992-1993. Also debts for privatized non-land assets were decreased by the re-assessment of their values (see also part 4). · Relatively solid system of cadastre and land titling; still, roughly two million parcels are not fully registered (titled).A new system of the identification of land usage has been developing, following the EU requirements (IACS). · Land market is partially operating: active and quickly developing land lease and rental market (lease is major tenure), but land purchases/sales are still hardly existing. . Land (re-)land consolidation, one of the basic preconditions for farm restructuring and the land market development, is going ahead very slowly (by 2002, the land consolidation has been completed only in 203 cadasters from their total number of about 13,000) 33 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Privatization of agroprocessing and services has Internationally competitive and privately owned Agroprocessing and been completed, but new owners will have to reduce agroprocessing and agroservices. Services for Agriculture. costs and improve efficiency to become internationally competitive. · Review the legal framework of cooperatives to · There are large overcapacities (about 30 ­ 35 %) in assess the impediments it creates in the formation food industry yet. Structure of agro-food of marketing and processing cooperatives and to processors is dominated by medium-scale firms (100 their effective management. ­ 299 employees) with 32% share in sales of food industry in 2000­ 2001. · Strengthen a network of private regional exchanges with or without the support of local · Most agro-industries (and partially also services) municipality. struggle with weak management and low labor productivity, which is slowly increasing (a better · Develop an analysis of price related risks taken situation exists in firms with a foreign participation). by entrepreneurs in the agricultural and food marketing chain, their costs, and launch training · Agro-food and agro-service enterprises attracted programs on agricultural marketing and price/risk some direct foreign investments (especially sugar management in agriculture. refineries, dairies, breweries, confectioners). The share of FDI in food industry (4,8 % in 2001) · Adjust general institutional framework to attract exceeds the share of food industry in GDP (3,9 % in further strategic foreign direct investments. 2000). · Corporate governance has been improving, following a simplification in the ownership structure. . However, the main problem of food industry (especially in meat and dairy industries) related to EU accession is the full implementation of food safety standards (as a part of acquis). Their implementation represents large investments (only 44 firms applied for a transition period after EU accession, other should comply with EU standards or should stop production). . · Competitive wholesale market for agricultural commodities and food are yet to develop, but consolidation in the sector is in progress. Commodity exchanges (2) and warehouse receipts system, introduced in 2001, are not still important as a "generator" of market prices. . There are some marketing organization of producers (milk, pigs, fruit, vegetables, etc.), but they often suffer from the low level of co- operativeness of their members. . In retail sector there is a rapid growing share of international food chains leaving only one Czech firm among the top 10 retailers in 2000 - 2001. The most progressive are hypermarkets, whose share in the retail turnover has increased from 27,5 % in 1999 to 36 % in 2001. 34 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 4. Rural Finance High financial risk stemming from under- Sustainable private rural financial services. capitalization, high debt, and poor credit history; · The current credit guarantee scheme needs to elaborated but financially weak system of credit be fully de-linked from government, and credit subsidies and guarantees. subsidies need to be discontinued in their present · Large number of commercial banks, dominated by format. `Commercial Bank' involved in the financing of · Credit subsidies might temporarily be replaced farming sector by investment grants for a transitory period to · Credit subsidies and guarantees are provided improve competitiveness. through the Support and Guarantee Fund for · Review legal and institutional obstacle for the Farmers and Forestry (SGFFF) and through the use of land as collateral. Czech-Moravian Guarantee and Development Bank (support for small and medium firms, except farms). · Activate the legal process for bankruptcy and liquidation. · High indebtedness and non acceptance of land as collateral reduces private involvement in financing · Reduce the level of the state guarantee on bank of farms without state guarantees. credits through SGFFF, to increase a risk component for private sector. · A part of the debts (for interest free loans from 1992 ­ 1993) was written off by the government in · Phase out interest rate subsidies and adjust 2000. In the same time, the privatized non-land investment supports to EU conditions. assets were re-evaluated, to adjust their value to real market conditions. A solution for transformation debts of coops (transformation shares issuing from the Transformation Law 1992), approved by the Parliament in 2001, was cancelled by the Constitutional Court. · Since 2001, new support schemes ­ grants for young farmers have been established. · For villages, there are possibilities to participate in more programs under the Ministry of Regional Development or under the Ministry of Environment (e.g. Program for Restoration of Villages, Program for Landscape Maintenance, Program for Revitalization of Water Flows)). · However, there are many expectations on SAPARD supports, which have started to function in 2002. · The Czech agriculture and rural regions suffered from the disastrous floods (1997, 2002) and drought (2000). Farmers and villages were compensated by large disaster payments, particularly in 2000 ­ 2001 for drought. 35 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Framework Consolidation and adjustment of main agricultural Improve efficiency in the provision of "public institutions has been largely completed. goods" to agriculture and strengthen effort of EU harmonization. · Relatively sophisticated agricultural research and education system, but insufficient information and · Strengthen private and public information extension services, including market information systems, and launch a program of collaboration systems for public use. between the private sector and state agencies. · Institutions to monitor and enforce quality and · Complete the restructuring of state agencies health standards have been made more efficient but involved in consumer protection, animal and plant more needs to be done to meet strict EU protection, agricultural research and extension, requirements. border control, farm registration, market information, market organization by sub-sector, · In 1999 ­ 2001 the process of the harmonization of and market intervention. the Czech legislation with the EU one has continued. · Adjust agricultural support system to CAP; accelerate institutional harmonization with EU · The present institutions for the implementation standards. and administration of agricultural policy are not still in full compliance with the EU requirements. · A more integrated regional and rural policy and However, quite new institutions have been related support programs have to be improved to established in 2000 - 2001: State Agricultural be able to utilize fully the EU's structural fund Intervention Fund, quota systems for milk and instruments. sugar sectors (with problems), Payment Agency for SAPARD etc. Some progress was made in the Integrated Administration and Control System and especially in the Farm Accountancy Data Network as a part of acquis. 36 SLOVENIA* Total Population 1.98 mil Agriculture in GDP 2000 2.9% Agricultural output in 2000 as % Rural (2000) 52 % percentage of 1990 level Food processing in GDP 1998 4.0 % 111% Total Area (2000) 2.03 mil ha. Livestock production in 2000 as Agriculture in total employment 101% Agriculture area in use: 0.52 mil ha. percentage of 1990 level (1999) 5.3 % Forest: 1.12 mil ha. Share of livestock in agriculture Arable land: 0.17 mil ha. Food processing in total 2000 61% Permanent crops: 0.03 mil ha. employment (1998) 2.8 % Permanent pasture: 0.31 mil ha. Share of trade of food and agriculture in Arable area used by agricultural Irrigated: 0.003 mil ha total manufactured goods (2001) enterprises or holdings (2000) n.a. - export 3.7 % 20381ha (no data available) Share of Agricultural Area 25.5 % - imports 6.6 % Arable land 8.5 % Share of independent full and Traditionally net exporter of hops, wine, Permanent crops 1.5 % part-time family farms in fruits, milk, eggs, and poultry. 97% Permanent pasture 15.5 % agricultural area in use 2000 Irrigated 0.6 % *Statistical data are mostly related to the Year 2000 (At the moment there is no official statistical data for the year 2001), later in this year data for the 2001 could be obtained. ISSUE STATUS OF REFORMS OBJECTIVES / PROPOSED ACTIONS 1. Macro-economic The macroeconomic environment in Slovenia is stable. Focus on preparation for EU Accession on Framework for Import protection still the main cause of distortions for institutional agricultural policy. agriculture and food industry. Agriculture 37 ISSUE STATUS OF REFORMS OBJECTIVES / PROPOSED ACTIONS A. Prices/Subsidies§ Thesystemoffinancialinterventionsinagriculturewas § Improvemarketstructureandfosterthe changed in 2000 according to the "Program of Agricultural development of market functioning Policy Reform 1999 ­ 2002" ("the reform of agricultural § Continueliberalizationofdomesticagricultural policy") accepted in 1998. The reform of agriculture policy and food markets. covers systematic, economic, organizational and § Createconditionsfortheimplementationofa institutional field. At the moment sectorial development private marketing infrastructure, including the plan for the period 2002 - 2006, which is basis for all key provision of detailed marketing information. agricultural developments after EU accession, is being adopted. § Supportproductmarketingandestablishingof regional and national trademarks. § In2000theAgricultureActwasadopted.Itsetsthe objectives of the agricultural policy and lays down the § Createadditionalemploymentandincome planning of development in agriculture and rural possibilities on family farms. development, agricultural policy measures, quality and labelling of agricultural products and foodstuffs, the marketing of agricultural products and foodstuffs, public services, databases in the agricultural sector, procedures and authorities for the implementation of the Act, research, training and development, technical tasks and supervision and control. § NewEUcomparableuniforminformationsystemwith central data base (IACS ­ Integrated Administration and Control System) administered by MAFF was established. § NewAgricultureActclearlydefinedMinistryfor Agriculture, Forestry and Food (MAFF) as an institution responsible for agriculture market-price policy, structural and rural development policy. Ministry for Economics (ME) stays responsible authority for general foreign trade issues. § Internalmarketisliberalized.Atthebeginningofthe 2001, new EU comparable legislation for milk and milk products was adopted which abolished fixing administrative prices. Later in 2001 new EU comparable common market organizations for different agricultural products (beaf and veal, sheep and goat meat, sugar, cereals, seeds of agricultural plants, wine, fresh fruit and vegetables) were introduced. Instead of price support direct payments for all respective products were introduced. § Agriculturalproductsfallintothreepricecategories: lower than the EU prices, e.g. maize, barley. Close to EU prices, e.g., wheat, milk, sugar beet, beef and veal. Higher than EU prices, e.g., pig meat, poultry meat, eggs. 38 ISSUE STATUS OF REFORMS OBJECTIVES / PROPOSED ACTIONS B. Direct Support and§ NationalProgramofAgriculturalPolicyReformand § Newaidschemesshouldensuremorede- Structural Policy new Agriculture Act introduced a new system of financing coupled payments in order to minimise domestic agricultural policy: direct payments, decreasing of prices, market and trade distortions. structural policy, all comparable with EU. § Clearcaponthebudgetconcerningdirect § In2001differentdirectpaymentswereimplemented: payments schemes. direct payments for arable crops, beef and sheep&goats, § InitsnegotiationpositionSloveniacalledfor LFA direct payments and agri-environmental direct direct aids to be paid in full by the accession. The payments. National Development Programme for the period § Onthebasisofagriculturereform,the following 2001-2006 (NDP) was adopted by the Government structural policy and rural development objectives are in December 2001. Slovenia will prepare on the implemented: the restructuring measures with supports for bases of adopted NDP Single Programming investments for agricultural holdings, producers Document for the period 2004-2006 (SPD), for the organizations, food producers and food and processing use of European Community structural funds, that industry, as well as land operations with the view to will also include the provisions for the improve the farm structure. Reform also includes spatial implementation of the measures co-financed from planning measures and the renovation of village, supports EAGGF-Guidance section. SPD 2004-2006 will be for the economic diversification in the countryside and the implementing document for the measures development of agriculture related infrastructure. Type, within the priority: The issues of the operational scope and conditions for carrying out off-farm activities on programme Agriculture and Rural Development agricultural holdings are defined. Modernisation Programme will be included in the § ImplementationoftheEUpre-accessionprogrammefor SPD as a part for the implementation of the agriculture and rural development (SAPARD) started in measures co-financed from the EAGGF- Guidance January 2002 when first invitation to tenders were Section. published. 39 ISSUE STATUS OF REFORMS OBJECTIVES / PROPOSED ACTIONS C. Trade Policies · PSE (OECD Producer Support Estimate) is significantly § ImplementWTOagreementsinaviewof higher than other CEECs and nearly the same as further liberalization of agricultural market. European Union's § PreparationforEUaccession,andincrease · Border protection is still important instrument but only for public awareness. certain most sensible agricultural products within EU § Furtherliberalizeagriculturaltradepolicyand comparable market organizations. Border protection is still reduce border protection together with reform of important instrument but only for certain most sensible domestic market organizations. agricultural products vokviru CMO · Slovenia's trade balance is negative. Agro-food trade in 2001 is about 36% of the global trade deficit. · Main trading partners on the export side are former Yugoslavia and EU, with respectively 68% and 17%. On the import side, the EU is the major trading partner (54%) with CEFTA countries (17%) and former Yugoslav Republics (10%). · Since October 1994, Slovenia is member of GATT and became a founding-member of WTO. Among the CEECs, Slovenia has a very specific position within the GATT Agreement, in particular, it made its commitments in euro. The initial AMS value amounted to 159 Mio ECU in 1995 and the final AMS to 131 Mio ECU in 2000. So far, the AMS does not appear to represent a particular policy constraint. Furthermore, Slovenia uses ad valorem (%) and fixed specific import duties (tariff equivalent) according to Schedule XCVI to the Protocol for the accession of the R Slovenia to the GATT. · Minimum tariff quotas have to be opened for wheat (80,000 t), barley (70,000 t) and maize (120,000 t), which more or less covers imports of these products. · Trade agreement with EFTA countries; CEFTA member since 1995; EU Association Agreement (signed 1997). Recently within AA significant range of products were liberalized. In December 2001 new trade negotiation round started. · Free Trade Agreements with Macedonia, Lithuania, Latvia, Estonia, Croatia, Israel, Turkey and from 2002 also Bosnia and Hercegovina. Introduction of FTAs has already significantly reduced border protection. 40 ISSUE STATUS OF REFORMS OBJECTIVES / PROPOSED ACTIONS 2. Land Reform and Small farm sizes (4.8 hectare in 2000) and dispersed Develop land market in order to improve Farm Restructuring structure of plots. efficiency; define and implement targeted § Averagefarmsizeis9.4haoftotalland,with4.8ha programs. A. Land Consolidation used for cultivation. Around 60% of farms occupying about § Use land taxation to encourage land one third of agricultural land, cultivate only 1 to 5 ha. consolidation. Policies should stimulate land § Lowlandtaxprovidesnoincentiveforallocationof market creation and facilitation mechanisms. land use to most efficient farmer. § RestructurestateFundforAgricultural Land § Processofrestitutionofnationalizedlandand and Forests to actively support land consolidation privatization of socially owned farms is still sensitive issue by buying, holding and reselling land to improve but after 1999 the process is again speed-up. farm structure (like SAFER in France). § Currentregisterisinaccuratehinderinglandmobility § Landcadasterwascompletedin2000. B. Land Cadastre and and causing additional costs. Land Registration§ Thefunctioningofthelandmarketwillbeimprovedby the new Land Register Law, which regulates the updating and computerization of the cadastre for urban and rural areas. § In2000projectformodernizationofLandcadaster(data on parcels) and Land register (data on ownership) started. And will enable computer-based data exchange. World Bank project for real estate modernization is also currently in progress. § GraphicbaseofLandcadasterisintheprocessof digitalization. C. Land Markets § Landleasingismoreandmoreacceptedasimportant § Supportlongtermlease. means for developing a competitive farm structure. § Introduceretirementscheme,andeasetransfer of land. § LandpricesstillapproachthehighestlevelsinEurope. D. Agriculture and § In2000systemofdirectpaymentsforenvironment § Fullimplementationofagri-environmental Environment protection and landscape and LFA, in compliance with EU measures and LFA schemes. guidelines, were implemented. In 2001 Slovenian agri- environmental program was adopted. § InthemiddleoftheYear2001,rulesfororganicfarming were adopted, followed by rules for integrated plant production, type of production with reduced application of plant protection products in year 2002 (fruits, wine, vegetables). High interest of producers in applying those agricultural practices is expressed in Slovenia. 41 ISSUE STATUS OF REFORMS OBJECTIVES / PROPOSED ACTIONS 3 . Agro-processing and Enterprises are partly efficient and internationally Improved farm efficiency; transformation of co- Services for competitive, but vestiges of old system hinder progress. ops and preparation for EU accession. Agriculture § Farmincomeismostlybelowthedefined"parity § Promotejointuseofmachinery(machinery income level". circle, contracting). A. Farm Profitability § Widespreadover-mechanization. § Startinformationcampaignoncostreduction § Lackingknowledgeofmodernmarketingandbusiness and productivity improvements in the different practices. production areas. § Lackofco-operationinproductmarketingandinput § Furtherdevelopmentofmarketinformation purchase. system for other agricultural products (eggs and poultry meat) is in progess. § In2001marketinformationsystemforpigmeat,milkand milk products, beef and veal and lamb was established. § Supportproductionofhighqualityinsteadof mass production. § Putstrongemphasisoncreationor improvement of alternative sources of farm income (tourism, forestry etc.). B. Agricultural Co- § Agriculturalco-operativesstillplayanimportantrolein § Revisethelegalandorganizationalframework operatives providing supply, marketing and credit services to under which co-operatives operate to let them agricultural producers. become genuine. § Theco-operativesectorinSloveniaiscurrently § Transformexistingco-operativestomarket experiencing a serious recession. Many organizations have oriented organizations. adapted poorly to the changed economic conditions. § Transformexistingco-operativestomarket § Overstaffing,excessivelydiversifiedoperations,and orientated organizations . lack of managing initiative lead to high costs and weaken § Supportspecializationandmarketactivitiesof the position of co-operatives. agricultural co-operatives. § Financialbusinessconsolidationintheco- operative system should be considered as an important element of the institutional improvement needed in Slovenia'a agro-food sector. § Informagro-processing enterprises about business opportunities and market mechanisms (3) Agro-industries § Thefoodindustrycontributestooveralleconomic output almost as much as agriculture but employs half the § Modernizationandadaptationoffood people. processing industry in compliance with EU standards. § Highfragmentation,unfinishedcorporatereformand § Improvementofeconomicefficiencyand policy interventions are the main impediments to competitiveness of food processing enterpris es. competitiveness. § In2001spatialprogramforrestructuringandadaptation § Improvementofindustrialstructure.Remove of food processing industry was continued; supports were all monopoly and oligopoly support but support given for adjustment of agro-processing enterprises to the vertical and horizontal integration. EU veterinary and biological standards and improvement of § Application of contemporary marketing and their competitiveness. In program high level of compatibility management strategy. to respective EU rules has been achieved. 42 ISSUE STATUS OF REFORMS OBJECTIVES / PROPOSED ACTIONS § In2001Foodsafetystrategy was adopted which § Nationalpolicyisorientedtowardimproving D. Quality policy and focused to whole food chain "from stable to table" product quality, promotion of trademarks together Food safety including phytosanitary and veterinary issues, feed and with food safety and protection of the general issues for consumer protection. environment. Process of introduction of EU quality § Rulesforgeographicalindicationsofdifferent agro-food standards is in progress. foodstuffs were adopted in 2001. Special Office dealing with this issues was established. General banking system is active in rural lending but the Fully functioning and viable rural financial 4. Rural Financing general problem of high interest rates is affecting rural system. economy. § Analyzetherealbottlenecksoftherural § Lackinginvestmentpossibilitiesinagricultureislessa financialsystem. phenomenon caused by missing credit resources than § Assistfarmersandotherruralentrepreneursin economic situation of farming and small structure of defining viable investment projects. production. § Supportthechangeofapproachfromanasset based to a concept (business plan) based lending approach. 5. Institutional Institutional Framework is intensively adjusting to full Efficient and effective public sector administration Framework market-based conditions. and support for commercial and private agriculture. § AccordingtonewAgricultureActclearresponsibilities § Completethereorganizationinagriculture and division of tasks between MAFF and ME was sector in a meaning of institutional building and achieved. improving administration efficiency, all with a view § IndependentNGOsarenotcoveringthefullspectrum of forthcoming EU accession. of agriculture and food activities. § Involveprofessionalorganizations, universities, NGOs in consultation, organization and implementation of public activities in the field § Newlegislationsetsthecleartasksamongdifferent of agriculture and rural development. bodies involved. MAFF is main responsible policy-making body. In 2000 the institutional-building of the Agency for § Takecarethatpublicadministrationisin Agricultural Markets and Rural Development (AAMRD- balance with the size of the sector. paying agency) started. AAMRD took over the § Establishamulti-institutional but independent implementation of agriculture policy. For the implementation agricultural policy analysis and rural development of the EU pre-accession program for agriculture and rural center, with high degree of flexibility. development (SAPARD), in November 2001 EU Commission AAMRD conferred accreditation of AAMRD concerning SAPARD program. § In2000theChamberofAgricultureandForestryof Slovenia was established and its main objectives were set agricultural extension services in close coordination with MAFF. 43 ESTONIA Total Population 1.38 mill Agriculture in GDP (2000) 3.6% 2000 agricultural output as Rural Population 32.5 % Food and agriculture in active labor percentage of 1990 levels 51% (2000) 5.2% 2001 livestock sector as Total Area 4.52 mill ha. Food and agriculture in export (2000) 10.5% percentage of 1990 levels 43% Agriculture area: 1.43 mill ha. Forestry share in exports (2000) 13.4% Share of livestock in GAO, excl. 59% Arable land 78.1% Food and agriculture in imports (1998) forestry (2001) Drained 66% Traditionally net exporter of processed 10.4% Share of private farms in total 100% Orchards 1.0% foods (eggs, butter, cheese and flax), cultivated land (1998) Natural Grassland 20.8% Estonia became a net importer in 1995 Share of private farms in total 100% Forested 2.02 mill ha (agric. trade balance in 2000: -3.1 agricultural output (1999) billion EEK). ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Completed price and market liberalization with Maintenance of an open market-oriented Framework for Agriculture almost no policy distortion. agriculture sector. A. Prices/Subsidies · All prices are freely determined, and markets are · Continue to harmonize policies with the EU in competitive. anticipation of planned accession. · Income support scheme based on crop acreage and number of dairy cows introduced in 1998. State support is provided through public funding of land amelioration (drainage and liming), advisory services and landscape maintenance. · SAPARD 2000-2006 launched in 2001, funding up to 50% of eligible investments in primary agricultural production, processing, diversification and infrastructure. · Rural credit funds established with government funds provide credit guarantees and loan capital to agriculture and the rural areas as well as credit for land purchases. B. Trade Policies · No export restrictions on agricultural trade. · Bring trade policy fully in line with EU. Import tariffs for agricultural products from countries with which there is no free trade agreement. · Member of WTO. Trade agreements with a number of countries, including EU, EFTA, some CEFTA countries, Ukraine. · EU membership in 2004. C. Taxation · Principle of equality prevails in tax policy. · Exemption from income tax for small private farmers. No income tax for profits invested in enterprises registered outside Tallinn and Harju counties. · Reduced land tax for agricultural land. But land tax is a local tax, and local governments are not interested in reducing land tax rates. 44 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and Farm Land is being restituted and privatized. 68% of Viable system of independently operated, privately Restructuring land is registered in the cadastre and ownership owned farms. is known · Complete land reform by identifying ownership · All assets of state and collective farms have of all remaining land and selling land that remains been privatized. Land ownership and use patterns unclaimed. are approaching those of the 1920s. The farming · Introduce incentives to register land. Currently structure has evolved towards private family farms there is a disincentive because land tax is imposed (more than 51,000) with an average size of 20.8 ha. once land has been registered. · An agricultural land market is emerging, and · Identify all remaining land in the cadastre and larger farms are consolidating their holdings dispose of unclaimed land slowly in order not to through purchases and leases. distort the developing land market. · The low price of agricultural land and small size · Upgrade and increase efficiency of farm drainage of agriculture farms resulting in insufficient infrastructure.. collateral is a major impediment to the access of financial markets by farmers. · Large parts of the farm drainage infrastructure are in poor condition. 3. Competitive Privatization of agro-processing has been Internationally competitive agro-processing and Agroprocessing and completed. efficient services for agriculture. Services for Agriculture. · Companies have adapted to the market economy, · Facilitate the upgrading of agro-processing to but need significant levels of investment. meet European Union standards in all sectors still lagging behind. · Over-capacities in many processing industries, e.g. dairy industry. · All agro-industry is open to foreign investment. · In some cases, excellent commercial institutions, often with the participation of foreign firms, have emerged. 4. Rural Finance Banking system has been fully privatized. Sustainable rural financial intermediation. · Modern banking system is developing, but · Train staff in financial sector to address the lending for agriculture is limited. banking and financial requirements of the agriculture sector. · Train farmers in preparation of business plans and credit proposals. 5. Institutional Framework Adjustment of the institutional framework is at a Strategic framework for assistance to the rural fairly advanced stage. sector. · Ministry of Agriculture has mainly regulatory · Place greater emphasis on rural poverty and functions. regional development. · Agricultural extension services are rapidly evolving towards market-based approach. 45 HUNGARY Total Population 10.197 mil Food and agriculture in GDP 2001 8.0 % Agricultural output in 2000 as percentage Rural Population 35,8 % Food and agriculture in active labor of 1990 average level 69,2% Total Area 9.3 mil ha force 10.4 % Livestock production in 2000 as Agriculture area: 5.85 mil ha Food and agriculture percentage of 1990 level 67,9% Arable land in exports (2001) 11 % Share of livestock in agriculture (2000) 48.6% Orchards 76,9% in imports (2001) 4.4 % Arable area in private use (2001) 56,1% Irrigated 1.67% Traditionally net exporter: grain, meat, Share of independent full and part-time Forested 1,63% vegetable oil, processed and unprocessed family farms in total land area (2001) 51% 19,0% fruits and vegetables, wine, livestock Land ownership 2000: coop 2%, state products and poultry. 10%, private 88%. ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Food and agriculture operates in a Liberal incentive and market system with minimal Framework For macroeconomic and trade environment with direct Government intervention. Agriculture links to the world market; support programs and import tariffs, however, represent distortions. A. Prices/Subsidies · Agricultural producer and consumer prices were · Create predictable and consistent system of liberalized already in 1990-1991:producer prices are various Government's policy instruments used in considerably below EU level; 2000 wheat 87%, agriculture. corn 72%, sugarbeat 56%, pork 77%,beef 70%, · Revise existing support programs and reduce consumer prices are close to US domestic price budgetary support in real terms. level, but below EU levels 65 %. · Focus support programs on efficiency · Producer prices of agricultural produce grew by a enhancement. factor of five between 1989 and 2001, during this · Avoid the use of minimal price programs and period the food price went up 8.3-fold, little less state grain purchases, and relate programs, if any, than the average (8.8) to world market prices rather than average cost of production. Subsidization of agriculture increased in 2000, agricultural budget was about US $570 million, § Focus onpayingagencydevelopmentfor 1.1% of GDP. absorbing EU support funds for area payment and set a side. · Subsidy schemes `simplified' terminating a number of titles including subsidies of agrarian § ModifythemarketregulationlawtowardsEU employment, animal breeding, investment, land conform schemas utilization and protection, forest and fishery . · Market support programs (35% of total subsidies in 2000), mainly export subsidies, represent the most problematic component of support program. · Minimum price program was effective for grain in 1998, state purchased wheat and pork at guaranteed prices mainly from small-scale producers in 1999. · Structure of support programs is changing in favor of direct support to producers in the form of area payments to prepare EU accession. 46 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · Tariffs for food and agriculture products are · Implement WTO agreements on subsidies and rather high (30-40%). Bilateral trade agreement tariff reduction. signed with EU, condition created to free trade · Phase out or thoroughly revise the system of conditions. export subsidies. · Export licenses are a piecemeal and non- · Remove remaining export licensing and quotas. transparent system of allocation that need to be reduced under the WTO agreement, the obtained · Fully implement anti-monopoly legislation. waiver applicable until 2002. · Continue to pursue active trade policy to · So called "Product Councils" incorporating improve market access for Hungarian food and produces, processors and traders work with the agriculture products. Government in implementing market intervention and trade policies. · Hungary became a founding member of the WTO on January 1, 1995, and a full member of OECD in March 1996. · CEFTA is providing a framework for increased sub-regional agriculture trade with some trade conflicts. · Foreign trade is fully privatized and demonopolized. Hungarian agricultural and food exports of 50% are destined for EU market in 2002. Positive trade balance. C. Taxation · Agriculture enjoys significant tax privileges · Review the exact impact of tax advantages for including income tax exception for small farmers, agriculture and evaluate against the costs of these reduced corporate tax, no land tax, and full tax policies. refund on fuel. · Shift tax exemptions towards tax incentives for · Tax exemptions increased over time: land tax was investment from properly reported corporate and eliminated in 1995, refunds of the fuel excise tax personal incomes. were increased to 100 percent in 1998. · Improve tax administration and tax collection in · Reduced VAT rate (12% instead of 25%) for most general. agricultural products. · Increase taxation of informal segments of · By 1997 all producers marketing any agricultural agriculture while continuing to decrease taxation of products were to be registered at the tax formal sector as well as reported personal incomes. authorities. · Government support, like the reduced VAT, could contribute to the reduction of the "gray" area of unregistered farming sector, since non registered agricultural producers do not receive any support. 47 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and The major initial tasks of land reform are close to Privately owned smaller and larger viable farms Farm Restructuring completion. as the dominant component of farming system · Land privatization included compensation of with service and transferable ownership rights. former owners and distribution of rest of collective · Accelerate the processing of titling new land for members. privatized land. · The compensation was completed by 1997, and · Amend land ownership and land market 90% of land of new owners was physically regulations by: (a) allowing land ownership for identified. legal persons (companies and corporations); (b) removal of upper limits for land ownership; and (c) · Physical distribution of land for collective allowing agricultural land ownership for foreign members is lagging somewhat behind. citizens. · First phase of collective farm reorganization was · Refine the legal framework for cooperatives in completed in 1995. Active members received agriculture providing more transparency of 41.5%, previous owners 38.7%, former members ownership and framework for easy further 14.4% of assets. restructuring and division of cooperative farms. · The restructuring of new collective structures is · Introduce measures to facilitate a speedy continuing, the share of cooperative sector in consolidation of land ownership and changes in arable land use was 24,3% in 1999. farm sizes. · Initial phase of state farm privatization was · Develop a strategy for further privatization of completed in 1996. 28 farms remained in majority remaining state farms. state ownership (10% of land) out of the initial 121. In 2001 12 farms was privatized. · About 50,000 full-time family farms and about 0.9 million part-time farms cultivate 55% of arable land in 2000. · 44% of arable land is used by about 5300 incorporated private larger farms and by the 16 remaining state farms in 2000. · Titling of privatized land is lagging behind. In mid-1996, 55% of the beneficiaries of compensation and only 10% of land share owners received titles. On the whole about 20-25% of agriculture area still requires titling. · Foreigners and legal persons can not own agriculture land there is a 300 ha upper limit set for individual land ownership. · National Land Found in 2001 was Established to promote land transactions and, consolidation, the Found started to operate in 2002 48 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Privatization of agroprocessing/input supply Competitive, privately owned agroprocessing and Agroprocessing and marketing and services is almost fully completed. input supply. Services for Agriculture · Upstream and downstream sectors were · Fully implement anti-monopoly regulations. privatized using tenders with entrepreneur to · Implement EU conform quality and safety management and workers to obtain a limited standards for agricultural imports and exports. percentage of share. · Support vertical integration of farmers, e.g. · Foreign investors obtained 55% of ownership through marketing and processing cooperatives. and made significant investments the specialization yet started . · Improve contract agreements and market transparency. · The upstream and downstream sectors are demonopolized and competitive. Input supply is · Promote research and development of new integrated into the West European input supply products and markets. system. A full selection of modern equipment and § Supportinstallationoffoodsafety systems inputs are easily obtainable all over the country. for small and medium size entrepreneurs. · Food processing industry is prospering, GDP is § Introducenewsupportmeasuresinupgrading about to reach the same share of agriculture. practices to meet EU environmental, hygiene, § FoodSafetyStrategypreparedandconsumer welfare, food safety standards protection tasks in accordance with the EU's regulations. § Marketorientedcooperativesorganization support introduced in fruits and vegetable sectors. 49 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 4. Rural Financing An appropriate financial system for privatized Viable financial institutions serving the agriculture is not fully in place. agricultural sector efficiently. · Public support to agriculture and bank financing · Decrease interest rate and credit guarantee are intricately linked: large majority of financing of schemes, and eventually phase out credit agriculture is done in connection with investment subsidies. or interest rate subsides. · Promote the emergence of competitive insurance · Several types of guarantee funds including the services for agriculture. agricultural guarantee fund mostly to small and · Create a framework for use of warehouse medium holders and the credit guarantee fund to receipts. large enterprises. · Account for compatibility of support schemes · Diversified private banking system: a new with EU requirements. mortgage bank has started to operate the participation of the State without success due to the missing land market. · Financing in agriculture is improving. But still below the needs of a market based privatized agriculture. · 30-50% interest rate subsidy is provided both for short term and investment credits in form of tax refund · Restructuring and privatization of banks with major portfolio in food and agriculture is completed. · National system of rural credit cooperatives with umbrella bank was created with EU. · Mortgage Bank was created in 1997 together with appropriate mortgage laws. · The use of warehouse receipts as collateral was introduced in 1997. 50 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Institutional structure was reformed, quality Promote the use of and support for commercial Framework public services, however, is not yet fully in place. and private agriculture. · Ministry of Agriculture and Rural development · Complete the reorganization and improve quality was created in 1998 of public agricultural administration to the needs of a market economy and forthcoming EU accession. · Education system has been mainly adjusted to emerging new conditions. · Complete the reform of agricultural education and research. · Reorganization of the research system is nearly completed. · Enforce the implementation of the EU conforming legislation. · Information system required by a market based agriculture is only partially in place. § Enforceruralprojectpreparationcapacityand project management. · Public activities (government research- education) in agriculture are seriously hampered § Enforceagri-environmental programs by budgetary difficulties. implementation capacities at regional level. · Agricultural extension system was created, § EstablishingtheIntegratedAdministration including a system of township advisors and and Control System (IIER) to achieve EU private advisory services (subsidy is provided). conformity in the operation of the support system · Advanced legislation, also with respect to EU harmonization, but enforcement still needs to be strengthened for example paying agency. § EU-ruraldevelopmentfoundstartedto operate, special SAPARD plan-implementation office was set up for managing different types of rural development projects. 51 LATVIA Total Population 2.35 mil Food and agriculture in GDP Agricultural production in 1998 as a Rural Population 32.1 % (1996) 9% percentage of 1989-91 level 47% (2002) Agriculture, hunting and in 2001 as a percentage of 1990 level 40.2% Total Area 6.46 mil ha forestry in GDP (2002) 4,4% Livestock production in 1998 as a Agriculture area: 2.47 mil ha Employed persons (2002) in percentage of 1989-91 levels 37% Arable land 74.1% agriculture, hunting and forestry 14,9% in 2001 as a percentage of 1990 level 28.5% Pastures 15.4% Food and agriculture in export Share of livestock (2001) 55% Drained 62.9% (2002) 10.2% Agriculture area in private individual use in import (2002) 13.4% (2002) 91.3% Forested 44.5% Traditionally net exporter of Share of private sector in total livestock products: meat, milk, agricultural output (2001) 76% and eggs ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Almost fully completed liberalization. Distortion free, efficient internationally Framework for Agriculture competitive agricultural sector. A. · Prices are freely determined, but Market · Keep commitment to liberalized prices. Prices/Subsidies Intervention System as safety network in grain · Foster the development of price information sector applied since 1998. systems for transparent and timely access to cost · No Government procurement quotas. changes by all concerned. · No deficiency payment systems. · Do not introduce high price guarantees. · Direct payment supports for high-grade breeds · Phase out implicit price subsidies. and seeds, flax and potatoes since 1996. In 2001 the area-based payments are implemented. (In 2002 direct payments for cereals, pulses were about 4 mil. Lats) · Law on Agriculture has been passed by the Ministers' Cabinet on 24 October 1996, setting the institutional framework for agricultural policy development in Latvia. In 2001 and 2002 the amendments were adopted to harmonize Law on Agriculture with EU legislation. · Draft of guidelines for agricultural development was worked out for 2003-2006. · As EU candidate, Latvia orients its agricultural policy to adopt CAP at time of accession. 52 B. Trade Policies · Export of agricultural products is deregulated. · Maintain an open economy policy to stay competitive. · Import regime has become relatively liberal. · Rationalize tariffs on low uniform ad valorem · In February 1999, Latvia has become full WTO levels and avoid frequent changes to reduce member. uncertainty and corruption. · The legal basis to apply anti-dumping and anti- · Uphold WTO tariff, export restriction and import subsidy measures is prepared quota agreements. · An extended set of agricultural free trade agreements has been implemented, EU and Baltic Free Trade Agreements play the major role. · Grain and sugar trade license system has been transferred into automatic licensing (trade deal has to be announced and is automatically registered). C. Taxation · Tax burden on farmers is relatively low; several · Reduce differentiation in tax rates to minimize tax exemptions are phased out. distortive effects on resource allocation through unequal burden. · The reduction of income tax for farmers is still valid. Tax has to be paid but less then by other · Introduce a social security system tailored for types of enterprises. the conditions of private farmers. 2. Land Reform and Agri-food sector has been fully privatized, but Efficient and internationally competitive farm Farm Restructuring further adjustments are needed what concerns structure. farm restructuring. · Finalize registration and titling of land to develop · Process of privatization of agricultural land still a functioning land market. in process. · Help to organize local and regional farmers' · More than 101.000 private family farms and cooperatives. 147.000 subsidiary farms have emerged as a result · Rehabilitate and modernize key rural of land reform. infrastructure, including access roads, electricity, · Only the most sustainable privatized agricultural and water to new private farms. joint stock companies are continuing their · Repair and redesign drainage systems to meet operation. needs of new farming structure. · Primary registration of real estate with the · Support economic diversification in rural areas to cadastre has been completed by the end of 1999 promote farm restructuring. · By the end of 2000 2,8 million ha as the property registered with the Land Book. · Land market has started to develop (60,000 rural transactions in 2000). · Drainage systems do not meet the needs of smaller privatized farms and require rehabilitation or comprehensive repair and maintenance, also to curb negative environmental impact. 53 3. Competitive Agri-food sector has been fully privatized, but Efficient agri-business firms subject to market Agro-processing and adjustments are needed, in particular further forces, and agro-processing industries with high Services for Agriculture. restructuring of agri-food enterprises. quality products which can compete in world markets. · Small-scale businesses continue to emerge and existing enterprises have started to restructure · Support the further modernization process of already. agro-industries. · Significant success has been reached in · Continue a policy that effectively stimulates modernization of agro-industries, in particular competition. dairies. · Design and implement a program to encourage · Development of the quality of both existing and rural SME development. new products through innovation is remarkable. · Support for restructuring and capitalization of · Quality control and measuring systems have enterprises based on their competitive merits. developed, but have not reached sufficient level, · Create an environment favorable for foreign limiting export opportunities, in particular for the investment. meat sector. · Support development of a commercial network of · Development of marketing infrastructure in the private input and output markets. food chain stays behind the needs of the large number of smaller farms and enterprises. · Support the introduction of product quality control and inspection systems that meet EU or US standards as soon as possible to gain access to these markets. · Facilitate farmer/processor/consumer market information systems. 4. Rural Financing A private banking system is serving farms and Viable financial institutions serving the agro-food business. agricultural and rural sector efficiently. · Credit, though limited, is available for the · Assist new private farmers in start-up period agricultural sector, particularly for the newly with provision of credit, training, and services. emerging private farmers. · The agricultural sector is considered as a high risk branch, leading to only little engagement of commercial banks in rural credit. · For agricultural and rural development, special governmental credit programs are set up. 54 5. Institutional Framework The institutional framework for reformed Efficient and effective public sector administration agricultural sector is in place. However, EU and support for private agriculture. integration requires further adjustments of the · Reorganize the Ministry of Agriculture and Government structure. regional agriculture administration according to the · Ministry of Agriculture (MoA): Basic Tasks of needs of a market economy and EU. the Ministry of Agriculture are to draw up and · Encourage and strengthen research system to jointly with the State management institutions to focus on applied research, transfer and adoption of implement the State policy in agriculture, forestry foreign technology, and the design of cost and fisheries as well as to co-ordinate activities of effective extension activities. these sectors. · Continue to develop independent effective and · The Ministry of Agriculture has delegated the far reaching sector farm management and technical implementation of the SAPARD Programme to the advisory services as well as agricultural extension Rural Support Service (RSS), which acts as services suitable to all possible sizes of private SAPARD agency, covering both ­ functions of the farms. implementing and paying body. · Reorganize and strengthen linkages between · It is planned that the RSS will take over the research, teaching, and extension to increase functions of the Paying Agency in respect of basic effectiveness and efficiency. elements of the EU CAP and EAGGF Guarantee payments upon accession to the European Union. · Phyto-sanitary and Veterinary Border Inspection is functioning. · Newly created private farms have only little farming and farm management skills; technical assistance is needed to develop institutional and human capacity to support emerging private entrepreneurs. · Latvian Agricultural Advisory Service (LAAS), which was established in 1992, shows more involvement of farmers in the management and is offering a broad range of different services and products. · Agricultural research and education lacks funding due to limited financial and human resources. Some improvements in coordination and problem orientation are still needed. · Work on curricula updating has started at the Latvian Agricultural University and at agricultural schools. · The capacity of market-oriented policy analysis has been increased through targeted training of local experts and the establishment of several analysis tools at the MoA and Research Institutions. 55 SLOVAK REPUBLIC Total Population 5.40 mil Food and agriculture GDP Rural Population 42 % (2001) Agricultural output in 2001 as percentage of 7.3% Agriculture in active labor 1989-91 average level 61.6% Total Area 4.9 mil ha (2001) Livestock production in 2001 as percentage 5.2% Agriculture area: Food and agriculture of 1989-1991 average level 67.1% 3.7 % Arable land 2.44 mil ha in exports (2002) Share of livestock in agriculture (2001) 56.9% 5.7% 1.45 mil ha in imports (2002) Agricultural area in private use (2002) 99% Orchards 19,000 ha Traditionally net exporter: Forested 41% grain, vegetable oil and o/w Cooperatives, JSC (2000) 76% livestock products. Family farms, gardens and small-holders 23% Share of private sector in ag. output (2002) 100% ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic After a slowdown due to stabilization measures Distortion free market and incentive system. Framework for macroeconomic growth, fairly progressing economic Agriculture and structural reforms (2002: GDP y/y 4.0 % , unemployment 17,5 (December to December)% , falling inflation 3,2 % (end of year); real income growth (nominal wages y/y growth 109.5 %) 56 A. Prices/Subsidies · Prices were liberalized in 1990/91 but distortions · SFMR is an obstacle to market development persist through border measures, government and ways to make its interventions less frequent subsidies, and support prices. and more predictable should be considered. · Subsidies declined by 55% since 1990. Total SFMR has been transformed to Intervention subsidies in 1990 17.5 mld. Sk, 7.6 bill. Sk in 1999 = agency. They use more transparent measures to 43,4%; and 8.3 bill in 2000 + 3.1bill related to severe operate on the market not to distort prices. The drought = 65.1% , 9.0 bill, in 2001, 7.5 bill in 2002 and agency is being re-shaped to a CAP-conform 8.5 bill.in 2003 institution · Measured by the Producer Subsidy Equivalent, · Gradual expansion of private sector trade aggregate support to agriculture declined from 60% in activity is needed to improve efficiency. With 1990 to 28% in 1995 and further to 11% in 2001 with greater reliance on private trade, modern market- negative MPS (-3 billion SKK). based risk management techniques (e.g., hedging · State Fund for Market Regulation (SFMR) in the year of price risk) would soon develop. Private 2001 provided only limited intervention in markets. It business is in place, but the marketing system as extended export refunds to exporters of dairy a whole is still less efficient. products, wool and malt, in some extent also to cattle · Minimum prices should be de-linked from exporters. It facilitated the cash flow on grain market production cost and either eliminated or their by extending subsidized commodity credits to farmers level should be reduced and linked to world price who deposited their produce into public warehouses. levels. No export subsidies in 2002 due to lack of funds. No actual intervention buying in 2002. · Dairy quota should be phased out. (Please note, that from 2004 the CAP quota is in place) · Minimum prices for main agricultural products (wheat, sugar, potatoes, cattle, ) set at the beginning · Income support payments to marginal areas of the planting season for specific quantities and should be gradually modified from a per hectare quality standards (cover 90% of estimated average basis to targeted support programs. (From 2004 production cost). EU RD payments, a.o. LFA payments will be · Milk is regulated by a system of minimum phased in) administrative prices combined with a premium to producers on dairy cow (quota/yield per cow = number of cows and minimum yield is 4000 l per cow and year) and an annual production quota of 930 million liters. Annual surplus of about 20 % was exported as milk powder and cheese with subsidies. · About 30 % of agricultural subsidies paid as area payments to less favoured areas. Other subsidies are scattered in a number of commodity specific programs (mainly suckler cows, dairy cows, , sheep and goats, vegetable, irrigation water, ecological programs, investments to improve quality standards). 57 B. Trade Policies · Import protection is limited and gradually phased · Export taxes, subsidies, and licenses should be out following WTO commitments. phased out. · Most export and import licenses are automatic and for registration purposes only, but can still be used to protect domestic market. · Export licenses are non-automatic only for a few sensitive products (though the list has been decreased)..Number of automatic licenses increased significantly (cattle, beef, oats, SMP, rapeseed, sunflower, lamb, barley, corn, flour, Following the fall- out of grain harvest by draught, non automatic export licenses linked to volume quotas were imposed on grain exports in 2000 and 2001. On the other hand import quotas with 0 tariff were opened. In 2002 and early 2003 export quotas were opened for grains subject to non-automatic licenses. · Average weighted import tariff for agricultural products was 4,3 % (1998) C. Taxation · Tax reform in 2002, the base VAT rate reduced from 24 to 20 %, the discounted rate put up from10% to 14 %(agricultural and food products) The corporate income tax reduced to 25 %. · Agriculture benefits from several exceptions to the Slovak tax code and tax reductions (e.g., consumption fuel tax rebate for tractors and road tax) The consumption fuel tax rebate has been replaced by cheaper colored petrol for farming, the excise tax for fuel will grow from 3 500 to 4 100 SKK per 1000 liter by 2003 There are income tax reductions (50%) for agriculture. 58 2. Land Reform and Transformation of collective farms and the Efficient, internationally competitive private Farm Restructuring privatization of state farms and most services have farms and an active land market. been completed. However, it will take more time for · Land ownership in cooperatives is highly the new owners to turn obsolete production facilities fragmented and ways to facilitate consolidation into efficient enterprises. should be considered. One option is to enable · Following their legal transformation in January 1993, active members to swap entitlements for many cooperatives have remained much the same as subsidies for payments to buy out land owners. before. Cooperatives cultivate 46% of farmland. Some Since the "market" price of land is much lower cooperatives have taken over bankrupted ones. Their than administrative price very limited number of average size is about 1600 ha. people sell their land. · Land market is dormant because of excessive · Ownership consolidation is essential for fragmentation of ownership and high transaction cost. reducing land transaction cost, activation of the However, land use has not been affected by land market, and acceptance of land as collateral. restitution as most land is leased and remains in large contiguous plots. · Administration of land registration has improved and the removal of arrears in registers is under way. · Restructuring and ownership consolidation of cooperatives is forced in those with poor financial performance either through voluntary reorganization or bankruptcy. · Privatization of state farms completed. Re-structuring is speeded by the farm minister´s ruling to phase out subsidies to non-viable farms in 2003. 59 3. Competitive Privatization of agro-processing and services has Competitive and privately owned agro-processing Agroprocessing and been completed. New owners will have to reduce cost and input supply. Services for Agriculture. and improve efficiency to maintain their market share against foreign competition. · Continue to resist pressure by special interest · The situation of agri-food industries is not the same for protection against foreign competition. in all subsectors. Some of them struggle with low · Continue to improve the enabling environment cash-flow, poor contract enforcement, weak for business activity. management, , and stagnating labor productivity, other (mostly those with FDI, but not only) conduct modernization investments and expand in output.. · Organized wholesale markets for agricultural commodities and food are yet to develop. Comprehensive Food distribution systems have been split during the reform, but new ones stepwise arise. , Arrears in the market transparency may still cause higher transaction costs Vertical links in the food chain are still weak, but starting to develop. · Several international food chains have come to Slovakia and their market share is growing. They execute a significant pressure pushing down consumer prices and processors´margins. · Foreign participation in agro-processing privatization has been limited to particular industries, but should increase. Foreign investors became dominant in sugar industry, isoglucose, confectionery, dairy processing, canning, beer and malt industry. 60 4. Rural Finance High risk stemming from undercapitalization, ongoing Access to credit should be improved using consolidation of ownership, high debt, and poor credit market-based instruments and techniques, and history, all mitigate against better access and more an efficient universal banking system. favorable credit terms in agriculture, but the situation is improving.. · Use of land as collateral is vital for agriculture · About 70% of financial needs in agriculture is to obtain better access to long-term investment covered from own-resources 10% is from subsidies financed by bank credit. and 20% by commercial credit. · Speed up bankruptcy procedures and improve · State Support Fund for Agriculture and Agro- protection of creditors in cases of credit default. industries (SSFAA) which supported medium- and long-term investment in agriculture and agro- · Phase out interest rate subsidies. industries by extending soft loans (5% annual rate) · Promote the emergence of competitive and credit guarantees has been replaced (from 2002) insurance services for agriculture. by an extended program of credit subsidies from the state budget combined with credit guarantees by the · Promote development of warehouse receipts Slovak Guarantee and Support Bank. The credit system by appropriate institutional reforms. support program has been extended in 2003 and the allocation for direct investment subsidies diminished. · Working capital financing is offered against pledges on future crops guaranteed by commercial banks through forward supply contracts with processors. · Preparation of legal amendments and new laws is underway to improve collateral law including land mortgage law. The collateral law has been amended allowing the use of movable property as collateral. · Some commercial banks are beginning to lend on the basis of warehouse receipts, and system is on the good way and is improving The interest on loans on the basis of warehouse receipts is subsidized by state support program. Banks extend loans for considerably lower interest than before (6.8 % p.a.). Farms´cash flow has slightly improved in 2001 and 2002. 61 5. Institutional Consolidation and adjustment of main agricultural Best practices in other countries should be Framework institutions has been largely completed. applied, where appropriate, to improve efficiency in the provision of "public goods" to agriculture. · Number of staff in agricultural and food industry research establishment declined by 55% between 1990 · No specific recommendations have been made. and 2000. · Excessive but inefficient research facilities have been either closed or transformed into consulting services on a commercial basis. Extension network has been developed comprising private advisers backed by training and information centers. · Institutions to monitor and enforce quality and health standards have been enhanced. The State Veterinary Administration and the Agricultural and Food Inspection have been merged into a single State Veterinary and Food Administration. As a coordinating body Food Safety Commission was established early 2002. The adjustment of the food safety legislation to strict EU requirements is progressing. 62 POLAND 2002 Total Population 38.64 mil Food and agriculture in GDP 2000 8.0% Output Ratios 2000 / 1990: Rural Population 38.25% agriculture alone 3.3% total agriculture agriculture alone in 1989 13% crops 87.7% Total Area 31.3 mil ha Food and agriculture in active labor 22.5% livestock 82.5% Agriculture area: 18.4 mil ha agriculture alone 18.9% Share of livestock in 91.9% Arable land Food and agriculture in exports (2000) 8.6% agriculture (2000) Orchards 76.4 of which to EU 48.5% 45.2% Meadows & 1.4 of which to FSU 23% Real agricultural income Pastures 22.2 Food and agriculture in imports (2000) 6.7% 2000 (1991=100) Forested area: 28.8 of which from EU 43.7% Inter-sectoral terms of 73% of which from FSU 3.7% trade (output/input Sales food proc./all retail sales (2000) 18.9% prices) 2000 [1990 = 100%] 74% ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macroeconomic Market liberalization is advanced, although ad- Limited intervention; a rule based safety net for Framework for Agriculture hoc protection and support are provided catastrophic occurrences only; reform of periodically to selected products, companies and farmers' social security and the tax regime sub-sectors. 63 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS A. Prices/Subsidies · Support for agriculture is in 4 categories: (i) · Make price support rule based, linking it to an direct subsidies to the farmers' social security objective measure, such as border prices and with system, (ii) price support, and intervention sufficient average difference between intervention purchasing, (iii) input subsidies and (iv) subsidies and market prices to allow the market to operate. for farm modernization and rural infrastructure. In Limit price support to key commodities. addition, state agencies provide preferential credit · Discontinue distortionary and opaque support and credit guarantees on commercial loans. So given by state agencies. Diminish share of ARR in called "direct payments" were introduced for cereal agricultural markets. producers in 1999 but actually this is additional price support measure as the payment is linked to · Develop for pre-accession time price support the amount of cereals delivered and not produced policy independent of current government in the past. Excluding the support by the state demands, with complex approach to allow consider agencies total budget transfers during 1999-2000 multi-relations among commodities have been increasing annually by about 3% in real · Develop strategy for potato producers which are terms which is mainly attributed to introduction of not cover by CAP direct payments and considerable increase of cereals purchase by state. The total budget for agriculture (including farmer pensions) represents 2.75% of state's budget ( in 2003 planned budget for agriculture increased by 16% and it's 3.06% of total budget expenditures) . · In 2002 market intervention was implemented through the state marketing agency (ARR ­ Polish acronym) for: bread wheat, rye, butter, skimmed milk powder, beef and pork carcasses, sugar, bee honey, tobacco, sugar, dried fodder and potato starch. In 2002 the ARR bought about 16% of domestic production of cereal, and 17% of bee honey and less then 3% of pork. · PSEs, in 2000, were 7 %, while in EU countries 34%, although in 2001 and 2002 was already higher · There is a functional and institutional overlap between market intervention and government purchases of national food reserves, decreasing the transparency of support. 64 ISSUE STATUS OF REFORM OBJECTIVES PROPOSED ACTIONS B. Trade Policies · As signatory to the WTO agreements, Poland · Resist demands for protection; interpret what is has abandoned quantitative import restrictions and allowed under WTO conservatively and insist on variable levies, but is allowed tariff protections quantified economic justification for all tariffs similar to EU levels, though only much lower proposed; incorporate estimates of real exchange export subsidies are allowed (but not fully used in rate in evaluations. 2002). · Evaluate the long-term prospects for the sugar · Weighted average tariff for agricultural products sector, assuming EU accession; make a plan for its reached in 2002 25,57% (effective weighted rationalization based on full privatization and average tariff was 18.47%). At the same time phasing out of export subsidies. weighted average tariff for non-agriculture products was only 2.47%. The tariff does not apply · Liberalize trade in these products that are to durum wheat, and crude soybeans oil. important for Polish export · "Double Zero" Agreement ­ Part I, concluded in · Accelerate fulfilling phytosanitary and veterinary 2000 with EU, regards further liberalization in regimes as a possible future obstacles in trade agriculture trade. It introduced annual quotas free within and out of EU of tariffs for some 13 products. Part II of this · Estimate EU accession impact for Poland import- agreement was signed in 2002 and covered export measures and develop appropriate strategy transformed products. that could protect against negative influences · agreement within CEFTA will be replaced by EU association treaty in May 2004; · From May 2004 Poland will adopt fully EU trade policy and its independence will be strong limited C. Taxation · Farmers do not pay income tax on agriculture · Agriculture derived income above a threshold production. should be taxed. · A land tax is levied on agricultural holdings as a · Corporate tax on cooperatives should be function of soil type and the price of rye; selected abolished; profit distribution should be obligatory, investments can create a tax deduction with limited retained earnings allowed with distributed profit taxable at level of cooperative · Rural cooperatives are taxed as corporations, this member[US sub-chapter S corporate structure perceived as double taxation [corporate income tax could be a guide] plus personal income tax on dividend or profit distribution] by members. · Levy agricultural tax only on land actually under production, so as to create incentive for voluntary · Agricultural VAT Act was introduced. set aside. According to the new legislation, farmers would be · Introduce a pollution tax based on mineral book able to choose between two methods of paying keeping to discourage misuse of fertilizers VAT: general VAT for farmers who claim more than zl 80,000 in annual turnover in 1999; and a lump · Introduce simplified agriculture accounting which sum VAT which would require farmers to add 3 allow minus VAT (this system apply in case of percent in tax to all products they sell. In the latter credits from ARMA) case, however, farmers would be unable to claim tax deductions for such farming inputs farming machinery, fertilizer and seed. A 3% VAT on agricultural machinery was introduced and 7% for food. Some fertilizes and machinery are have 0% VAT ·Poland is allowed to keep a 3%VAT (but not lower) within 4 years after accession to the EU. 65 ISSUE STATUS OF REFORM OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm APAST has took 4.7 million ha of arable land in Complete privatization of former state farms; Restructuring 1992: 33% has been transferred to new owners, accelerated land consolidation and development of and 52% has been leased. The average size of land market. private farms is only 8,39 ha, in an average of more than 12 parcels, but this indicator is · Speed up and complete the privatization of stronglyregionalized (in Rzeszowskie 4 ha in ownership of former state farm land; consider average 20 pieces) auctioning off the rights to privatization, within · All assets and liabilities of former state farms prescribed guidelines, to private land development were transferred, in Jan. 1992, into a state owned, companies operating in the local land market. off-budget, agency-APAST. Liabilities were fully Develop a sunset policy for APAST and amend its paid. Privatization of land and other assets has by-laws accordingly. been slow, mainly due to still not resolved re- · Improve the operation of the land market by (i) privatization issue in Poland fomenting the creation of a real estate brokers · In addition to the assets of the former state association, (ii) assist with the development of farms, APAST also received custody of the State information on land transactions and on offers and Land Fund, consisting of a large number of, requests for land and (iii) improve the efficiency of usually small, parcels of land (totally 0.6 million registration of land transactions (iv) help to ha), and of 333.000 apartments of which 90% was establish mortgage banks in rural areas privatized · Integrate the lands obtained as State Land Fund · Privatization of land is hindered by: reluctance to into the land market, directly and through the break-up large farms, pre-nationalization claims, consolidation programs. political opposition against privatization and · Speed up consolidation program to minimum associated land sales to foreigners, and by vested 400.000 ha/a which allow to cover urgently 2 interests of APAST staff. million ha (of 3.4 million ha total necessary), mainly · Land holding, and production, structure on the in South-East part of Poland 80% of agricultural area in private hands is archaic, · Introduce cadastre system reminiscent of the situation in most of Western Europe immediately after the second world war. · develop perpetual register as more smoothly Land consolidation process covers less than system 10,000 ha annually. · The draft of Land System Act is in parliament. According to new legislations the farm can't be less then 4 ha, but no more then 300 ha, the one piece of land should be more then 0.60 ha before dividing within family. In this shape this is against principles in Constitution. · The legal registration system are not copy the real situation: around 70% of farm holders operate on the informal 66 ISSUE STATUS OF REFORM OBJECTIVES PROPOSED ACTIONS 3. Competitive Delays in privatizing agroprocessing; emergence Complete privatization and harmonization of Agribusiness System. of new private sector processing; large border rules, regulations, standards and controls with trading companies have emerged from the human the EU and support the development of interest and goodwill assets of former state trading associations and market instruments monopolies; agriculture service sector, notably marketing, remains weak. · Develop a divestiture plan, with target deadlines, · Delays in privatization have maintained high cost for all remaining state owned agro-industry enterprises, creating opportunities for new private enterprises, including privatization, bankruptcy entrants to exploit attractive margins. This, though, and sales of assets. puts a question mark on the industry's competitiveness. · Develop a timebound implementation plan for the part of the EU's "acquis communautaire" that · Standards and quality control remain to be pertains to the food processing industry, including adjusted to the requirements of a competitive the creation and adaptation of institutions and market, with emphasis on the EU's "acquis associated training and staff development. communautaire." Industry interest associations that should undertake some of that work and lobby · Assist with the creation of wholesale markets, government for the rest are still embryonic. warehouse receipts and later, commodity futures contracts. · Some kind of certain markets are monopolized (dried fodder, sugar, vegetable oil), which has · Support the development of interest associations negative impact in microscale. in agribusiness activities. · Study the likely competitiveness of Poland's agro-processing sector within an enlarged EU. · Support marketing activity of private companies and developing overall management skills 67 4. Rural Finance The dominant institution in rural finance, the Viable rural finance system, served by agile Bank for Food Economy (BGZ) remains in state financial institutions, incorporating the hands in 70%; interest rate subsidies are still traditional rural cooperative banks. used; private banking for rural finance remains highly selective. · Resolve the core structural weaknesses of BGZ, · The former rural finance monopoly, BGZ, still has both operationally and in its portfolio; privatize the a large portfolio of non-performing assets bank. belonging to former or current state owned · Create ways and means to give rural enterprises. municipalities access to the capital market. · New Cooperative Banking Law, introduced in · Develop decentralized system that will allow 2001, stated that BGZ can't associate cooperative disbursements of expected future EU structural banks. BGZ S.A. works as a domestic bank with funds through regional financial institutions. 187 service stations. The net loss of BGZ for 2002 · Discontinue the credit guarantee operations of resulted to postpone to float BGZ's share on the ARR, ARMA and APAST, in favor of one Warsaw Stock Exchange. It can impede privatize transparent program operated by an accredited the BGZ. financial institution. · 605 cooperative banks, gathered in three · Improve climate for private banks in rural areas associations showed good financial standings for before launching IACS system 2002 · Simplifying regulations for cooperative banks · The limited rural financial intermediation leads to · Continue RDP, supported by World Bank a dominance of cash transactions and savings that · Develop wide disaster insurance system that are held in cash or in physical assets. cover production and future income · Public Financial Law by centralized flow of funds could be an obstacle in utilizing EU structural funds in rural areas 68 ISSUE STATUS OF REFORM OBJECTIVES PROPOSED ACTIONS 5. Institutions Institutional restructuring has been substantial and Creation of administrative capacities dealing meaningful; responsibility of the Ministry Agriculture with rural development. Modification of has been broaden to rural development and functioning of institutions dealing with the EU and changes in the ministry has to be adjusted; selected adaptations to EU practices and methods of operation in step with requirements are still needed. structural changes in production and landholding. · The Ministry of Agriculture and Food Economy (MAFE) · Continue and strengthen the on-going was restructured in 1998 under the MAFE and further program of institutional adaptation to the streamlined as part of overall restructuring of government. requirements of the "acquis communautaire." According to the amendments introduced by the Law of 24 July 1999 amending the law on state administration · Bring all institutions under the purview of divisions, the MARD is responsible for the following government by making them "on-budget" and sectors: agriculture, rural development and agricultural have foreign support for them flow through the markets. Based on this Law, the Veterinary Department at budget. MARD was dissolved and the new independent unit was · Make personnel remuneration in selected established, namely the General Veterinary Inspectorate, institutions market based, rather than being whose head is appointed by the Prime Minster. Pursuant determined by general civil servant rules, so as to the Law, the Fishery Department was established at to attract and keep "the best and the brightest." MARD. This is of particular importance in view of the · The extension service was essentially recreated with a going-on negotiations for EU membership. dual emphasis, on technical matters and on business · Complete the reform of agricultural education matters. and associated research. · Important institutions remain dependent on, often · Study the expected future direction of foreign, off-budget resources for their existence. This agricultural research in Poland, both private keeps them sometimes de-facto out of the mainstream of and public, in support of the development of a agriculture policy making and development. research strategy. · The MARD completed initiative undertaken in 1996, to · Reform farmers' pension system which now restructure the curricula of the agricultural high schools so costs over 70% of the total budget of the as to make it more relevant to contemporary conditions. Ministry of Agriculture and Food Economy · The budget squeeze on institutes of higher learning has (MAFE), while contributions cover less than forced its management into entrepreneurial activities, 10% of costs. bringing more "real world" focus into that part of academe. · Develop long-term strategy for ARMA transforming to decentralized organization · The agricultural research establishment, notably · Speed up the strengthening of extension government's 42 breeding farms, maintains institutions and service practices that appear archaic but that may still be appropriate given the archaic nature of production and landholding of the vast majority of Polish farms. · In 1999, according to the new administrative division of Poland, 16 chambers of agriculture replaced the formerly existing 49 voivodship chambers of agriculture. The supreme organisation is the National Council of Chambers of Agriculture. · After accession to the EU, Poland will be participating in European CAP. ARMA will be the institution responsible for running financial side of CAP in Poland. ARMA has its regional offices in all 16 voivodships. 69 LITHUANIA Total Population Share of agriculture in gross Change in agricultural production 2001 (2001) 3.48 mil value added (2001) 6.3% compared to 1995 -7.8% Rural Population 33.1 % Share of employees engaged Structure of total agricultural production Total Area 6.5 mil ha in agriculture in total number (2001): Agricultural area 3.4 mil ha of employees (2001) 16.7% Crop production 55.3 of which: Share of agricultural and food Animal production 44.7 Arable land 85.3% products (2001): Share of total agricultural production on Natural pastures 13.4% in total export 12.4% Family and household farms (2001) 79.0% Orchards 1.3% in total import 9.7% Agricultural enterprises (2001) 21.0% Forest 2.0 mil ha ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Reduced inconsistencies and distortions in the Distortion free, efficient and internationally Framework for policy environment andreduced spending, but competitive agricultural sector: Agriculture temporary reversals introduce undesirable uncertainty and restrict efficient resource allocation. A. Prices/Subsidies · Changes in support systems over last few · Continue toward greater reliance on income years eliminated use of minimum prices and price support, which is decoupled and direct payments, subsidies and shifted to less distortionary based on reference area and animal numbers and interventions, including area and headage targeted to promote quality and efficiency payments. (note: payments are no longer improvements. Prepare for full implementation of the differentiated by quality) EU CAP market regulation and income support · schemes. New law on agriculture and rural development, which came into effect in January 2003, as part of · Maintain a consistent policy strategy for legal harmonization process with the EU CAP agriculture that avoids the disruptive temporary acquis, removed the legal basis for Government shifts in support programs and provides a stable setting minimum farm prices. planning environment for private and public decision · makers and focuses agricultural support on quality Budgetary outlays for agricultural support and efficiency enhancement and structural declined by 18 percent in nominal terms from 2000 to adjustment. 2001, including a 28 percent decline in market regulation and income support expenditures. · Increase support for improved market Outlays would have been even lower in 2002 had it institutions including market information systems. not been for one time disaster payment for drought · Implement EU guidelines regarding producer relief. support mechanisms and rural development · Principle of self-financing of the sugar regime programs. was restored by removing the temporary distortions introduced in 2001 and reducing by 8 percent the quantity of sugar eligible for support in 2003. · First class wheat intervention prices continue to be higher than the EU levels. 70 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · WTO accession is completed and the legal and · Undertake new WTO liberalization commitments institutional frameworks as well as the trade regime that emerge from the Doha Agenda. are in compliance with WTO requirements. · Improve foreign trade and market information · The Europe Treaty negotiations on further systems and prepare to implement EU border trade liberalization, effective January 2001, provided measures upon accession to the EU. for unlimited free access to both EU and Lithuania markets of the "least sensitive" agricultural products (those for which the previous EU import duty was less than 10%, products imported from the EU and not cultivated in Lithuania, such as citrus fruit and olives). · The agreement also provides a double zero list, which includes pig meats, poultry, sausages, cheese, eggs, tomatoes and apples. In addition, tariff quotas have been increased, especially in the cheese sector. For certain products, such as milk powder and butter, Lithuania has been unilaterally granted duty free tariff quotas on imports to the EU. · The Baltic Free Trade Agreement (BFTA), covering all agricultural and food products, creates free trade zone for Baltic origin ag. and food and fishery products as well as eliminating non-tariff barriers. 71 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS C. Taxation · Personal income tax exemption for persons with · Increase transparency and enforcement of agricultural income exceeding 50% of total income agricultural taxation and reduce tax preferences, and making less than set amount per year. which distort resource allocation between agriculture · and other sectors. Agricultural companies engaged in raw material production, processing and services to agriculture have profit tax reduction from 15 % to 10 %, and it is waived if agriculture (farming, processing and services to agriculture) exceeds 50% of total income. · Land tax exception for three initial years for farmers and other rural populations remain. After that, Municipal authorities may authorize a reduction or even waive land taxes or rents on an annual case by case basis. · Legislation, approved in 2000, exempts economically weak farms from full payment of social security contribution. The difference is covered by the budget. · Since 1999, increases in fuel excise tax is partially refunded to agriculture and fisheries through direct payments from the agriculture budget. · Excise tax on sugar and sugar containing products was introduced in 1998 as part of the new sugar market regime. It was replaced by sugar tax in 2001. Revenues are used to finance direct payments to sugar beet producers. 72 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Government committed to transforming A farming system based on private ownership of land Farm Restructuring agriculture into an efficient and dynamic sector by and a working land market for efficient and fair encouraging the development of a market-based, asset transfer. predominantly privately owned production system. · Passed the Constitutional Amendment to permit agricultural land ownership by local legal entities and foreigners. Foreign ownership rights · Complete the transfer ofremaining agricultural portion of this are phased in over 7 years as part of lands from State control to the private sector by the transitional arrangements under the EU resolving claims disputes and issuing titles as well as accession negotiations. by selling state land not claimed by former owners. · Substantial progress in the privatization of · Establish a framework for consistent land agricultural land and developing the conditions for valuation and efficient land market information a functioning land market. However, approximately dissemination. 44% of agricultural land has not yet been · Improve design of legal and institutional transferred (titled) to private owners, though all but framework to permit sound mortgage operations. 23 % is approved for transfer. Absence of title does not prevent use of the land but limits land market · Expected farm consolidation and resulting labor activity. shedding will require measures to facilitate the movement of labor from former agricultural activities · The process of land restitution has returned to new employment, both within and outside the about 77% of the land to former owners and their sector. heirs, while the remaining claimants have taken other forms of compensation or are waiting for disputed claims to be resolved. · As pressures to become more competitive increase, greater farm consolidation is expected, with average farm size increasing and smaller farms disappearing. Consolidation process is supported by granting priority of purchasing state-owned land by land owners neighboring the parcel on sale. · The State Land Cadastre and Register, established in 1998, renamed as Register in 2003, consolidates real estate, land, and mortgage data systems to improve the efficiency of processing claims as well as the many other land related transactions. 73 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Considerable progress in privatization of agro- Efficient, privately owned agro-business firms, Agro-processing and industries, but additional domestic and foreign subject to market forces, and agro-processing Services for Agriculture investment is needed. industries with high quality products that can · compete in world markets. Foreign participation in marketing and agro- processing is very limited, except for specific · Foster a policy and market environment that industries such as beer, pet food and tobacco. attracts new investment, especially investment that · brings new agricultural and agro-processing (note: this restriction was eliminated long technology.(note: done long ago) ago)New plants and consolidation of private enterprises is bringing about an increased level of · Adopt measures to facilitate the relocation and competitiveness. As pressures to modernize re-training of excess labor. intensify, labor shedding is expected to continue in · To expand sales of processed meats in the EU the sector. and prepare to meet EU requirements in the domestic · Nineteen dairy plants (representing about 80 market, continue to expand the share of meat packing percent of production) and nine meat processing and processing plants meet EU sanitary and plants (representing about 40 percent of veterinary requirements. production) have a license to export to the EU. · (note: no longer an issue except for already There are more meeting the requirements but not yet bankrupt enterprises) certified. · · Strengthen farmer/processor market information Agricultural exports increased more than 50 systems. percent in two years, and the quality conscious EU and US markets replaced the CIS as the largest · Support modernization of transport, storage, and market. communications facilities. · Bankruptcy laws permit bankruptcy to be initiated not only by banks, but also by local authorities and farm organizations representing creditors that have suffered from payment delays. In 2000, government approved series of resolutions to protect producers for payment arrears. Since 2002 this problem actually ceased to exist except for already bankrupted enterprises. · The Agro-Information system is being developed in line with EU requirements. In addition, in 2002, the Labor Economics and Training Methodology Services was established, consolidating two previously independent services in the Ministry of Agriculture, to develop curricula for further agricultural education, provide information on production innovations and labor economics. 74 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 4. Rural Financing Creation and development of a sound financial Viable financial institutions serving the system is under way, but rural financial markets agricultural and rural sector efficiently. still need focused attention. · EU SAPARD is an important investment · Complete the implementation of parcel and crop funding source for rural development. In November declaration and animal identification and registration 2001, 5 measures were accredited out of 8 foreseen systems in compliance with the EU guidelines. in the National Rural Development Programme. The program is operating and as of April 2003, Euro 120 · Develop financial arrangement to facilitate sector million was allocated to these five measures and 12 access, especially among smaller farmers, of percent of it was disbursed. sufficient funding to meet SAPARD co-financing · requirements and project preparation. Loans to agriculture increased by nearly 50 percent between 2000 and 2002, partly due to · Facilitate the development of financial services operation of the Rural Loan Guarantee Fund, and retail banking services in rural areas. providing for up to 70 percent guarantees. · Provide training to farmers on preparation of · The Agricultural Bank and Savings Bank have business plans needed for loan applications. been privatized, which completed privatization of the banking sector. · Burdensome bank collateral requirements and the exclusion of land as a form of guarantee reduce farmers' access to credit. This is changing with the Constitutional Amendment to Article 47. · 5. Institutional Institutional development is primarily driven by EU Efficient and effective public sector administration Framework integration requirements. and support for private agriculture. · Continue to strengthen the research system and · County agricultural officers now report to the increase focus on competitiveness of products, National Paying Agency under the Ministry of quality control and management of standards. Agriculture. EU procedures have been adopted for · Complete implementation of the National Acquis SAPARD-administered rural development activities Adoption Program for the development and and are being prepared as well for administration of implementation of quality requirements and the EU CAP and Structural Support programs upon restructuring of the food quality control system. accession. · In 2000, government approved regulations regarding compulsory quality standards for food and agricultural products, and other technical regulations. · Milk quality control system and standards, which came into effect January 1, 2000, a step in converging to EU milk standards, has demonstrated farmers' ability to respond to quality determined incentives. · Considerable progress has been made in the area of legal provisions concerning livestock breeding and veterinary medicine. 75 BULGARIA Total Population 7.9 mil. Food and agriculture in GDP Agricultural output in 2001 in Rural Population 31 % (2001) 13.6% percent of 1990 85.362% Food and agriculture in Share of livestock in agriculture active labor (2001) 26% (2001) 42% Total Area 11.1 m. ha Food and agriculture Share of independent private Agriculture area: 6.2 m. ha in exports (2001) 10% farms in total arable area (2001) Arable land 44% in imports (2001) 6% 98% Orchards 3.2% Traditionally net exporter: Irrigated 1% tobacco, sunflower seed, Forested 30% dairy products, wine, fruits and vegetables. ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Most prices are liberalized; free trade policy; Continue policy of stabilization and liberal Framework for currency board has controlled inflation since markets, and stimulate growth in Agriculture 1997. agriculture and the development of rural regions. A. Prices/Subsidies · Previous systems of price and profit margin · Continue policy of low price distortions, control and of "negotiated prices" were ended and extend liberal policy to tobacco. and most prices were fully liberalized in 1998. · Price and trade restrictions and impediments, especially export taxes and licensing have been largely eliminated. 76 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · Taxes on all agricultural exports and · Continue liberal trade regime, at least until discretionary import duty exemptions have been date of EU accession is defined. eliminated; non-automatic and automatic · Continue compliance with WTO principles. licensing for agricultural exports largely eliminated. · Keep tariffs on fertilizer imports and other agricultural inputs low. The foreign trade regime is fairly liberal. Tariffs are determined on the basis of international · Adopt a lower and more uniform tariff agreements such as the WTO, these with the structure. EU, CEFTA and bilateral free trade agreements. · Import tariff regime provided in recent years · Extend trade liberalization to all products high and non-uniform protection, especially for including tobacco. processing industries. Some tariffs, such as fertilizer and especially poultry meat, are very Proceed cautiously with introduction of CAP high. type interventions as the CAP is a moving target and could be changed by the time of · Member of WTO since Dec 1, 1996 EU accession. · Member of CEFTA since Jan 1., 1999 Free trade agreements with Turkey, Macedonia, Lithuania, Israel, Estonia, Croatia. EU Association Agreement signed in 1995, subsequent "double zero" and "double profit" agreements signed for liberalized trade in agrifoods. The country plans to join the EU in 2007 and introduce at least 3 years prior to accession, as recommended by Brussels, CAP mechanisms such as intervention on commodity markets, and export subsidies. Implementation of these plans is contingent upon available financing from the state budget and institutional capacity, which have so far been insufficient. C. Taxation · Single 20% VAT applies to all products and Lower VAT level in the medium term to services. stimulate food consumption and production; lower VAT registration thresholds so that agricultural enterprises can claim rebate; reduce waiting period for rebate; improve administration of rebates so that taxpayers are not penalized for non-payment at lower level of the marketing chain. 77 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and While privatization of state and collective farms Farm Restructuring is completed, large-scale emergence of efficient private farm units remains a significant challenge. · Complete land registration, information and cadastre system reform to guarantee security · Initiated in 1991, the protracted process of land of tenure and information on land restitution and liquidation of collective farms transactions. devastated most farm assets and led to excessive land fragmentation. · Promote an active land market and the use of land as collateral to improve access to · All farmland has been restituted (99%), and long-term credit. most land formally titled (90%), except for cases where formerly rural land is now located in town · Promote market-led land consolidation, centers. · Land transactions ­ both leases and pass the relevant legislation and stimulate sales - are picking up, especially in Dobruja and the process by various measures, proceeding near the coast, but land prices are still low, from experience gained from pilot projects. compared with Bulgaria's Central European · Permit land purchases by foreigners. neighbors. · Maintain neutral policy toward all legal · Forest land restitution is near completion (at forms of business association. 95%). · Amendments to Land Registration and Cadastre Law under discussion to improve the Continue with improvement of property present system. registration and cadastre legislation to promote the development of land markets. 78 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Most agroindustry not competitive, but Competitive, private agro-processing and Agroprocessing and situation improving input supply in a stable macroeconomic Services for environment. Agriculture. The trend to loss of export markets continues due to the crisis in the primary sector · Finalize privatization and/or liquidation of state-owned enterprises (e.g. Bulgartabac). · Privatization is almost completed. · Some progress in establishment of warehouse receipts system (500,000 mt licensed warehouse · Continue to make State Reserves activities capacity now exists). more predictable and transparent by implementing management approaches and · Operations of the State Reserves improved but transparency measures outlined in COM still poses problem for destabilization of private decree. storage market. · Improve market infrastructure including development of commodity exchange trade, · Law on Water Users' Organizations has been information systems· Further develop passed; a new Water Agency formed, but the warehouse receipts system. state-owned irrigation company still needs to be · Expedite formation of water users' restructured associations, and transfer irrigation assets to · Beginning to transfer operation and them. maintenance responsibility for small-scale · Restructure Irrigation Systems Company irrigation infrastructure to water users' associations · Implementation of SAPARD has begun, and is · Update the strategy and assessment of the gaining speed after a slow start irrigation network, and the needs for its rehabilitation. 4. Rural Finance · The banking system is stable and all banks are · Improve access to rural credit for privatized (only one still undergoing creditworthy borrowers by extending privatization), mostly by foreign banks. outreach of the bank and non-bank Additionally foreign banks have opened branch intermediaries offices. · Restructure SFA to focus on its role as · Still high risk stemming from low profitability counterpart agency for EU SAPARD funds; and poor credit history greatly limit access to along with fulfilling functions necessary in credit. view of preparation for EU accession; eliminate short-term direct credit, closely · Most working capital needs are met from monitor long-term direct credit to ensure farmers' own-sources as banks are reluctant to adequate targeting and transparency. credit the sector; but the volume of bank credit Interest subsidies are a continuing source of is expanding (albeit from a low base) especially concern.. to agro-industrial firms; the term structure of loans is very slowly expanding from short term · Develop the legislative basis for the credit (up to 12 months) to medium term (up to 5 cooperatives to increase small farmer access years). to credit. · Donor supported credit co-op network is small, but results are encouraging. 79 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Agricultural institutions including research Start with a narrow focus on essential Framework and education have deteriorated, lacking policy priorities in public sector administration to direction, and losing skilled staff. ensure success. · Instead of guiding agriculture to a market- · Develop a solid information database and based system, MAFF has in the past focused statistical analysis capability for agricultural only on ad hoc actions often motivated by a policy decision-making, encompassing data crisis or pressure from a special interest lobby. from diverse sources (household, commodity level, sector, financial system). Provide · Statistical information on agricultural access to statistical/agricultural information production and prices, agro industry, and rural and analysis to the public. finance, is unreliable · Rationalize agricultural services by · · Financial resources barely cover salaries salvaging remaining valuable assets in and are spread too thinly over rapidly declining research and education. number of centers, staff and projects. Little innovative research is underway, both · Develop extension and export promotion technology and equipment are outdated. services to farmers, including smaller and medium size farms lacking access to · Adjustment in agricultural education has been commercial information sources. limited and public extension service does not exist. 80 Moderate Reformers (countries with a ranking score of 6.0 to 7.9) Albania Romania Croatia Armenia Macedonia Azerbaijan Kyrgyz Republic Serbia and Montenegro Moldova Bosnia and Herzegovina Georgia 81 82 ALBANIA Total Population 3.1 million Agriculture in GDP (2000) 51% Agricultural output in 1998 RuralPopulation 58% Food and agriculture in as percentage of 1989 level 132% Active labor force (2000) 42% Livestock production 1998 Total Area 2.8 mil. ha Food and agriculture as percentage of 1989 level 166% Agricultural Area 1.3 mil. ha in exports (2000) 10% Share of livestock in agriculture in imports (2000) 17% (1999) 50% Arable Land 25% Agricultural area in private Irrigated 7% Currently an exporter of: Use (1998) 100% Orchards 17% Vegetable, fruit, fish products and Share of family farms in total Natural Grassland 15% tobacco agricultural land (1998) 100% Forested 36% Share of private sector in total Agricultural output (1998) 100% ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro -Economic Markets and prices are fully liberalized with minimal Distortion free marketing and incentive Framework for price distortion, but market structures are weak and system and a more open trade policy. Agriculture poorly integrated. All agricultural producer and consumer prices A. Prices/Subsidies · Refrain from introducing agricultural price deregulated. interventions. · Government has retained small subsidies for irrigation. · Support development of infrastructure · Private sector took over cereal imports from GDSR in · Improve means to target transfer payments late 1996 to rural poor. · Markets remain weak due to poor infrastructure and Improve barriers for business development low marketed surplus. . · Public transfer system for low income groups in rural areas has limited resources. B. Trade Policies · WTO member since September 2000 · Recent import tariffs decrease: ad valorem tariffs of 0- · Advance multilateral and bilateral trade 18%. agreements. · Free trade agreement with Macedonia · Promote export production under · Member of Stability pact for South Eastern Europe preferential trade agreement · Preferential trade agreement with EU - Stability and Association Agreement negotiations with EU started C. Taxation · Land tax introduced in 2003, but not yet implemented · prepare and implement property taxation due to incomplete decentralization process system with moderate tax rates to be effective after first time registration is completed. 83 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Comprehensive re-distribution of all public Full ownership rights and a working land Farm Restructuring agricultural land completed, but most of this land still market for efficient land transfer. lacks secure, unambiguous property rights. · 85% of agricultural land re-distributed in 1991-92. · Complete first time registration of land. · 90 % of the agricultural land has been registered and · Complete transfer forest and pasture land titled. Registration process of all land is ongoing. to commune/village control and develop · Forest and pasture land under public ownership and forest management plans. partially transferred to communes for management · Put appropriate measure in place to resolve · Inadequate legal and administrative procedures for claims of former land owners and resolving ownership disputes. registration disputes. · Land market is developing, though informal transactions · Review laws related to property rights to prevail due to tedious, costly and time consuming improve efficiency and reduce transaction registration procedures costs. · No timely and equitable solution for restitution and · Implement business plan for registry office compensation issues of immovable property. and improve automation process. 3. Competitive Agro- Privatization nearly completed; over-regulated seed Competitive, privately owned Processing and Services sector. agroprocessing, input supply and service for Agriculture · 90% of agro-processors now privatized, recent subsectors operating with minimal government commitment to accelerate and complete government protection. privatization of the remaining (mostly larger) State- · Complete privatization of remaining State- Owned Enterprises. Owned Enterprises. · Limited foreign investment in agro-processing. · Facilitate access to private commercial · Newly privatized agro-processors hampered by outdated credit for private sector enterprises, and equipment, lack of credit and a weak understanding of continue support for improving management competitive markets. techniques. · Product quality is low and new systems for setting and · Complete establishment of new systems monitoring quality standards are not yet in place. for defining and monitoring product quality. · Seed sector overregulated and still dominated by public · agencies. · Restructure seed research institutes to · Growing dynamic system of private sector input dealers more applied and relevant research has evolved but they are constrained by poor access to · improve security and macro conditions to credit. attract foreign investment 4. Rural Financing Lack of an appropriate financial system for Viable financial institutions serving the agriculture agricultural sector efficiently · Rural credit is available outside micro-credit-type · Complete legal and regulatory framework schemes. Rural Commercial Banks merged with National for loan enforcement including bankruptcy Commercial Bank,. law. · There are 10 private commercial banks and their interest · Expand micro-credit-type organizations in agriculture is increasing. where appropriate, but in a sustainable way · Following the decrease of deposit rates by the BoA to with no rapid scaling -up. 7 %, the interest rate of credits is decreasing. · Finalize regulatory and supervisory · procedures for savings and credit associations. · Savings and credit associations and village credit funds operating in many areas, process ongoing · Strengthen implementation and enforcement and supervision capacity of the · Law on savings and credit associations passed in 2001. Bank of Albania. 84 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Public institutions not yet adjusted to the needs of Efficient and effective public sector Framework small-scale private farmers; lack resources and trained administration and support for personnel. commercial private agriculture. · MAF now has mainly regulatory functions, but has yet · Capacity building in national and local to re-organize and train personnel to implement these governments. functions effectively. · Clear definition of responsibilities within · Agricultural extension services are weak. Reform of the decentralization plan. agricultural research system has started. · Continued reform of extension and · Limited MAF capacity for policy analysis. research programs and institutions · PRSP and MTEF conducted and alignment of tasks and · Continued efforts to improve the capacity budgets improved. for policy analysis. · Decentralization and civil service reform in progress, · MOA to realign its structure with but lack of capacity and will to clearly define roles and decentralization structure responsibilities · Improved and more transparent budget · Establishment of regional development plans started. allocation in MOA and increased accountability 85 ROMANIA Total Population 22.4 mil Agriculture in GDP (2001) 13.4 % Gross Agricultural Output (GAO) in Rural Population 45.6% Food and agriculture 2001 as percentage of 1989-91 level 91 % Total Area 23.8 mil ha in active labor (1998) 40.6% Livestock production in as Agriculture area: 14.8 mil ha Food and agriculture Percentage of 1989-91 level 89 % Arable land 63.2% in exports (2002) 2.6 % Share of livestock in agriculture as % Orchards, vineyards 3.2 % in imports (2002) 5.0 % of GAO (2001) 39 % with Irrigation Facilities 13 % Traditionally net exporter: live cattle and Agricultural land in private use sheep, meat (pork, beef, poultry), grains, (2002) 93.2% Share of independent full and part- Forested 26.6 % sunflower oil, wine time family farms in total agricultural area (2000) 82% ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Food and agriculture operates in a price and trade Maintain relatively liberal market system Framework for environment with direct links to the world market. Weak initiated under ASAL, with minimal Agriculture private market institutions, not enough price Government intervention. Support the transparency, high transport costs and poor logistics development of private market inhibit market development. organizations, market information systems and better infrastructure and logistics. A. Prices/Subsidies · Gradual price liberalization started in Oct-90 but substantial · Create predictable and consistent system of reform did not occur until February 1997, when agricultural Government policy instruments for producer and consumer prices were liberalized. No uniform agriculture. minimum price schemes exist, but after a gradual expansion · Revise existing support programs and of "premia" (initialy for wheat and milk), starting with 2002 continue improving targeting and reducing subsidies are delivered on a per-ton basis to "commercial" inefficient allocation. farms, for major commodities (wheat, barley, sunflower, · Avoid the use of minimal price programs soybeans, maize, vegetables, fruits and milk, beef , pig and and relate programs, if any, to world market poultry meat). prices rather than average cost of production. · Producer prices are below EU levels. A large share of · Develop and support initiatives for market production is not marketed. Consumer prices are at export information system (price and output) and parity levels, or slightly above import parity levels, but below improved physical market infrastructure EU levels. (roads, communications, marketplaces) as · Regional price variation is significant, due to high transport well as "soft" infrastructure (warehouse costs, poor logistics and weak arbitrage. Absence of market receipts, grain grading systems, marketing information system combined with high transactions costs groups, contract enforcement mechanisms, contribute to regionalization of domestic trade in food etc). products; lack of off-storage security combined with high interest costs of storage and poor grading reduce incentives for off-farm storage. · Subsidies (including directed subsidized credit) has reduced from a level of about $ 570 million at the beginning of reforms in 1997, to $ 316 million in 2000 and $ 276 million in 2002. A system of general input vouchers, was put in place in period 1997-2000 and comprised over one-half of the total value of subsidies. These were channeled to the private sector, whereas previously most direct subsidies went to state enterprises. In 2001 distribution of vouchers was replaced by distribution of cash and eligibility expanded to include state farms among beneficiaries.. The new approach of subsidy delivery is based on farm size and market oriented production, with minimum thresholds for efficient farms set by Ordinance in 2001. In 2002 the Parliament amended the Ordinance, giving the right to fa mily farms to receive subsidies for their marketed output. However, only registered (at ministry offices) farms are eligible for subsidies, and small farms are mostly excluded. 86 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · Worldwide tariffs for food and agriculture products reduced · Maintain trade policy framework from a trade-weighted average of 80% to 27% in 1997, and to implemented from 1997-99. Refrain from 22% in 1999: maximum tariffs reduced to 40-45% in 1997/98 backsliding on quantitative controls or for milk and dairy products and some non-sensitive temporary import duty exemptions. commodities. By mid-1999 this was the maximum for all · Pursue active policy to improve market commodities. This regime has been successfully maintained. access for Romania food and agriculture In 2001 a further reduction in import tariffs for pork and products, including improvement of food poultry meat to 22% was decided, as to increase competition safety standards to conform with EU on meat market. standards. · Licensing and quantitative restrictions for exports and imports removed starting Jun-97, and temporary import duty exemptions ended. Some backsliding on these measures has occurred in different modalities in each year since then.. Tariff-rate quotas (TRQs) are maintained in the framework of bi-and multilateral trade agreements. · Romania joined CEFTA in 1997 and regional tariffs have declined and are well below worldwide tariffs; regional agreements with the EU (1995), CEFTA, Moldova (1994), Turkey (1997) and Israel (2001) are providing a framework for increased sub-regional agriculture trade. · Agricultura l foreign trade is privatized. C. Taxation · Agricultural taxes are generally lower than other sectors, · Improve tax administration and tax because of large share of family farms. Profit taxes on collection in general. primary production (paid by incorporated farms) is 25% (this · Increase taxation of informal segments of is also the regular rate). In 1997-1999, some agricultural agriculture while continuing to decrease products were either tax exempt, or benefited from a lower taxation of formal sector as well as reported rate of VAT, but these exemptions have been eliminated, and personal incomes. a uniform rate of 19% now applies. · An "agricultural revenue tax" (based on amount of land · Provide increased tax incentives for owned) was legislated in 1994, and suspended in 1997. The investment from properly reported corporate end personal incomes. suspension has been renewed in each year since 1997. The Government failed in 2001 to pass a new ag. land tax law (for · Reduce tax disincentives to investment in farms holdings over 10 ha). While the suspension of the capital goods. This inhibits agricultural 1994 law was continued in 2002, starting with 2003 the tax machinery investment and limits development will become effective. of a leasing market. · The informal sector, which accounts for most agricultural production, but a much smaller portion of the marketable surplus, generally escapes direct taxation. 87 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and A land reform was legislated in 1991, and its Privately owned smaller and larger viable Farm Restructuring implementation is close to completion. Land under former farms are the dominant components of collective farms was restituted to the former owners and farming systemwith transferable their heirs up to 10 ha, or given to the workers of the ownership rights. collective farms (0.5 ha). About 9.3 mil. ha were restituted · Accelerate the titling of newly privatized to about 4.7 mil. persons. At end of2002 88.4% of the land. claimants had definitive titles (covering 81% of area to be · Introduce market based measures to restituted). After a long political debate started in 1997, a facilitate a speedy consolidation of land new Law on land restitution was issued in January 2000, ownership and changes in farm sizes (e.g. allowing a high limit of restituted land (50 ha). internet based land information service, as in Complicated implementation and subsequent changes (an Bulgaria). Ordinance in 2001, and a Law 2002), made this process This could involve support for dissemination extremely slow. of land market information, legal advice on · Another 2.2 mil. ha, mainly in the mountain and hilly areas, land transactions for those entering or exiting was not collectivized during central planning. The owners farming, or more direct incentives to support now have full ownership rights over the land, and it is exit of nonviable farmers and entrance of operated as small-scale family farms. potentially viable ones. · In Oct. 97, the Parliament adopted a Law on the legal circulation of the land that removed the moratorium on the land sales. Amendments to the Leasing Law eased restrictions on leasing. · The privately-owned land is organized in small-scale farms and (formal and informal) associations. In 2001 (June), about 1.6 mil. ha out of the total 12.78 mil. ha of private agricultural land, were organized into formal associations (aver. 385 ha each), about 0.78 mil. ha into informal associations (about 121 ha each) and 10.3 mil. ha are owned by smallholders (2.47 ha each), some of whom rent out their land. · The private sector accounts for 95% of the value of agricultural output, however its share of the marketed surplus is less. · The state-owned farms administered in 2002 about 0.5 mil. ha of arable land. At the beginning of 1997, there were about 499 crop producing state farms (with arable land) and 112 animal farms (mainly in pig and poultry production, without arable land). Privatization has been blocked in the crop production sector by 1999, when an Ordinance oo privatization state farms was issued. The implementation of this Ordinance has begun in force (with privatization of 250,000 ha by end 2000,), but was very slow in 2001 and 2002, when the Law on state farms privatization was amended. At end of November 2002, the number of privatized state farms was 236 (312 state farms were under liquidation or restructuring, and other 191 farms to be privatized). Completion of state farm privatization remains a key unfinished task on the policy agenda. 88 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Privatization of agroprocessing, input suppliers, storage Competitive, privately owned Agroprocessing and and services was slow until 1996. An impetus to the agroprocessing and input supply. Services for privatization process occurred in 1997, and major · Complete the privatization of grain storage Agriculture. progress was made by the end of 1999. companies, animal farms, fertilizer · As of mid-1999, most out of a total number of 534 agro- companies, food industry companies, and industrial companies, have been privatized or placed under state farms. liquidation, including about two-thirds of cereals storage · Implement EU conforming quality and companies and most pig/poultry enterprises. The sugar and safety standards for agricultural imports and tobacco industries still lag in the process. exports. · The certified seed business was organized within two · Improve contract discipline and market commercial companies, producing grain and oilseed varieties, transparency. and vegetable seed varieties. These were privatized. · Promote research and development of new · All Agricultural Service Companies (including machinery products and markets. service companies, or Agromecs), have been privatized or · Reform the land reclamation agency placed under liquidation. (SNIF), transferring assets to voluntary water · The upstream and downstream sectors are demonopolized. users associations. However, the slow privatization pace and the dominance of · Stimulate and support increase of coverage the MEBO privatization method, has blocked the infusion of capital in these companies, and maintains obsolete production of viable irrigation schemes with functional methods, high costs and significant marketing margins. · In WUAs. Reform the irrigation subsidies distribution system targeting the beneficiaries 1996, gross output of agroprocessing (except tobacco) was around 65 % of the 1991 level. (water users) instead of SNIF. · In 2001 free of charge transfer of ownership over on-farm irrigation facilities (including small pumping stations, buried pipelines and field equipment) from SNIF to water users' associations (WUAs) started and physical takeover was carried out on about 65,000 ha. At end of 2002 the area covered by existing 95 WUA's was 334,821 ha, and area with irrigation facilities transferred was 188,293 ha. · Implementation of Sapard measure for improving processing and marketing of agricultural products started in last part of 2002 with few applications received. 89 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 4. Rural Finance An appropriate financial system for privatized Viable financial institutions serving the agriculture is not in place. agricultural sector efficiently. · Up to 1996, most of the agricultural lending was provided · Develop bank network serving rural areas. through directed credit lines from National Bank of Romania, · Promote the emergence of competitive intermediated mainly through Banca Agricola and backed-up collateral services for agriculture (accept land with state guarantees.. Despite the preferential interest rates as collateral; develop the warehouse receipts (often with negative real rates), the collection rate for system; start collateral registration; develop agriculture was worse than in other sectors (60-70%). NBR- grain grading and commodity exchanges) supplied credit contributed significantly to inflation. In 1997 this practice was stopped. · Develop credit cooperatives and other low- cost financial intermediaries in rural areas · In 1997, 1,050 bn Lei (150 mil. US$) of directed credit was capable of serving smaller clients. placed on the budget and lent for grain planting (550 bn Lei) and for purchase of domestic bread-making wheat (500 bn · Promote leasing industry by reducing tax Lei). The Government continued this mechanism in 1998, disincentives for capital goods investments. but substantially reduced total credit to $ 7 mil. in 2000. In early 2001, the GOR ended all directed, subsidized credit to agriculture, as a Board condition of the Rural Finance Project. · Credit cooperatives serve rural households mainly with household credit. A draft law to reform cooperatives has long been discussed but never agreed upon, however, the regulatory framework improved in 2000 when the NBR assumed responsibility for regulation of credit cooperatives.. · High interest rates, typically over 40% in real terms, and the lack of collateral seriously limit lending to agriculture. Passage in 1999 of a secured transactions law prepared by the Rural Finance Project team and passed as a condition of PSAL, has significantly improved the legal environment for lending against movables. · Banca Agricola' s privatized contract was ratified by the GOR in early 2001 5. Institutional Institutional structure was reformed, but the MOA has Promote the use of and support for Framework been slow to quality of public services, however, is not in commercial and private agriculture. place. · Complete the reorganization and improve · Ministry of Agriculture renounced its former role in price quality of public agricultural administration to control or supervision and direct distribution of subsidies, in the needs of a market economy. MOA should favor of market-oriented functions such policy formulation, spend less discretionary funds on subsidies extension, research, market information, rural development. and more on public goods. Only tentative steps have been taken in this direction, · Complete the reform of agricultural however. extension and research. Establish a · Four inter-professional organizations was formally sustainable research framework. established (for sugar, beer, pork, wine), and another nine are · Provide assistance in the development of in process of developing. the producer associations, stimulation of · Information system required by a market based agriculture farmer marketing and input purchase groups. is only partially in place. Price information and input use · Support productive investment in public data for different types of farm units is virtually nonexistent. infrastructure for grain marketing and · Public investment in agricultural infrastructure is not irrigation, roads, etc.. prioritized on the basis of economic analysis. 90 CROATIA Total Population 4.38 m Agriculture in GDP (2000) 7.0% Agricultural Output in 2001 Rural Population 43 % Food and Agriculture in as percentage of 1990 level 98% Active Labor Force (2001) 10.4% Livestock Production 2001 as Total Area 5.65 mil ha Food and Agriculture Percentage of 1990 level 70% Agricultural Area 3.21 mil ha in Exports (2001) 10.0% Share of livestock in agriculture (est) 40% Arable Land 63% in Imports (2000) 9.5% Agricultural Area in Private Use (2001) 75% Orchards 4.4% Tobacco products, processed fruit and Share of Independent Family Farms in Natural Grassland 36% vegetables, processed meat, wheat, and total agricultural Land (2001) 75% Forested 35% wine and spirits are the major export Share of private sector in total products agricultural output (2002 est. ) 85% ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro -Economic Significant but incomplete liberalization of Distortions free marketing and incentive Framework for Agriculture markets prior to independence, limited further system and a more open trade policy. progress since independence. A. Prices/Subsidies · Progressively reduce the aggregate support to · Crop production and sales are currently driven the agriculture sector by reducing the number of by a combination of production quotas and crops eligible for area payments and phase out incentive payments, which divorce domestic the system of support for livestock production. prices from international trends in both absolute According the WTO rules the current system is and relative prices. not "blue box" compliant. · The production quota system locks producers · Abandon the calculation of national crop into traditional patterns of production at a time quotas on the basis of self-sufficiency when they should be changing their crop mix in requirements. response to changing patterns of domestic consumption and competition from imports. · Price policy reform initiated in 1998. Area payments have been introduced for most major crops in order to compensate farmers for the reduction of import protection. · Livestock production subsidized with producer payments for milk and headage payments. B. Trade Policies · Significant reductions in import protection will · Implement the WTO agreement, which be implemented from 2003-2006 under the WTO establishes a more rational and transparent basis agreement, and trade agreements with the EU and for trade and price policy. Under the agreement numerous other trading partners will take effect the country has committed itself to reduce the during the same period. level of protection on agricultural products and · The system of variable levies has been replaced to remove export subsidies with specific seasonal tariffs. · Explore agriculture export opportunities under · A total of 27 bilateral and multilateral the trade agreements with emphasis on the agreements with major trading partners have been interim trade agreement with the EU which signed. Stabilization and Association Agreement offers tariff-free access for all Croatian and Interim Trade Agreement with the EU was agricultural exports to EU countries, except for signed in October 2001. wine and baby beef. C. Taxation · Land tax abolished in 1996 91 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm Small-scale private farms predominated before Private ownership of all land; secure, Restructuring independence, slow progress with privatization transferable property rights; and an active and re-structuring of the remaining ex-Social land market Sector Enterprises · Enact laws on land consolidation and enforce · Small-scale private farms account for 66% of existing inheritance laws to prevent further land agricultural land but are very small (average 2.9 fragmentation. ha) and highly fragmented. · Lease state land subject to ownership claims; · Ex-Social Sector Enterprise land transferred to sell all other state owned land. the State in 1991. New Land Law that legally · Passage of amendments to Cadastre and Land bounds the Government to dispose this land came Registration Laws to make them compatible; to force in 2001. update and reconcile Cadastre and Land · Conditions for an active land market not yet in Registry. place: property rights remain unclear due to the major inconsistencies between the land registry and the cadastre. 3. Competitive Agro- Limited progress with privatization and Competitive, privately owned Processing and Services for demonopolization relative to pre-independence agroprocessing, input supply and service Agriculture situation. subsectors operating with minimal · Approximately 50% of the equity in agricultural government protection. and agro-industrial enterprises is now in private hands. · Privatize and unbundle the remaining · Slow progress with the privatization and Kombinats and AgroKombinats. restructuring (unbundling) of the larger remaining Kombinats and AgroKombinats due to their · Register these companies and develop a complexity and size, their overvaluation, and the secondary market for their shares. operating procedures of the Croatian Privatization Fund. · Encourage competition among domestic suppliers and from external sources. · Emergence of private sector input and output marketing structures and agencies to replace · Reduce protection for agro-processors and Kombinats and AgroKombinats. encourage competition among domestic suppliers and from external suppliers. · Agro-processing sector continues to receive very high levels of protection so raising consumer prices. 4. Rural Financing Slow emergence of a viable private banking Viable financial institutions serving the system, which is active in the agriculture sector. agricultural sector and rural areas efficiently. · Massive program of subsidized credit financed · Support the development of collateral by treasury was terminated in 1992. instruments suited to agriculture and support · Most rural credit comes from public sector training of agricultural lending officers. institutions, the Ministry of Agriculture operates · Guide interim publicly funded rural credit two rural credit programs. The credit is distributed schemes and transform them into Rural Credit and administrated by commercial banks, however Guarantee Fund. the decision to allocate available credit is not based on purely commercial criteria and therefore repayment rates are rather low. · Private sector banks show little interest in servicing the credit needs of the great majority of farmers. 92 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Framework Gradual adjustment of institutional structure Efficient and effective public sector to a role suited to a market-oriented economy. administration and support for commercial · Bulk of MAF budget is still allocated to direct private agriculture. payment for production and processing. · Reform existing system of incentives and the · Significant progress with the development of a use of MAF budgetary resources. public extension system but the institutional · Continued support for reform of extension framework and links with the private sector are program and its integration in the Chamber still weak. System. · Established Agricultural Research Council as · Continued efforts to reform research system. the basis for focusing research and linking it with · Continued efforts to increase the institutional extension has made significant progress. capacity for policy analysis. · A farmer-managed Agricultural Chamber · Agricultural Chambers to be based on system for technical support to agriculture have administrative units of sufficient size to create been legislated under the new Law on Agriculture. the critical mass of funding and expertise to The system will be established under a separate support a sustainable technical service. Law on Agricultural Chambers. 93 ARMENIA Total Population .3.0 mil. Food and agriculture in Agricultural output in 2002 as percentage Rural Population 35.2 % NMP* 2000 27% of 1988 level 98% Food and agriculture in Livestock production in 2002as percentage Total Area 3.0 mil ha active labor (2002) 39.2% of 1988 level 84% Agriculture area: 1.4 mil ha Food and agriculture in Share of livestock in agriculture ( 2001) 41% exports ( 2002) 11.7% Agricultural area in private ownership 35% Arable land 35% in imports ( 2002) 20.2% (2000) Orchards 4.5% Traditionally net importer: Share of independent private farms in total 71% Irrigated 20.1% grain, sugar, vegetable oil arable area (2000) Forested 12.8% and livestock products. Share of private sector in total agricultural 99% output (2002) ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Market liberalization is advanced, although some Distortion free marketing and incentive system. Framework for delays in full completion. Agriculture A. Prices/Subsidies · Agricultural producer and consumer prices were · Phase out subsidies to irrigation by targeting the deregulated in 1992 and state orders for all products conversion from pumped water to gravity-fed eliminated in 1995. schemes and by increasing cost recovery in the water · There is no direct subsidization of agriculture and tariff to 44% for 2003 and to 85% by 2007. food prices. Irrigation water is still subsidized: · Establish the multi-utility regulator and let it set current water fees cover roughly one third of the water fees on the basis of the technical commission's economic cost of water. The cost recovery target for findings. 2002 of 33% has not been reached, recoveries · Increase water fee collection rates from the current amounting to 25.2%. This poor performance is due to level of 55% to 80-90% by 2006. low fee levels and poor billing, while collection performance has improved. The recovery target of 44% in 2003 is unlikely to be achieved. · The TORs for the technical commission have been expanded to better quantify real O&M needs, but the technical survey has only recently been started and its findings will not be available until the 2004 irrigation season. · Profit and marketing margin control in the food processing industry were removed in the mid-1990s and restructuring of agro-industry has improved producer prices for raw materials for traditionally exported processed products. B. Trade Policies · Grain and other commodities for state reserves are · Pursue active trade policy to improve market procured by commercial methods. access for Armenian food and agricultural products, · Food exports no longer require licenses. especially in the FSU and Central and Eastern Europe. · Tariffs reduced to low and uniform rates. · Develop a legal framework and adopt appropriate · WTO member since 2003. quality standards, establish an independent food testing laboratory, and regulations to promote export of agricultural and agro-processed products. C. Taxation · 20% VAT (farms are exempt). · Simplify and reduce taxation in agro-processing and promote investments via tax incentives. *Net Material Product 94 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and Comprehensive land reform implemented, Individual private farming is the predominant Farm Restructuring transferring most of arable and perennial crop structure in the farming system, with secure and areas to private owners. transferable ownership rights. · Agriculture was de-collectivized in 1991. Only · Implement the property registration system which about 15% of arable land is kept in state reserve, has been designed to provide security of tenure, full which is utilized by leasing and is to be sold through information on property transactions, and a basis for auctions to private farmers. real estate taxation. · Pastures and meadows remain largely state and · Strengthen the rural credit system and land municipality owned, with some being sold while most mortgage procedures. are leased. · Prepare and implement a program to support land · Law creating legal conditions for a land market was consolidation and the move towards more efficient adopted in December 1995, but the land market is holdings. developing only slowly. · A new Land Code was adopted in May 2001. The lease period for state lands was lengthened to strengthen incentives for sustainable use. 3. Competitive Agro- Delays in privatizing agro-processing and services Competitive, privately owned agro-processing processing and for agriculture. and input supply. Services for · Privatization of agro-processing and input supply · Establish feasible and reasonable quality and Agriculture. was included in the privatization program safety standards for agricultural imports and exports. implemented in 1995-98. · Promote joint ventures to tap foreign expertise, · Foreign participation in the agro-processing technology and capital, and to provide access to privatization is increasing. foreign markets. · Marketing and trade promotion supported by · Promote research and development of new USDA are opening new export opportunities. markets and products, especially those which can be produced by medium-sized firms with low capital- intensive technologies. 4. Rural Finance Inadequate financial system for privatized Promote the development of viable financial agriculture. institutions serving the agricultural sector. · Financing in agriculture is adjusting slowly to the needs of a market based privatized agriculture. · Promote growth of ACBA and of rural savings and · The commercial banking sector is weak and not credit societies. interested in lending to agriculture, but the newly · Accelerate the development of the real estate established Agricultural Cooperative Bank of cadastre and continue to implement a fee structure Armenia (ACBA) is very actively lending and major that promotes the use of the cadastre. agro-processors are financing their contract growers. · The gradual development of an effective land cadastre has not yet led to increased use of agricultural land as collateral, but the urban land market is growing rapidly. 95 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional Adjustment of institutional structure is slow and Efficient and effective public sector Framework constrained by budgetary difficulties. administration and support for commercial and · The agricultural education system has been partially private agriculture. adjusted to emerging new conditions, and further · Finalize and adopt the Sustainable Agricultural reorganization and rationalization of the research Development Strategy with clearly established system is under consideration. A strategic study on priorities. the future of agricultural support institutions carried · Complete the reorganization of public agricultural out with FAO support is providing the basis for an administration to conform to the needs of a market institutional development strategy now being economy. initiated. · Complete the reform of agricultural education and · Public activities in agricultural research and research and rationalize the links between research, education are seriously hampered by budgetary extension and agricultural education. difficulties. · Transform the 13 regional sections under the · An agricultural extension system has been created, SCWM into autonomous agencies whose tasks can but mobility of agents has been a constraint on service potentially be taken over by WUA federations. provision. · Promote registration of WUAs on the basis of · The organizational structure of the public irrigation sustainable financial and technical parameters. agencies is unsatisfactory, and the Drainage and · Implement measures to strengthen WUAs. Irrigation Management Agencies in particular are overstaffed, costly and subsidized. · Accelerate the preparation and promulgation of the · A WUA law has been enacted, and implementation package of regulations supporting the Water Code and WUA/Fs. regulations are now being drafted. 12 WUAs have already been registered and should sign the Transfer Agreement this summer and the water delivery contract this fall. 96 MACEDONIA, FYR Total Population 2.0 million Food and agriculture as percentage Agricultural output in 1999 as Rural Population 45 % of 2000 GDP 13% percentage of 1990 level 110% Agriculture and forestry in active Livestock production in 1999 as Total Area 2.57 million ha. labor (2000) 18% percentage of 1989 level (est.) 95% Agriculture area: 1.29 million ha. Food and agriculture in exports Share of livestock in agriculture Forests 0.95 million ha (2000) 17% (1999 ­ est.) 30% % of Ag. area in imports (2000) 13% Private agricultural area (1999) 80% Arable land 42% Traditionally net importer of grain, Share of independent private Orchards/Vineyards 4% sugar, vegetable oil and livestock farms in total arable area (1999) 80% Meadows 4% products. Traditional exports are Share of private sector in total Pastures 49% tobacco, wine and lamb. agricultural output (1999 ­ est.) 80% Irrigated 37,000 ha ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic A standing agreement with the Fund and Bank Complete implementation of agreed Framework for Agriculture exists on a viable, medium-term macroeconomic adjustments to macroeconomic framework framework A. Prices/Subsidies · Some input, output and export subsidies apply to · Use import protection to support wheat crop and livestock products; but the amounts involved prices, and set the floor price at a level are small their impact on production and market below import parity. behavior is negligible, and they are to be phased out. · Limit the activities of the State Office for · The State Office for Commodity Reserves buys Commodity Reserves to the acquisition and wheat and tobacco to support Government set floor management of modest strategic reserves. prices, and buys and manages strategic food reserves. B. Trade Policies · Negotiations for WTO membership concluded in · Implement WTO agreement. 2002. · Implement improvements in duty draw · Membership will entail the removal of import and back scheme. export licenses on agric commodities, and the · Adopt and enforce EU product standards reduction of high existing tariffs. and improve product quality. · Free Trade Agreements with major trading partners (EU, Yugoslavia, Croatia, Slovenia, Turkey, Bulgaria) further distort trade. · Low product quality and difficulty satisfying EU product standards remain major constraints to exports. C. Taxation · A VAT of 19% applies to some agricultural products, but most are taxed at 5%. · Farmers are exempt from income tax and there is no land tax. 97 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm Land is mostly under private ownership, but Strengthen the institutional framework Restructuring markets function poorly. for land transactions and complete · 80 percent of the arable land is under secure privatization of the agro-kombinats. ownership by private farmers. · Improve the operations of the land · The new Land Use Law provides for security of registration system to facilitate land sales tenure and update cadastral records and tradable titles. · Land markets are "sticky," i.e.; there are high friction costs involved with the sale, rent or lease of · Introduce a land lease registry. land. · Expand the operations of farmers' · Most private farms are small and fragmented. Land associations. consolidation and expansion are needed to increase · Complete the privatization of agro - farm size, obtain economies of scale and improve kombinats. efficiency. · Create a suitable exit policy for newly · Only 25 agro-kombinats now remain to privatize. privatized farming units which experience · Most of the privatization was done through liquidity problems, in order to accelerate management or employee buyouts, resulting in post-privatization restructuring. dispersed ownership and weak corporate governance in many privatized enterprises. 3. Competitive Agro- Continued progress with privatization and a small Encourage development of private sector processing and Services for but growing private sector engaged in agro- input supplies. Agriculture. processing and farm input supply. · Enact legislation to facilitate wider · There is strong competition among private private sector responsibility for the seed agricultural input suppliers and machinery dealers. and planting material industry. · The private sector is also active in agro-processing, · Simplify pesticide registration mostly in the form of small-scale cottage industries procedures. producing for the domestic market. · Foster entry of strategic investors in · 420 agro-processors have now been privatized, and processing, storage and marketing agri- the remaining 25 are in the process of privatization. kombinats spin-offs and define strategy for · Most privatized agro-processors are in severe regulating newly privatized monopolies. financial difficulty due to over-scaled, outdated plant, excess labor and weak management. · Foreign investment in agro-processing remains weak, with 50% of investment to date in a tobacco processing company. 4. Rural Finance Continued reform of the commercial banking Increase access to finance in rural areas. sector but financial intermediation is limited and Strengthen the legislative associated with rural people have limited access to bank credit. collateral and loan recovery. · Financial intermediation is still constrained by · Improve the procedures for issuing title continued distrust of the banking system and deeds and develop a system of land and inadequate laws and procedures for securing loans. chattel mortgages as security for credit. · There are no formal rural financial institutions. · Develop legislation and institutional · Donor credit programs for rural people have had structures to encourage the development of mixed success. farmer's associations, credit unions and savings cooperatives. · Rural people prefer to keep debt levels low and to self-finance new investments, with help from family · Strengthen donor credit programs and use and friends. them to build sustainable institutions for rural finance. · The main requirements for investment and working capital are for upstream operations (input distribution · Increase the capitalization of successful and machinery procurement and operation), and micro-finance organizations and expand downstream marketing and processing activities. their operations in rural areas. 98 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Framework The Ministry of Agriculture lacks a clear sense of Strengthen the capacity of the Ministry its new roles in a market economy, the capacity to of Agriculture to define and implement fulfill many of these roles and a coherent its roles, and to guide sector framework for future development of the sector. development. · A weak capacity for trade and price policy analysis · Strengthen the capacity for price and limits the Ministry's ability to influence policy. trade policy analysis and develop realistic · An independent national extension system has been and market oriented policies for the future. established but has yet to provide an acceptable · Accelerate the development of demand- service. driven agricultural extension services, and · A pilot program to introduce a competitive, demand- expand the capacity to self-finance these driven agricultural research system has been services. completed. This should now be expanded. · Restructure the agricultural research · Curricula and program design in the agricultural system to focus on technological innovation university system are ill-suited to the requirements of a suited to the needs of a market economy, market economy. funded by competitive grants. · Successful privatization of the veterinary services, · Modernize curricula and programs in the but animal breeding services remain firmly located in Agricultural Faculty, so that they are the public sector. relevant and responsive to the needs of a market economy. · The existing market information system does not respond adequately to the needs of producers and · Strengthen the capacity of the Veterinary traders for timely information on local, regional and Department for regulation, inspection and international markets. the monitoring and control of animal disease. · Producers, processors and traders lack an adequate mechanism for trade promotion and market · Strengthen the existing market development. information service and the current approach to trade promotion and market development for agricultural products. 99 AZERBAIJAN Total Population 8 mil Food and agriculture in Agricultural production in 2001 as % 75% Rural Population 43 % GDP (2001) 17% of 1990 level (VA) Food and agriculture in Agricultural production in 2001 as % 97% Total Area 8.6 mil ha active labor force (2000) 42 % of 1992 level Agriculture area 4.5 mil ha Food and agriculture 33% Arable land and permanent in export (2000) 3 % Individual agricultural area in total agricultural area (2000) crops (% of agr. area) 39% in import (2000) 19% 96% Irrigable land (% of agr. Traditionally net exporter of Share of private sector in total area) 31% cotton, fruits and vegetables agricultural output (1999) Permanent pasture (% of to former Soviet Union agr. area) 57% Countries Forested (% of total area) 12% ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic After several years of delay a rapid process of A distortion-free, efficient and Framework for agricultural reforms has been followed since 1996. internationally competitive agricultural Agriculture · Abolition of the state order system. sector · Break-up of most state and collective farms and · Agricultural sector policies within A. Prices/Subsidies distribution of arable land to households. macroeconomic policy framework aimed at limiting the upward movement of the exchange · Distribution of most livestock to households. rate (Dutch disease) to maintain agricultural · Removal of quantitative controls on external trade sector competitiveness. in agricultural products. · Define extent and mechanisms for · Domestic price liberalization and the privatization subsidization of the irrigation system within of most agro-industrial enterprises through direct, context of establishment of a cost-recovery voucher and auction sales. system. · State companies, dealing with poultry, food and · Avoid direct government interventions in bread have been liquidated. the agricultural sector such as input and · Farmers receive fuel subsidies and additional price subsidies which create economic subsidies to the sector are being considered, as is the distortions. Targeted government establishment of a state fund for state procurement of interventions should be limited to alleviate products and regulation of prices of main agricultural poverty of the most vulnerable. products. 100 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · The foreign trade regime and the associated · Adopt a consistent trade regime based on payments systems has been largely liberalized, international competition with tariffs limited to leading to the development of world-market related anti-dumping (genuine cases only) and a low domestic price structures for most commodities. uniform revenue generating tariff to be · Preliminary work completed to prepare for WTO eliminated as oil revenues supplement the accession. government budget. · Cotton exports channeled through private · Undertake immediate independent assessment companies since 1997, but problems with the of the issues related to apparent lack of privatization of the ginneries, low prices paid to competition in cotton marketing. farmers and the late payments as well as lack of · Appoint independent external inspectors to competition have lead to a dramatic reduction in verify external trade quantities and prices production and area planted to cotton. Production in · Further pursue long-term aim of joining the year 2000 was further hampered by drought. WTO. C. Taxation · In response to ongoing concerns about the effect of · Government to develop a medium and longer the tax rate on producer incentives, the Government term fiscal strategy for the agricultural sector approved on March 1999 a five year tax holiday for defining the planned change in the net resource all primary producers including both juridical entities flow to the sector as oil revenues come on (VAT, profit tax exemptions) and physical entities stream. (income tax). The only tax primary producers will continue to pay is the land tax. Previous tax liabilities of collective farms and their debt to a social protection fund were written off. It is planned to extend the tax exemption until 2010. · Land tax is based on the region, quality of land, and use (arable, fallow, perennial crops). 101 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Government committed to transforming A working land market for efficient and fair Farm Restructuring agriculture into an efficient and dynamic sector by asset transfer and a socially acceptable land encouraging the development of a market-based, consolidation process. predominantly privately owned production · Strengthen the legal and institutional basis for system, with rapid progress in land distribution the leasing of land. since 1997. · Improve the design of the legal and · Significant progress in the privatization of institutional framework that provides for agricultural land. State Land Committee and Land financially sound mortgage operations. Institute have made substantial progress in issuing legal land titles. · Establish efficient arrangements for the sustainable management of state and municipal · Effective Distribution began after Land Reform lands i.e. pastures and forests. Law was passed (July 1996) and accelerated after January 1997. By January 2002, 838,000 farm · Establish a unified cadastre and registration families (96% of the total) with an average of 4 system for all immovable property people per household had gained legal title over 1,350,000 ha. Land registration and titling is almost completed. · Apart from a 5% "land reserve" all arable land is being distributed to private farmers. All other lands including pastures are allocated to the state and the municipalities. An efficient system of future pasture management is yet to be established. · Individual farm sizes are very small and farmers often look for opportunities to associate and establish farmer's associations, such as marketing associations. · New law on mortgages and a revised land code which codifies rights to land were passed. · The process of registering land titles and transactions is in place. Efforts to strengthen the land registration system are underway in the newly established regional land registration offices. Proper record of land transactions gives correct information on land property rights and is a precondition for a buying or selling land or using it as collateral. · A fee structure for land registration system has been adopted. This fee structure balances the objective of cost recovery with the need to assure that the fees do not serve as a deterrent to registration of land transactions. · Land market is beginning to develop and 700 land transactions (buying and selling, lease) have been registered since 1999. Lease market is also developing. 102 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Privatization of agro-industry is proceeding Reestablish an export led diversified product Agroprocessing and rapidly, with major industries such as the State base in agriculture. This will require rapid Services for Bread Concern and the cotton processing sector productivity growth in the agro-processing Agriculture almost fully privatized. sector to regain markets and to offset the · Slower privatization progress in some remaining expected upward movement of the manat as sub-sectors, including tobacco, fruit canning, wine oil revenues increase. and spirits, and cotton ginneries. · Complete privatization agro-industry to include · Foreign investment in agro-processing is still productive capacities currently retained in public limited. Some is taking place in cotton ginning, but sector (cattle breeding, seed multiplication). some other investment in oilseed and fruit processing · Create a favorable economic and legal is beginning to emerge. A study on the general environment for attracting foreign investment in investment climate in Azerbaijan is underway. agro-processing. · New Law on Privatization adopted and second · Create an enabling environment for private phase of Privatization Program under way, special tax support services to accelerate private sector incentives to investors under consideration. investment in agro-processing and to improve · Little progress yet in recovering market share in marketing operations. FSU markets lost since 1992 or in entering new · Review cotton industry and assess the need for markets such as the EU . a regulatory competition law. · Basic legal framework for private sector agro- industries still inadequate, inhibiting access to bank credit. However, the recent law on mortgages, once implementation rules are developed, should help. · Inadequate or non-existent market information and support services for producers and the marketing chain. · State Wheat Reserve Agency is abolished given private sector supply capacity. · The cotton industry has been privatized, but the processing industry and exporters face an oligopsony. 103 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 4. Rural Financing The former rural credit system has collapsed, with A private sector-based rural financing system, the main institution, Agroprombank transformed based on indirect channels of credit to into a Loan Recovery Agency with a limited producers via processors and input and license of a Non-Bank Financial Institution. There service suppliers rather than on direct credit are no local providers of longer term credit for the channels to household farms. sector. · Improved supervision and regulation of the · Emerging privatized farms have neither the commercial banking sector and measures to experience nor the asset base for borrowing from ensure compliance by participating commercial financial institutions. banks in on-lending schemes for the agricultural · Some signs of processors providing crop input sector. credit, especially in the cotton sector. · Government to avoid a top-down approach to · The commercial banking sector is itself going directed development of the credit union sector through a rapid process of restructuring with the and to allow gradual development based on number of operating banks reducing sharply. Few active grass-roots participation. banks lend to the agricultural sector, preferring the higher and less risky returns in trade and oil industry financing. · Grass-roots savings and credit institutions are beginning to emerge in the form of credit unions on the basis of a legal framework developed by the Government in cooperation with Azerbaijan National Bank. Further actions on elaboration of prudential norms and supervision mechanism for grass-roots savings and credit unions were completed by the National Bank. · Three state commercial banks including Agroprombank have been merged. 104 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Re-organization of MOA under preparation; Review the role of government, notablyin key Framework however, the process of reforming other state subsectors such as seed production, livestock organs with a role in agriculture (irrigation development and irrigation. For seed and committee in particular) is not yet finished. livestock, this could be part of the preparation · State Irrigation Committee has gone through an of development strategies. initial restructuring aimed at consolidating several · A review of the irrigation sub-sector is needed institutions and departments. Further restructuring is to identify the current state of the irrigation expected to continue during the next years. system and develop appropriate approaches for · New institutions needed to manage irrigation and sustainable management of irrigation systems. drainage networks. Some grass roots efforts to · Establish a strong capacity in MOA or Cabinet develop water user associations are under way but the of Ministers for policy making; develop new capacity of managing such systems is not sufficiently statistical instruments do fulfill the pertinent developed. information needs required for policy decisions. · Sector still lacks a capacity for policy making for · Further reorganization of veterinary services the rural sector. A Rural Strategy Unit is established balancing public and private responsibilities for in the Ministry of Economy to assist the Government delivery of veterinary services. to develop a long-term appropriate policy responses · Review the legal/regulatory framework on to the impact of the anticipated oil revenues on the pest/pesticide control, property rights, veterinary competitiveness of the rural sector. medicine, etc. Review existing strategies for · Most production and commercial functions in controlling quarantine pests & diseases. agriculture have been removed from government. · Strengthen and develop Regional Advisory However, this has not occurred in seed multiplication, centers as a private providers of farm advisory livestock breeding. At the same time, private services and market information. veterinary services in the form of veterinary field units are beginning to emerge. · Improve rural infrastructure, notably electricity, to enhance productivity in the · State veterinary committee and plant quarantine agricultural sector. inspection were abolished and their functions transferred to the Ministry of Agriculture. · Farmers face insufficient support services, particularly regarding technical & management advice as well as market information. Ministry of Agriculture has proposed radical changes in its extensive research network with consolidating the system to form a few key priorities and at the farm level. · Establishment of essential private farm advisory services are initiated both in the form of Regional Advisory Centers and through contracting out of extension and training services to a service provider (such as local NGO or institute) on a pilot basis. Both models are being tested to identify the most appropriate one. · Actions are being taken to develop a strategy for the development of farmer-oriented adaptive research and the restructuring of the national agriculture research system. A Competitive Grant Scheme Board was established for identifying priority problem areas, soliciting research project proposal for these areas. · Institutions responsible for monitoring/regulating natural resource management, plant/animal diseases and trade/use of related drugs have not adjusted to the context of private farming. However, new laws have been passed on seeds, plant/animal property rights, and plant protection. 105 KYRGYZ REPUBLIC Total Population 4.9 mill Food and agriculture in GDP (2001) 35% Agricultural output in 2002 as Rural Population 65% Food and agriculture in percentage of 1990 level 102% Total Area 20 mill ha active labor force (2000) 53% Share of livestock in agriculture Agriculture area 11 mill ha Food and agriculture (2001) 43% Pasture 10 mill ha in exports (2001) 10% Arable land 1.4 mill ha in imports (2001) 12% Cultivated 87% Pasture 3% Exports include sugar, cotton, wool, leather, Forest 10% tobacco, fruits & vegetables, and alcoholic and non-alcoholic beverages. ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro -economic Markets, prices and the trade regime are Removal of remaining distortions in markets, Framework for Agriculture liberalized, but distortions remain at the local prices, trade regime and the incentive system; level; market structures are slow to develop, development of fully functioning, competitive not competitive and not integrated. markets for agricultural inputs and outputs. A. Prices/Subsidies · Agricultural input and output prices are · Eliminate administrative interference in markets deregulated and budgetary subsidies abolished. and movement of goods, such as multiple Notable exceptions are irrigation water and licensing requirements and imposition of informal electricity for agricultural use, which remain fees on road traffic. subsidized. · Phase out government involvement in input · Proliferation of subsistence agriculture, with marketing, notably of donor/government financed small marketable surplus and high prevalence of equipment and inputs. barter transactions. Government practice of · Cease in-kind collection of taxes and social collecting taxes and other payments in kind and of security contributions and in-kind payment of paying pensions and salaries in kind impedes wages, salaries and pensions in rural areas.. monetization. · Remove tax and other policy obstacles to entry · Responsibility for operating and maintaining on- of agrobusiness SMEs, especially the VAT on farm irrigation systems is being shifted to water fertilizers and seeds. user associations (WUAs). Parliament approved the WUA law in February 2002. A new Water · Remove export taxes on agricultural goods and Code has been drafted which advocates setting ensure timely VAT refunds to exporters. service fees for irrigation infrastructure O&M · Accord priority to rehabilitation and according to financial needs, rather than political modernization of critical irrigation and drainage considerations. It will also introduce long-term infrastructure and maintenance of irrigation water rights. The Water Code is expected to be infrastructure. Ownership/leasing arrangements discussed in Parliament during the 2003 spring for on-farm irrigation infrastructure and taxation session. issues are being worked out under the WUA law. B. Trade Policies · Trade regime is generally liberalized, but many · Eliminate non-tariff trade barriers. Rationalize non-tariff trade barriers remain, many of them conduct of agencies overseeing foreign trade. unofficial. · Develop an export promotion strategy and · Member of three international trade establish institutional framework to implement it. organizations: WTO, Customs Union (Russia, Align export certification with international Belarus, Kazakhstan and the Kyrgyz Republic), standards. and CIS Free Trade Zone. But Customs Union · Align Customs Union membership terms with and Free Trade Zone are ineffectual. WTO terms. · Terms of WTO membership conflict with terms · Deepen existing trade frameworks and secure of Customs Union membership. harmonization in customs and legal procedures. 106 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS C. Taxation · Tax rates for primary agricultural production are · Remove or lower tax barriers to entry of reasonable. agribusiness SMEs, particularly payroll and · Nominal tax burden (particularly for agro- turnover taxes. industry) is very high, but collection rates are · Improve transparency of the tax system, tax generally low. administration and collection. Rationalize tax · VAT on seeds and fertilizers prevents rates to improve tax revenue, incentives and development and growth of formal distribution equity. networks. · Clarify difference between user fees and taxes. · Multiple user fees are in place (many with · Replace the current land tax assessment system dubious justification), with no clear distinction with a land valuation methodology. Finalize and between taxes and fees. approve the Immovable Property Tax law, and · Local governments lack financial resources to establish the administrative arrangements to use for local priorities. implement it. Reduce the 5% tax on land transactions to less than 1%. · Promote fiscal decentralization. 2. Land Reform and Farm Significant progress has been made in land Completion of regulatory framework and Restructuring privatization and farm restructuring, but the administrative capacity to develop a fully process is not yet complete. functioning land market and promote market- based farm restructuring and agrarian reform. · A Law on Management of Agricultural Lands · Amend the Law on Management of Agricultural was adopted in December 2000 which severely Lands to allow less constrained buying, selling restricts buying and selling of agricultural land. and mortgaging of agricultural land. Draft amendments are in preparation which will · Educate the public about the property rights and relax the most serious restrictions. responsibilities granted by the land and agrarian · Law on Registration of Rights in Immovable reform program. Good progress is being made in Property was adopted in December 1998, and a this regard, but much remains to be done. State Registration Agency was established in · Examine the issue of use of rights for common February 1999. 43 registration offices have been property such as pasture land, surface water, established, and the full set of 50 should be irrigation infrastructure, and forest land, as well as operational by June 2002. Regulations for the leasing and management of land by local registration have been approved and will undergo (village) governments to individuals or groups. further revision based on accumulated experience. · Develop instruments to deal with land disputes, · Most arable land has been privatized, distributed including conflicts with traditional land use rights. and marked, and ownership certificates have been · Clarify roles of different agencies and issued. Private farms hold 42% of arable land, joint stock companies, collective peasant farms institutions, including local governments, in land and producer cooperatives account for 45%, and administration. only 13% remains in seed and breeding farms · Stimulate the creation and effective functioning which have only recently been privatized, but of independent farmer groups and cooperatives to where title certificates are not yet issued. More increase efficiency in the use of land and other than 84,000 private farms are now operating. inputs, and in marketing. · 25% of the arable land is placed in a Land · Identify alternative sources of revenue for local Redistribution Fund (LRF), assigned to local governments and free up the sale of land from the governments for redressing inequities and/or to be Land Redistribution Fund. sold, auctioned or leased. Local governments rely · Continue the development of appropriate on leasing of LRF land for revenue and show little pasture use models, including long-term lease interest in selling such land. arrangements. · Pasture and forest land and irrigation and · Conduct training and information campaigns to drainage infrastructure in the former state and advise on sound legal structures and economically collective farms will likely remain state property, efficient methods for farm management. Develop but WUAs would be given long-term users right. adequate farm accounting methodologies, methods of auditing and liquidation procedures. 107 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Agro- The process of privatizing the agro-processing Complete the privatization of agro-processing processing and Services and input supply enterprises is not yet complete and input supply enterprises and close for Agriculture and the privatized enterprises are not very inefficient state owned enterprises that cannot efficient. be privatized. Promote a dynamic rural SME · Input and output markets remain weak due to subsector. poorly developed infrastructure, institutions and · Establish a regulatory and tax system that information. promotes, rather than hinders, the entry of SMEs. · Input markets in the south are distorted by · Complete the process of privatizing the subsidy policies in neighboring Uzbekistan remaining state-owned agro-industrial enterprises. · Most small and medium-scale state-owned agro- · Simplify registration procedures and reduce the processing enterprises have been privatized. permits required to establish agro-industrial joint · The large agro -industrial enterprises are being ventures with foreign partners. privatized case-by-case, but the process is slow. · Foster commercialization of agriculture, and · The newly privatized enterprises are hampered promote agrobusiness SMEs and other non-farm by obsolete equipment/technology, lack of credit, employment creation in the private sector. poor management, and poor understanding of · Promote the development and functioning of competitive markets. competitive input and output markets, with a · Product quality is very poor; and the existing primary focus on institutions and information that product quality grades and safety standards (which foster the entry and growth of SMEs. are not being enforced) are not comparable to · Remove administrative interference in the international grades and standards. operation of private trade and business. · Although even with present levels of product · Establish product quality grades and safety quality there is some potential for export to other standards comparable to international standards. Central Asian countries and Russia, lack of · Promote the development of a competitive marketing experience, inability to assemble private agricultural input marketing system. appropriate lot sizes of standard quality, and Eliminate subsidies and other government formal and informal barriers to regional trade limit involvement in input marketing/distribution. actual exports. · Improve the regulatory environment and · Lack of critical agricultural inputs is a key economic incentives to promote foreign direct constraint to increase agricultural productivity. investment in agro-industry. · Foreign direct investment in the agro-industry · Support further privatization of veterinary remains very low. services. Clarify the division of responsibilities · Animal health services are being privatized in between public and private veterinary service some oblasts. providers. 4. Rural Finance Poor access to credit is a serious constraint to Establishment of sustainable financial rural development, but steps to establish a institutions serving the rural and agricultural commercial rural credit system have been sectors. taken. · Diversify KAFC's lending portfolio to include · The commercial banking sector is very weak funding for long-term investments, non-farming and not interested in lending to agriculture. activities, processing, agri-services, etc. · Access to credit remains limited as most · Refrain from interfering in KAFC's operations producers and entrepreneurs cannot meet the though government decrees or political pressure. collateral terms or afford the real interest rates · Improve business judiciary system; strengthen charged. bankruptcy procedures; expand list of workable · Kyrgyz Agricultural Finance Corporation collateral. (KAFC), operating since 1997, is the main source · Develop and enact a sound legal framework for of credit for agribusiness and farmers. micro-finance. · IFC is supporting rural lending through support to FINCA. Several other donors support rural credit operations. 108 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Framework The institutions of a "planned" economy are Accelerate the process of establishing efficient gradually being replaced by institutions that and effective institutions to serve commercial serve private agriculture based on market private agriculture and the rural sector. principles, but the process is very slow. · Complete the reorganization of MAWRPI to · The Ministry of Agriculture, Water Resources serve as the main agency to implement and Processing Industry (MAWRPI) has been agricultural policy. Devolve all possible tasks to reorganized to streamline its operations, but appropriate lower levels of government or the remains an obstacle to needed policy and private sector. institutional reform in the agro-food sector. · Strengthen and re-orient, including through · The agricultural research and education systems consolidation, the agricultural research and have not yet been adjusted to the emerging market education systems to complement activities of conditions. private input industries and thereby to serve more · A functioning market information system has effectively the needs of private farmers and farm been established. enterprises. Develop the ability for contracting research and services. · The institutional capacity to undertake agricultural policy analysis is extremely limited. · Strengthen institutional capacity and training of staff involved in designing and implementing · With donor assistance, cooperatives have been agricultural and rural development programs, created, but these have not yet demonstrated including agricultural policy analysis. sustainability. · Privatize services such as animal health, crop protection, seed supply, etc., and limit State involvement to quality control and encouragement. · Support the development of producer and marketing cooperatives. 109 SERBIA & MONTENEGRO Total Population 10.5 mil. Food and agriculture in GSP (1990) 10 % Agricultural output in 1998 as Rural Population 50 % Food and agriculture in active labor percentage of 1989-91 level na (1990) 24 % Livestock production in 1995 as Total Area 10.2 mil ha Food and agriculture percentage of 1990 level (estimate) na Agriculture area: 5.6 mil ha. in exports (1999) 22% Share of livestock in agriculture (1995) na Arable land 79 % in imports (1999) 13% Share of independent private farms in Orchards 6 % Traditionally, net exporter of: total arable area (1991) 80 % Irrigated 0.6 % cereals, livestock and meat products, Share of private sector in total Forested na raw and processed fruit and agricultural output (1991) 80 % vegetables ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Past price and trade policies severely distorted Efficient agricultural markets with minimal Framework for Agriculture production incentives and inhibited output. public intervention. Recent price and trade policy reforms have significantly improved this incentive structure. A. Prices/Subsidies · Direct support is now limited to a floor price for · Review the commodities which benefit from wheat and subsidies for milk, sugarbeet and public support. tobacco. Tobacco and sugarbeet are minor crops. · Phase out the remaining controls on consumer · Control of consumer prices is now limited to a prices. maximum price for dark bread. · Rationalize the allocation of public expenditure, · Public expenditure on agriculture remains and develop a more stable, predictable and moderate but it is poorly targeted however (< 10% appropriate platform for price policy. for public institutions) and associated policy · Reform the Directorate for Commodity decisions are erratic. Reserves by limiting the number of agricultural · The Directorate for Commodity Reserves has commodities in its mandate, reducing the level of now become a major source of support through its reserves it holds, terminating its role in the supply purchase of wheat, and the provision of farm of seasonal credit and farm inputs, lowering the inputs and seasonal credit. This creates severe floor price for wheat, and increasing the distortions in factor and commodity markets and transparency of its activities. inhibits private sector activity in these markets. B. Trade Policy · Trade policy is now based on a six tier tariff · Remove all remaining quotas on agricultural structure (1%, 5%, 10%, 15%, 20%, 30%). Most products, and terminate the additional levies. agricultural commodities are protected by the two · Further simplify the current tariff structure and highest tariffs. Additional levies (up to 15%) apply reduce excessive levels of protection. to many agricultural commodities, which are reviewed on an ad hoc basis. · Support the process of joining WTO. · Export quotas, export subsidies and licenses have been terminated but import quotas are still widely used, including quotas for some "basic" agricultural commodities. · Raw materials are often subject to high tariffs relative to protection for processed and semi - processed items. This reduces competitiveness. · As part of the Stability Pact, FRY agricultural products now have free access to EU markets for the next 2-3 years. · FRY has now submitted an application for membership of the WTO. 110 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm Although 80% of farmland is in private Establish clear, secure and readily transferable Restructuring ownership, ownership rights to this land are use and ownership rights, and an active land often difficult to establish. Most socially-owned market as the basis for improving farm agro-kombinats are of modest size (< 5000 ha) structure. and have been largely disaggregated. · Restore all land records and reconcile the · Private farms average 3-5 ha, and are highly cadastre and land register as the basis for fragmented. establishing clear property rights. · Discrepancies between the cadastre and land · Strengthen land markets to support farm register make it difficult to demonstrate clear restructuring and land consolidation. ownership of private land. This inhibits land · Finalize legislation to allow the privatization of markets and so the process of farm consolidation the state-owned land currently held by the agro- and enlargement. kombinats. · Land sales are legal but the land market is thin. · Develop an appropriate basis for resolving Most rural land transfers are effected through restitution claims which apply to the agro- inheritance or informal, short-term leases. kombinats. · Socially-owned agro-kombinats hold 20% of arable land. It now appears that the portion of this land which is not subject to restitution claims will be privatized through long-term leases. 3. Competitive Markets The collapse of socially-owned agro-kombinats Competitive, privately owned enterprises for for farm output and farm and agro-processors has decimated traditional agro-processing and input supply inputs. marketing structures. Private sector activity in · Reform the Directorate for Commodity these markets is also inhibited by the Reserves Directorate for Commodity Reserves. · Fully implement the program to corporatize and · Agricultural markets are weak and inefficient privatize agricultural input supply, output due to the collapse of both supply and demand, the marketing, and agro-processing enterprises. high reliance on barter trade, and the activities of the Directorate for Commodity Reserves · Establish appropriate quality and safety standards for agricultural imports and exports. · Most of the agro-processors have corporatised, but have been slow to re-establish due to their · Provide technical assistance for training in tenuous financial position, poor access to credit enterprise management and to promote the and reliance on barter trade. development of new products and markets. · Preparation of the legislative and institutional framework for privatization is now well advanced. · Most agricultural services (extension, veterinary services) remain in the public sector. 4. Rural Finance The banking system has completely collapsed, Establish viable financial institutions to decimating traditional sources of rural finance efficiently serve the agricultural sector. and creating a severe credit shortage. · Support the establishment of a strong private · The collapse of the banking system and the banking sector, and develop its capacity to provide socially-owned agro-kombinats and agro- financial services to rural areas. processors has decimated traditional sources of · Reform the banking supervisory framework and rural finance. strengthen the legislative and administrative basis · State-owned banks are insolvent, and no longer for using land as collateral, and recovering provide credit to socially-owned agricultural security in the event of default. enterprises; domestic private banks are very small and lack the capital and expertise to deal with · Establish an appropriate legal framework for the rural lending; and foreign banks are only just operation of non-bank financial institutions (micro-credit organizations, local savings and beginning to establish. credit associations etc) and support their · The interest rates on short-term credit are high establishment and operation. for agriculture, and there is little medium-term credit. 5. Institutional Framework The institutions responsible for agriculture are Establish an efficient, effective public ill-coordinated, under-resourced, and ill-suited administration which provides appropriate to their role in a market economy. support for private, commercial agriculture. · The capacity for policy formulation and analysis · Review the structure and resources of the is weak, and ill-suited suited to a market economy Ministry of Agriculture, and establish institutional · The protection of plant and animal health is structures that are consistent with public roles and weak, as is the enforcement of trade regulations at responsibilities in a market economy. the border. · Strengthen the capacity for policy analysis and · Public support for agricultural research and formulation, and for the protection of plant and extension systems is very limited. Most animal health. institutions have survived from the income of their · Reform agricultural research, extension and commercial activities. education programmes and institutions to make · Agricultural education is based on the teaching them needs-based and demand-driven, and of socialist principles of production, and oriented increase public support for these institutions. towards the large-scale, intensive production · Strengthen border control and the enforcement systems of the agro-kombinats. This approach has of trade regulations, and harmonize product limited relevance to small-scale private farmers. standards with the EU. · There has been no real privatization of public · Promote the private sector provision of services services such as veterinarians, extension, and such as veterinarians, extension and standards quality and standards testing. testing and quality control. 112 MOLDOVA Total Population 4.4 mil Food and agriculture in GDP Agricultural output in 2001 as percentage of Rural Population 47 % (2002) 47% 1989-1990 level 51% Food and agriculture in active Livestock production in 2000 as percentage Total Area 3.4 mil ha labor (2000) 43% of 1989-1990 level 30% Agriculture area: 2.3 mil ha Food and agriculture Share of livestock in agriculture. (1995) 32% in exports (2002) 63% Agricultural area in private use (2000) 89% Arable land 81% in imports (2002) 15% Share of private sector in total agricultural 75% Orchards and 9% Traditionally net exporter: wine, output (2001) vineyards processed and unprocessed fruits Irrigated 10% and vegetables, and pork. Forested 12% ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Continuing general price and market Minimal Government intervention in Framework for Agriculture liberalization. agricultural markets. A. Prices/Subsidies · Most producer and consumer prices have been · Maintain the liberal course of market and price liberalized. policies. · Indirect producer subsidies have also been · Maintain a no intervention policy for virtually phased out. In 2002 the Government has agricultural markets. established direct subsidy schemes in the wine and · Re-monetization of the sector by proper tobacco sectors which were subsequently treatment of inter-enterprise arrears, accumulated abolished. For 2003, the Government has declared debt and revision of tax and social security its intent to re-establish the direct subsidy schemes payment policies. for wine and tobacco. · Bread prices were liberalized in late 1996, but the Government has occasionally used its reserves to control both consumer and producer prices. In 2002, there was no Government interference on the bread market. · In 2002, the Government budgeted a US$2.5 million Agriculture Support Fund for a direct subsidy across the sector. The subsidy mechanism was discussed and agreed upon with IDA. Only US$600,000 were disbursed. For 2003, the Government budgeted some US$2 million for the Agriculture Support Fund, using the same principles and mechanisms as in 2002. 113 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · Domestic trade is largely liberalized, but a · Establish a commodity exchange or promotion competitive market structure is yet to fully of the use of commodity exchanges in other emerge. countries. · Government procurement is restricted to grain, · Introduce market methods in procuring grain for purchased for state reserves. In 2002, the government purposes and for marketing of grain Government agreed with IDA that the Grain and input deliveries based on inter-governmental Reserve will not exceed 5000 metric tons a year. agreements. The Government has observed this agreement. · Maintain low import tariffs and abstain from · Export of agricultural products was liberalized quantitative export restrictions; drastically reduce in 1997; but many non-tariff intra- and foreign non-tariff barriers. trade barriers exist. Licensing requirements have · Develop a strategic policy, including: been eased in 2001 and 2002, however some · Ensure timely and accurate VAT regulatory control continues to exist in the form of reference prices. In the fall of 2002, the reimbursements for exports; Government introduced reference prices for 18 · Eliminate ad-hoc export barriers on selected agricultural commodities (wheat, sunflower, commodities. tobacco, and others), which virtually led to a one month sand-still in the country's exports. After some time, following pressure from donors and exporters the Govern ment repealed its decision on reference prices. Such ad-hoc impositions of reference prices and other disturb and discourage trade. C. Taxation · Land tax is maintained as the primary form of · Fully implement the non-discriminatory system taxing agriculture. of agriculture taxation. · In 2002 the Government has reverted to limited, · Improve tax collection rates. in-kind tax collection of some local taxes. · Gradually increase VAT to the proposed 20 %. · Registered private farms almost fully fulfill their · Create incentives for proper registration of tax obligations. private farms, to increase further the rural tax · Proposed introduction of 20% VAT for base. agriculture to harmonize VAT levels across sectors has been postponed. 114 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm · Process of farm restructuring and privatization · Farming structure based on secure transferable Restructuring has accelerated since mid 1998. land use rights. · February 1995 Amendment of Land Code · Make the establishment of new private farms, allowing only group exits from large farm was and farming enterprises based on partnership or eliminated by the Constitutional Court in early cooperation as easy as possible. 1996. · Use reserve land whenever possible for · Revised and improved exit and registration providing land for new beneficiaries or offer procedures were adopted for the establishment of financial compensation instead of decreasing private farms. already allocated land shares. · Legislation on bankruptcy procedures was · Market mechanism for rent, leasing and the adopted to expedite the process of land establishment of collateral should be developed as privatization. soon as possible with the aim of facilitating land · A uniform cadastre system has been established. consolidation and financing efficient farming. · Of the more than 1000 state and collective farms · Provide effective legal aid support to new, all but 46 have been privatized and 2.2 million private land owners and lease holders. titles have been issued by Spring 2001. · Debt restructuring and liquidation of old farm enterprises started in 1999, liquidation was completed in 2000 ­ with the creation of new corporate farms. · In 2002, about 600,000 private farms had been registered with over 80 percent currently operating through some type of leasing arrangement. · Procedures for administering transactions of agricultural land were introduced and the transfer fee was reduced to 2% of the sales value. · Legal disputes between lessors and lessees is emerging. · In 2002, the Parliament adopted a set of amendments to the Land Code of 1991, aimed at streamlining voluntary land consolidation. 115 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive · In 2002, progress in privatization and de- · Private competitive processing and input supply Agroprocessing and monopolization of remaining state owned agro- industries. Services for Agriculture processing enterprises was slow. Only two large · Market discipline (hard budget constraint) needs wineries were privatized to buyers from Russia. to be imposed on existing enterprises to provide · Agroprocessing and input supply industries have incentives to restructure or liquidate. been privatized as part of the overall privatization · Promote the participation of foreign investors in process. However, as a result of the mass privatization auctions. privatization through vouchers, ownership at these companies is extremely segmented, and the · Encourage emergence of new entry into the agro-processing sector Privatization Investment Funds have failed to bring about effective enterprise restructuring as a · Develop and implement effective anti-monopoly result of problems with ownership, management legislation. and control. · Strictly enforce bankruptcy legislation in order · Producers of agricultural raw materials received to consolidate the newly established private sector. 50% of ownership of agroprocessing. · Re-evaluate the effectiveness of the · The initial privatization of agro-processing was Privatization Investment Funds. completed by the end of 1995. The majority of enterprises, however, are unconsolidated and lack transparent ownership. · Most agroprocessing sector enterprises are still operating the old fashioned way (without any significant restructuring) and are in effect bankrupt. · Anti-monopoly regulations are not fully in place. · Still limited new entry of the private sector into the processing sector. · Limited foreign participation/investment in the privatized agro-processing enterprises. 4. Rural Financing · Lack of an appropriate financial system for food · Viable financial institutions efficiently serving and agriculture. the food and agriculture sector. · Financing in agriculture is not adjusted to the · Improve the overall business environment to needs of a market based privatized agriculture. encourage processors or suppliers' credit schemes · High interest rates, lack of collateral, lack of to finance farming inputs. clients with sound business practices seriously · Revitalize financial services. limits lending to agriculture. · Simplify legal systems to protect lenders and · Development of a rural credit system based on borrower's rights in case of defaults. rural credit cooperatives. · Government to implement a matching grant · Underdeveloped judicial system significantly scheme acceptable to IDA/IMF. hinders the process of collateral acquisition by · Introduction of an efficient system for movable banks. pledge registration. · A market oriented Law on Pledge was adopted and enacted but the technical infrastructure for the implementation of the Law still doesn't exist. · In 2002, the World Bank Rural Investment and Services Project became effective, aimed at providing, among other, long term credit resources for rural development, and technical assistance to the banking system to improve rural and agricultural lending skills. 116 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Framework · Adjustment of the institutional framework is at · Efficient and effective public sector a rather early stage. administration and support services. · Research/education system has not been · Prepare and implement a program of re - adjusted to emerging new conditions, mostly non- organization of public administration in functioning and seriously hampered by budgetary agriculture. difficulties. Yet, in 2002, the Government has · Reorganize the Ministry of Agriculture and requested from IDA assistance in restructuring the Food. country's two largest research institutes. A group of consultants was deployed to draft a turn-around · Reform the agricultural education and research system to meet the demands of the changing plan for these institutes. The plans have been finalized and presented to the Government. A final agricultural sector. decision by the Government on how to proceed · Support the emergence of private farm advisory with the restructuring of the two institutes is services for landowners. expected in the first half of 2003. · Support the emergence of private farm · First attempts of creating an western type organizations. agricultural extension system are being made under the PPF stage of the Rural Investment and Services Project. · A new business co-operative law has been passed. In 2002, a Law on Producer Cooperatives has been finalized and adopted. The Law is rather futile, as it is not realistically expected to contribute neither to continuing implementation of market reforms in agriculture, nor can it serve as an effective instrument for reversing past land and farm reforms. 117 BOSNIA AND HERZEGOVINA Total Population 3.79 mil. Food and agriculture in GDP (2001) 12 % Agricultural output in 2001 as Rural Population 50 % Food and agriculture in active labor percentage of 1989-91 level 70 % (1990) 18 % Livestock production in 2001 as Total Area 5.1 mil Food and agriculture percentage of 1990 level (estimate) 60 % Agriculture area: 2.5 mil ha. in exports (2001) 0.5 % Share of livestock in agriculture (est.) 50 % Arable land 63 % in imports (2001) 25 % Share of independent private farms in Orchards 4 % Increasing reliance on imports and total arable area (2001) 95 % Irrigated 0.3 % loss of traditional export markets due Share of private sector in total Forested 46 % to stagnation of agric production agricultural output (2001) 85 % ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Agricultural markets operate freely and direct Efficient agricultural markets which operate Framework for Agriculture support for agriculture is low. The Ministries with minimal public intervention. of Agriculture are now seeking a significant increase in budget support. A. Prices/Subsidies · No controls on producer and consumer prices · Maintain fully liberalized prices. for agricultural commodities. · Minimize government intervention in · Agric Ministry budgets are less than 1% of total agricultural markets. budget expenditure. Subsidization is minimal as a · Focus limited budget resources on support for a consequence and is dispersed across too many limited number of commodity programs (e.g., programs to be effective. dairy) and key public institutions and activities. · Floor prices are set for wheat and milk but these are close to border prices, and are not supported due to lack of budgetary resources. · A significant increase in budget support is now being sought in FBiH and RS. This will include producer subsidies, interest subsidies and incentive payments for many agricultural products. B. Trade Policy · State level trade policy applies to both entities, · Promote and accelerate the current process of based on four tariff bands (0%, 5%, 10% and joining WTO. 20%). Most agricultural products are in the 5% · Review and modify the tariffs applied to and 10% tariff bands. Additional levies of 5% - selected agricultural products, to improve the 20% also apply to most other products comparative advantage of livestock production. · Some anomalies exist in this tariff structure, · Review the additional levies to remove notably the tariff on maize which significantly distortionary protection raises the costs and reduces the competitiveness of livestock production. · As part of the Stability Pact, BiH agricultural products now have free access to EU markets for the next 2-3 years. EU agricultural products will have full access to BiH markets after 2006 · Bilateral Trade Agreements with the countries of former Yugoslavia exempt BiH exports from duties but allow for a phased removal of BiH tariffs by 2006. 118 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS C. Taxation · The tax burden on farmers is low, most farmers · Incorporate larger farms (socially-owned and operate in the informal sector. private) into the business tax system. · Land taxes existed prior to the war but are no longer collected. · Taxation of food processing is in line with general taxation of businesses. High social charges on dependent labor. 2. Land Reform and Farm Private farmers own 95% of farmland but their Complete the original land reform initiatives, Restructuring ownership rights are still difficult to establish, including privatization and land restitution; and small fragmented farms remain a serious establish clear, secure and readily transferable constraint to increased efficiency. Minimal use and ownership rights, and an active land progress with land restitution and the legal market as the basis for improving farm status of state owned land. structure. · Private farms average 3-5 ha, and are highly · Complete the land restitution process and fragmented. resolve the status of agri-kombinat land, by · Land fragmentation is increasing due to the allowing its lease or sale. maintenance of traditional inheritance laws. · Restore all land records and reconcile the · The post-privatization status of state land has cadastre and land register, as the basis for not been resolved and an estimated 100,000 ha of establishing clear property rights. high fertility agri-kombinat land lies idle. · Strengthen land markets to support farm · Pastures and meadows remain state and restructuring and land consolidation. municipality owned. · Enact legislation to reform land inheritance · Discrepancies between the cadastre and land practices. register make it difficult to demonstrate clear ownership of private land. This inhibits land markets and slows the resolution of ownership disputes and the transfer of land among displaced people and returning refugees. · Land sales are legal but the land market is thin. Most rural land transfers are effected through informal, short-term leases. 119 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Agro- Continued delays in privatizing socially owned Competitive, privately owned enterprises processing and Services agro-kombinats, agro-processors and public for agro-processing, input supply and for Agriculture. services for agriculture. agricultural services. · Numerous socially-owned enterprises have yet · Complete the program to corporatize and to be privatized, and continue to operate at low privatize agricultural input supply, output levels of efficiency. marketing, and agro-processing enterprises. · Low levels of foreign participation in the · Establish appropriate quality and safety privatization process due to the poor business standards for agricultural imports and exports. environment created by stalled reform. · Technical assistance to provide training in · No formal privatization of the veterinary system enterprise management. although most vets now operate as private agents. · Promote the development of new products · Progress with the enactment of new laws for and markets. farmer cooperatives and associations, but more · Promote the development of farmer work is needed. cooperatives and associations 4. Rural Finance Limited access of agricultural enterprises to Increase the access of agricultural available credit. enterprises to commercial credit. · Bank sector reform and the entry of foreign · Improve the capacity and incentives for banks has dramatically improved the banking commercial banks and micro-credit system, and increased the availability of organizations to lend for agriculture through a reasonably priced credit, but commercial banks combination of technical assistance and credit remain wary of agricultural lending. lines. · Micro-credit has also grown rapidly and farmers · Strengthen the legislative and are making increasing use of this source of administrative basis for using land and finance. The credit available through these moveable assets as collateral, and the basis channels remains well short of demand however, for loan recovery. even at interest rates of 1%-2% per month. · Broaden and strengthen the legal · The Ministries of Agriculture in both entities are framework for the operation of non-bank now seeking to fund interest rate subsidies from financial institutions (micro-credit agencies, their budgets, but have yet to obtain funding. local savings and credit associations etc) and support their establishment and operation. 120 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Framework Institutions remain weak, under-resourced and Establish an efficient, effective public resistant to reform; and public leadership of administration to provide appropriate support the sector remains inadequate. for commercial agriculture. · Sector stagnation is a reflection of weak public · Complete the existing agenda for reform. leadership and inability to complete critical · Review the role, structure and resources of the reforms. two ministries, and the Canton governments, and · Both entities continue to support public guide the establishment of institutional structures institutions which duplicate pre-war facilities and which are consistent with public roles and make poor use of the limited agricultural budget. responsibilities in a market economy. · Donor programs to establish a public · Promote the establishment of a private extension agricultural extension service and privatize the service, located in co-operatives, producer veterinary service have had minimal impact. associations and agro-processors; and support the · Donor programmes to improve the (public) establishment of a fee-paying, public extension institutional framework for animal health have service. been more successful. · Reform agricultural research and education · Agricultural research and education programs programmes and institutions to make them needs- are still under-resourced, and poorly supported. based and demand-driven, and increase public support for these institutions. · Strengthen border control and the enforcement of trade regulations. 121 GEORGIA Total Population 5.4 mil Food and agriculture in GDP (2002) Agricultural output in 1998 as Rural Population 44% (estimated) 19% percentage 1989-91levels 60% Food and agriculture in active labor Livestock production in 1998 as Total Area 7 mil ha. (1997) 27% percentage of 1989-91 levels 60% Agriculture area: 3 mil ha. Food and agriculture as percent of Agricultural area in individual 26% total private ownership (1998) Arable land 26% in exports (1998) 36% Agricultural area leased by private Orchards 11% in imports (1998) 19% individuals from Government. 25% Irrigated 45% Traditionally net exporter of wine, Agricultural Land controlled by Forested 40% processed and fresh fruits, vegetables Government 49% and tea ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Liberal agricultural markets mainly free of Competitive and functioning agriculture Framework for Agriculture Government intervention. markets, without Government intervention. A. Prices/Subsidies · Producer prices have been liberalized and · Phase out remaining producer subsidies on minimal government intervention on agricultural irrigation water and energy. markets. · Control of energy prices is being gradually readjusted to reach cost recovery levels. · Subsidization of water charges is the last remaining producer subsidy. · Regulation of food aid distribution has been substantially improved to reduce distortions B. Trade Policies · 12% uniform tariff on imports. 5% on selected · Refrain from intervening in agricultural import capital goods, raw materials, and medicines. and export markets with the exception of interventions acceptable under the WTO. · Tax on exports was eliminated in late 1994. · Maintain low and uniform tariffs and no · Liberal export policy with no licensing for most quantitative restrictions or taxes on exports. agricultural products. · Improve physical and commercial infrastructure · Most agricultural products are traded on for export trade rather than introducing special essentially private, informal markets. incentive programs. · Georgia became a member of WTO in 1999. · Government is considering abolishing VAT and Income tax for small primary producers and · Indicative prices which are substantially higher replacing it with a single land tax. that world market prices are used as the basis for calculating VAT taxes on imported products such as wheat. In addition VAT is applied to the gross value of the imported product, resulting in very high effective tariffs on imported products. · Illegal rent seeking and bureaucracy seriously constrains domestic markets. 122 C. Taxation · VAT and income tax collection rates from · Simplification of the tax laws and improvement primary agriculture producers is extremely low. of the enforcement mechanisms based on clear The Government is considering dropping both legal procedures should be introduced to reduce VAT and income tax for primary agricultural harassment and rent extraction by government producers and replacing it with a single land tax. officials. · There are numerous conflicting taxes and registration fees that create opportunities for rent seeking by government authorities. 123 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm Progressive, but rather spontaneous, Private farming as the major component of the Restructuring unstructured and unfinished land reform. farming system with secure transferable land use rights. · The 1992 land privatization program provided 57% of arable land and land under perennials to · Complete the initial privatization of land as private individuals, but remains unfinished. envisaged by the Presidential decree of December 1992. · Law giving ownership rights to the beneficiaries of the 1992 land reform was passed by the · Establish title registry offices. parliament in early 1996. · Gradually transfer remaining state lands to · Land titling and registration legal framework is private ownership through auctions. in place, but require implementation for the functioning of the land market to develop. · Transfer non-land productive assets from state/collective users to private users and · Law on providing lease rights to state owned operators. agricultural land was enacted in mid 1996. · Develop mortgage procedures for land, other · In addition to the land in private ownership, an real estate, and moveable assets. additional 27 % of all arable land and land under perennials is leased by private entities. · Move from rental of large farms to private ownership. · Of the total area of agricultural land, 26% is in private ownership, 25% is leased by the · Increase or remove the 1.25 ha limit on land Government and 49 % (mostly pastures) is still ownership. under direct government control. The land privatization process is therefore incomplete. 3. Competitive Spontaneous and slow privatization program. Competitive, privately owned processing, input Agroprocessing and supply and service subsectors. Services for Agriculture · The early phase of privatization was rather spontaneous and often inequitable. Most assets · Complete privatization of remaining agro- were transferred to existing management. processing and input supply companies controlled by the Ministry of Agriculture, preferably through · At the end of 1998 143 or 32 % of the strategic sales to private investors with new capital enterprises originally controlled by ministry of and expertise. agriculture had not been privatized. Over 80 percent of those privatized were privatized to · Remove constraints to secondary sale of existing management teams and employees on enterprises privatized enterprises, such as punitive preferential terms. This process of privatization capital gains taxes or restrictions on resale. has not lead to inflows of new capital and management expertise required to turn these · Facilitate the emergence of new and restructured companies around. These enterprise assets are private firms in processing, input supply and being gradually being bought out by entrepreneurs services by reducing registration requirements. that have capital and management skills to develop them, resulting in mild growth in the · Encourage the establishment of producer sector by the late 1990s. associations that can improve product quality and facilitate entry into new markets. · Foreign participation in the process of privatization remains low. · Enforce bankruptcy and liquidation on firms that are bankrupt, particularly those in arrears on · Consistent energy supply is a major problem for taxes, loans or privatization payments to the agroprocessing companies operating in rural areas. Government. 124 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 4. Rural Finance Existing financial system is small, is focused on Viable financial institutions efficiently serving short term trade financing and does not serve the agricultural sector. the agricultural sector. · Continue to improve Bank supervision and · Both primary agriculture and agroprocessing certification programs. have a serious liquidity crisis due both to tight supply of medium term credit. · Continue establishment of credit unions together with the necessary monitoring and controls. · A major coordinated effort is underway, supported by the World Bank, IMF and bilateral · Improve the environment for foreign direct donors to strengthen the banking system's investment as an alternative to medium term bank infrastructure. This is progressing well. credit. · About 100 Rural Credit Unions and about 50 other non-bank financial institutions have been formed to start addressing the problem of credit to small scale rural farmers. 5. Institutional Framework Institutional structure needed by privatized Efficient and effective public sector agriculture is not in place. administration and support services. · At the regional level the administrative structure · Prepare and implement a program to alter the of the socialist era has been preserved with little structure and scope of government organization change. for management of agriculture. · Research/education system has not been · Re-orient Government attention toward private adjusted to emerging new conditions. agriculture. · Public activities (government research- · Re-orient Government role from direct education) in agriculture are seriously hampered intervention to establishing the general rules and by budgetary difficulties. facilitating conditions for the smooth operation of the markets and independent business · Western type agricultural extension system does organizations. not exist, but pilot projects have been implemented and are expected to expand in the · Support the emergence of private farm advisory future services. · Efforts to restructure the Ministry of Agriculture · Restructure the agricultural education and have begun. research system. 125 126 Slow Reformers (countries with a ranking score of 0.0 to 5.9) Ukraine Kazakhstan Russia Tajikistan Uzbekistan Turkmenistan Belarus 127 128 UKRAINE Total Population 48.0 mil Food and agriculture in NMP Agricultural output in 2002 as percentage of Rural Population 33 % 2001 18% 1990 level 60% Food and agriculture in active Livestock production in 2002 as percentage of Total Area 60 mil ha. labor (2001) 27% 1986-1990 level 41% Agriculture area: 42 mil ha. Food and agriculture in Share of livestock in agriculture (2002) 40% Arable land 77.9% exports (2002) 13% Share of individual in total agricultural land Orchards 1.9% In imports (2002) 7% (2000) 26% Irrigated 5.0% Traditionally net exporter: Share of individual in total agricultural output Forested 15.6% grain, oil seeds, sugar, dairy (2001) 65% products, beef and pork. ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Market liberalization is advanced, although Minimal Government intervention in Framework for hampered by government interventions and agricultural markets. Agriculture underdeveloped market structures. A. Prices/Subsidies · Prior to 2002, the government abolished fixed · Abstain from implementing new distortionary producer prices for agricultural commodities (in price control measures. 1994); virtually removed budget credit (mainly in · Liberalize agricultural markets by implementing the form of input supplies) which was significant competitive government procurement methods in 1997-1999; wrote off UAH 5.6 bln (more than which would assist development of private US$ 1 bln) of public debts accumulated by the intermediaries. farming enterprises between 1994-1999 (in 2000). · Continue to remove implicit taxation on · Implicit taxation on agricultural producers has agricultural producers and processors by been significantly reduced between 1998-2001 promoting competition and domestic market · Fixed profit margins for bread often remain at development. the local level. · Lack of competitive domestic markets and underdeveloped trading system still keep high margins between producer prices and border prices. · The 2002 budget allocated UAH 722 mln (US$ 140 mln.) to finance leasing of agricultural machinery through government Leasing Fund. Of this, only UAH 59 mln (US$ 10 mln) was actually paid because most of the funding was to come from the unlikely repayment of earlier credits by farms. · In 2002, the budget allocated UAH 55 mln (US$ 10 mln) to support livestock production. In addition, around UAH 600 mln (US$ 110 mln) were paid by processing enterprises as a subsidy to farms for the meat and milk sold by farms for processing (see Section C. Taxation). · Since 2000, the government introduced minimum prices for sugarbeet and sugar and quotas for the supply of sugar to the domestic market. In 2002, the min. price of sugarbeet was UAH 165/t (US$ 31/t) and sugar UAH 2,050/t (US$ 387/t). 129 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · In 2001-2002, the government has been · Maintain conditions for remonetizing abstaining from direct purchases of agricultural commodity and payment relations. commodities. · Ensure that all state agricultural procurements · A system of pledge purchases of grain by the are limited to budget allocations and executed on a national and local government was established in competitive basis through the agricultural 2000 but has been of insignificant importance commodity exchanges, public tenders, and since then due to lack of funding. auctions. · Quotas on imports of some meat products were · Maintain conditions under which there are no introduced in 1997 but never implemented in restrictions on inter-regional movement of grain. practice. · Amend the system of pledge purchases of grain · Average agricultural and food sector import by limiting it to budget funded volumes and tariffs were at the level of 24% in 2002, with allowing private sector to implement the pledge many tariffs set in specific form (Euro/ton) at purchases equivalent ad valorem rates of 50% or higher. · Reduce import tariffs and remove export taxes · Agricultural imports are often taxed on the basis on live cattle, animal skins and sunflower seeds. of reference prices. · Refrain from intervening in agricultural import · Export duties on live cattle and animal skins and export markets, with the exception of were introduced in 1997; 23% export duty on interventions acceptable under the WTO. sunflower seeds became effective in 1999 and is · Pursue active trade policy to improve market still in place. access for Ukrainian food and agricultural products through the WTO and Cairns Group, and by seeking duty-free access for these products to the markets of the states of the FSU. C. Taxation · 30% profit tax is applied for food industry and · Promote a fair and non-discriminatory system of for intermediary activities. taxation. · As of January 1, 1999, and until January 1, · Remove the existing tax breaks applied to the 2004, the primary agriculture pays single land tax agriculture sector. calculated based on land area in use with certain adjustments for land quality. · As of January 1, 2000, farms receive back the VAT paid on all off-farm sales of agricultural commodities. In 2002, farms received UAH 1.4 bln (US$ 260 mln) through the repayment of VAT. Farms can use these funds only for the purchase of inputs. · In 2001-2002, the VAT charged on sales of meat and dairy products by the processing enterprises is used as a subsidy to farms that sell meat and dairy products to processing facilities. 130 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm Land reform and farm restructuring Secure transferable land use rights conducive Restructuring accelerated in 2000-2002, but the process is still to promoting long term investment, access to at an early stage. financial markets, and enhanced land mobility. · The process of issuing land share certificates has · Encourage land reform by informing farm been virtually completed. However, only less than members on the legal basis for division and 10% of all collective farm members have left the privatization of large farms, which would promote large collective agricultural enterprise. development of viable farm management units. · Almost all large-scale collective agricultural Develop a comprehensive program for farm enterprises have been re-registered as private, restructuring and land reform, that promotes private-lease enterprises or cooperatives in 2000 genuine farm restructuring through liquidation of following a December 1999 Decree of the existing large-scale farms. President. · Continue systematic titling of agricultural land. · 80% of farmers who received land share · Develop procedures for implementation of the certificates rented them out to farms where the Land Code. certificates have been issued. · Approve and implement legislation on · Ongoing process of privatization: additional registration of titles for immovable property, land was provided for private and household including land. farmers in 1998-2001, reaching about 11 million · Develop mortgage procedures for land, other ha or about 26% of total agricultural land. real estate, and moveable assets. The mortgage · Replacement of land share certificates with land law would allow lessees to mortgage their titles with physical allocation of land on site has leasehold interest. gained momentum in 2001 and 2002: according to official statistics, 3.3 mln or about 48% of farmers who received land share certificates exchanged them for land titles as of April 1, 2003. · The Parliament suspended all transactions with land share certificates in early 2001, except for lease or inheritance. · A new Land Code has been approved by Parliament. It sets up moratorium on sales of agricultural land until January 1, 2005 and limits the area of land which can be owned by one individual to 100 ha until 2010. · Land registration does not meet the needs of a functioning land market. 131 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Agro- Privatization and demonopolization has been Restructure state agricultural institutions to processing and Services largely completed; in many instances, this focus on the role of market facilitator, and for Agriculture process has resulted in restructuring and bolster agricultural market information. increased efficiency of the food processing · Facilitate the emergence of new and privatized sector. restructured firms, and the growth of efficiency in · State owned agroprocessing and input supply both input and output markets and in system has been largely privatized through a mass agroprocessing. privatization scheme. · Complete corporatization and privatization of · The majority of grain storage and processing grain procurement and storage enterprises that are facilities have been privatized. currently part of Khlib Ukrainy. Sell · About 100 grain storage and processing Government's remaining "golden share" in a large facilities remain in state owned holding company number of grain elevators, which still allows some Khlib Ukrainy (Bread of Ukraine) and in State government control. Reserve Company. · Create a policy and legal environment · Basic anti-monopoly regulations developed supportive of direct foreign investment. during 1993-1994; Anti-Monopoly Committee (AMC) tries to prevent collusion and local monopolies. 4. Rural Financing Lack of an appropriate financial system for Viable financial institutions efficiently serving food and agriculture. the food and agriculture sector. · Financing in agriculture is not adjusted to the · Introduce and implement legislation that needs of a market based privatized agriculture. defrays transaction costs and reduces risk in rural · The banking sector is weak and its financing to lending. the productive sector is limited. The size and · Increase the ability of rural assets to carry debt. presence non-bank lenders is negligible. High · Create more conducive environment for lending interest rates and the insufficient collateral limit to agriculture lending to agriculture. Although their has been an improvement in short term lending by commercial · Develop a viable distribution network for banks (est. UAH 4.5 billion in 2001), there is very various segments of rural financial markets. little medium and long term lending. · Removal of government input supply schemes and increased profitability of the farming sector led to increased lending by commercial banks to primary agriculture and food industry enterprises in 2000-2002. · The government allocated UAH 150 mln (US$ 27 mln) to subsidize 70% of interest rate charged by commercial banks lending to primary agriculture and 50% of interest charged to processing and service enterprises in 2002. 132 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Framework Adjustment of the institutional framework is Efficient and effective public sector at a rather early stage. administration and support services. · Government administration still carries many · Prepare and implement a program of features of Soviet type structure. reorganization of public administration in · Research/education system has not been agriculture, both at the national and local level. adjusted to emerging new conditions. · Review and streamline agricultural education · Public activities (government research- and research system. education) in agriculture are seriously hampered · Support the emergence of private farm advisory by budgetary difficulties. services. · Western type of agricultural extension system does not exist. § Advisoryserviceswerepilotedbydonorsin few regions. 133 KAZAKHSTAN Total Agricultural GDP 2002, billion Agricultural output in 2002 as Population, 2002 14,86 M KZT 552 percentage of 2001 level. 102.7% Rural Population 43.57 % Agriculture and forestry, fishing and hunting in total GDP, 2002 14.7% Share of livestock in agriculture, 42% Total Area 272.5 M ha in active labor force, 2002 8.8% 2002 Agriculture area, Food and agriculture, export Share of crop in agriculture, 2002 58% 2002: 222 M ha absolute value mln USD 2002 508 Arable land 22 M ha Share in total export 5.3% Agricultural enterprises (JSC, (o.w. actually Food and agriculture, partnerships, etc.) out of all land used) 17.7 M ha import absolute value mln USD users engaged in agricultural 63% Hayfields 5 M ha 2002 317.4 production, Pasture 182.4 M ha Share in total import 5% peasant private farms 34% Forested 21 M ha Average monthly wage, Household plots' share in in econ KZT 20827 livestock husbandry 86% in agricultural sector KZT 8693 All agricultural produce is Traditionally net exporter of wheat provided by private enterprises and cotton products ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 134 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Significant but incomplete liberalization of Competitive markets for outputs and Framework for Agriculture agricultural markets but increasing state inputs of agriculture with minimal intervention. Government intervention. A. Prices and Subsidies · Government price controls ended in 1994/95. · Maintain liberal pricing policies and · Domestic prices largely follow world market prices increase transparency on local markets; though they still reflect some distortions due to · Focus support programs on efficiency underdeveloped local markets. enhancement programs if any allowed by · Subsidies out of the national budget for the purchase budgetary situation. of fertilizer and seed amounted to KZT 400 million in · To optimize zonal structure agricultural 2002 but only 237.9 mln were disbursed. production the Government should support · Illegal control of city markets and bazaars by groups grain production only in zones favorable for in power that often collude with local authorities, it. It is necessary to focus on diversification together with trade barriers leads to abnormal price and production of high quality wheat that inflation for the most of fruit and vegetables across the considerably increases export potential. country. · Supervisory bodies should enhance their · In order to support agricultural producers and to work to ensure competitive environment in maintain the state food reserves the Government the market of fruits and vegetables. annually exercises a state program of grain · Reduce reliance on subsidies and procurement. Starting from 2001, futures two-phased protections to support the sector procurement is practiced. At the first phase the Government makes futures contracts with agricultural producers to prevent price dumping during spring field operations. The second phase is executed during autumn field operations. Due to unexpected price fall in autumn 2002 agricultural producers significantly gained from the futures state procurements. Total in two phases 459,631 tons of grain were procured in 2002. In CY2003 the Government plans to procure 1,5 million tons of grain using loans from the commercial banks and 500,000 tons for the state reserve using budget means. · Due to the national and local government subsidy program agricultural producers can purchase fuel, lubricants, spares, seeds and fertilizers with discount up to 40%. B. Trade Policies · WTO membership is continuing to be negotiated · Proceed with the efforts to explore with agricultural subsidies being one of the major world markets at the same time try not to obstacle to WTO accession. increase protection · Foreign trade is liberalized but seriously constrained · Introduce WTO conformed trading regime by inadequate control of standards and insufficient and complete membership procedures. transportation facilities. · Initiate mutual removal of VAT for trade · No export tariffs on any agricultural commodities. inside CIS. · Import tariffs are aimed to support domestic · Eliminate interference by local authorities producers. Slight increase of import tariff for poultry is in agricultural markets. observed. 135 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS C. Taxation, 2000 · Effective July 1, 2001, VAT rate was lowered to · The maintaining an equitable and fair 16%. The President initiated a process to lower it to taxation of agriculture to be observed, 15% in CY2004. consider further tax reduction as the · Individual private farms are imposed a "unified land preferable way of supporting emerging tax" and are freed from other taxes normally paid by agricultural producers; enterprises. · Amendments to Tax Code further alleviate tax burden for agricultural producers. Thus, farmer payments for land plots and water resources use, and for environmental pollution were cancelled, some other taxes are modified. 136 2. Land Reform and Farm Successive waves of land reform and privatization Efficient farming based on transparent Restructuring initiatives have characterized Kazakhstan's reform ownership and land use rights. efforts. Initial privatization of farms has been · Facilitate the further restructuring of completed, however, the restructuring of the inefficient farms and increasing the number farming sector is still in progress. of family farms; · The new Land Code allows private ownership of · Explore measures to reverse negative agricultural land. However it has some controversial social impact of excessive concentration of measures such as payments to transform a conditional land user rights; land share in private land and impediments to sublease conditional land shares. A Water Code and a Forest · Facilitate the financial consolidation of Code are also under elaboration. These legislative acts newly emerging farms by debt settlement and introduction of international accounting are aimed at compiling all scattered legislative acts at one document and enhance preservation of natural practices; resources while increasing economic efficiency from · Use bankruptcy procedures to accelerate its use. the farm consolidation, use land as a · Adoption of the new Land Code is believed to collateral to stimulate rural crediting by the enable the use of land as a collateral that should second ­ tier commercial banks. invigorate economic activities in rural area. However, · Develop and implement pragmatic and low numerous other steps will be needed before this will be cost measures to delineate the remaining realized in practice. notional land certificates for land parcels. · A comprehensive State AgroFood Program 2003- 2005 was elaborated by the Government. The program includes identification of support tools for livestock and crop production. Furthermore the state Program of Rural Development is being elaborated by the Government. The program aims at wide addressing of problems of rural area, especially of the depressed territories. · The farm restructuring and ownership changes to date are only slowly beginning to yield increases in farm productivity or improved profitability. Moreover, the process has been characterized in some instances by a lack of transparency, poor information, and manipulation and has led to a rapid accumulation of land use rights by some farm managers. · Number of private agricultural enterprises continues to increase throughout Kazakhstan and most of them concentrated in southern regions. 137 3. Competitive Formal privatization of state enterprises completed, Private-based and competitive Agroprocessing and technological improvement and financial agroprocessing and input supply and Services for Agriculture consolidation of these enterprises is lagging behind. facilitation of entry of new private · The President of the Republic of Kazakhstan declared entrepreneurs. 2003-2005 as years of aul (rural area) in his annual · Enact anti-monopoly and fair competition address to the Kazakhstan nation. Pursuant to that legislation. several governmental programs are being developed · Aggressive application of bankruptcy and the main of them is directed to actively support legislation to facilitate further restructuring agricultural producers and agroprocessing industry of agroprocessing. through budget and commercial banks crediting mechanisms. · Improve the legal and policy environment for direct domestic and foreign investment in · Capacity in most of the former state enterprises is agroprocessing. significantly underutilized, and produce quality has only marginally improved. Quality of management in · Facilitate the introduction of international quality standards and actively encourage most cases is gradually improving. introduction of new technologies. · Import substitution in agrofood industry is widely encouraged by the Government. Some success in · Take measures for the development of insurance market in agrofood industry reduction of share of imported food in total consumption is observed. · Risk Insurance in agrofood industry remains somewhat underdeveloped that constrains investment in this sector of economy · Agroprocessing enterprises remain technologically backward, and lack funds to introduce new technologies; Although agroprocessing is receiving more funds than before, a lot still remain to be done and the sector is still heavily underinvested · The grain sector is demonopolized with some strategic investment by foreign multi-nationals; · Some increasing private sector investment into input supply and output marketing is observed. 138 4. Rural Financing Basic financial sector reforms in place, with rapid Viable financial institutions efficiently emergence of private financial intermediaries, serving the food and agricultural sector however the development of a rural financial · Facilitate accessibility of credit resources system is lagging behind. for borrowers engaged in agricultural · With declaration by the President the upcoming production. three years as years of all governmental financial · Review the program of leasing of injections to the rural area are expected to increase agricultural machinery being carried our by drastically. In 2003-2005 about US$ 60 mln of Kazagrofinance to determine its costs and additional funds are to be invested annually in rural sustainability. infrastructure projects in transport, water supply and social sphere. Furthermore according to governmental · Introduce international accounting standards. plans in 2005 financial allocations to support agriculture should reach 1.8% of GDP. · Implement further Bankruptcy provisions. · Amount of rural lending are expected to increase with ratification of new Land Code that provides legal ground for use of land as collateral. At the moment food processing industry has received KZT 50 billion (about US$ 350 mln) of credits from all sources. Additional financial requirements are estimated to be about KZT 29 billion of which 8.5 billion for capital renewals. · Efforts now underway, with World Bank support to incentivize formal bank financing for farms through the implementation of the projects of agricultural competitiveness and post-privatization support; · Agricultural Credit Corporation (ACC) established in 2001 to provide channel of subsidized credit to farms. 30 Agricultural Credit Partnerships (ACPs) were established across the country. Authorized capital stock to come from members of ACPs and from ACC. Budgetary allocations for ACC in 2001 and 2002 amount $4 million each. · Program of machinery leasing being implemented by the Ministry of Agriculture through the state owned enterprise "Kazagrofinance". Farms lease machinery with a 20-30% downpayment and a 2-3% margin to cover administrative costs. The terms of such leasing arrangements vary. The program is supported by funds from the budget in the form of an interest-free credit to Kazagrofinance. Budgetary allocations to cover the interest subsidy increased from $400,000 in 2001 to $1 million in 2002 and to $3.5 million in 2003 reflecting increased value of needed machinery covered by the program. 139 5. Institutional Framework Adjustment of the institutional framework to meet Effective provision of public goods and the requirements of a market-oriented agricultural support services. sector is still at an early stage. · Accelerate the creation of quality public · To reflect increased governmental attention to rural administration in agriculture by issues the role of the Ministry of Agriculture was concentrating increases in budgetary expanded. The Minister of Agriculture gained a status allocations on pay levels rather than of the Deputy Prime-Minister. Some critical activities increasing the number of staff. fields like agricultural science, water management, · Implement comprehensive reform of forestry and fishery moved from other state agencies to agricultural research and training systems; the competence of the Ministry of Agriculture. · Facilitate the emergence of an effective · Agricultural research and training institutions remain farm advisory service. only weakly attuned to end-users' priorities and are unable to provide technological and information needs · Improve provision of public goods such as due to institutional and budgetary constraints. market information, land titling and registration, disease control, seeds and grain · The creation of quality public services required by a quality analysis and grading. market based agriculture (market information, animal disease control, phyto-sanitary regulations, seeds, grain quality analysis and international grading system) is being further developed. 140 RUSSIA Total Population 144.1m(2002) Agriculture in GDP (2001) 6.9% Agricultural output in 2001 as Rural Population 27 % percentage of 1990 level (in constant Agriculture in active labor (2001) 12.3% prices) 68.5% Total Area 1709.8 mil ha Agriculture area: 189.9 mil ha Food and agriculture Share of livestock in agriculture Arable land 56.1% in exports (2001) 2.1% (2001) 47.1% Pasture and Meadows 30.5% in imports (2001) 22.5% Hayland 10.7% Agricultural area in private (non state Fallow land 1.8% Agriculture in fixed assets (2001) 6.0% and non corporate) use (2001) 13.7% Perennial Plantations 0.9% Net importer of livestock and dairy products and sugar Share of household plots and family 56.1% private farms in total agricultural output (2001) (52.4 HP+3.7 Family farms) POLICY STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Overall and Macro- Previously, substantial liberalization at the Consolidation and maintenance of economic Framework for federal level, but a federal agricultural policy macroeconomic stability. Prevention of Agriculture was never clearly enunciated, and so policy has excessive state regulation of agrarian economy. been to a large extent regionalized. Less liberal Removal of barriers to foreign trade (food policies prevail at the regional level. Attempts imports) and domestic trade at the subnational introduce various measures of state regulations. level, reduction of intervention at the provincial Federal intervention in grain market has been level, integration of national markets and reintroduced. Import quotas for meat were complete linkage with global markets. introduced in 2003. · Enforce legal prohibition on interference in A. Prices/Subsidies · Little price intervention at the federal level, inter-regional trade; require competitive though there is serious discussion of re-imposition procurement by regional governments; WB should of some controls, under the rubric of "regulation". begin policy dialogue at regional level (but · Substantial intervention by some provincial constrained by regional credit-worthiness) governments in the form of administrative controls · Within sectoral budget consistent with on prices or margins, barriers to inter-regional macroeconomic stabilization, achieve expenditure trade. In 2002, subsidies, cash grants and switching toward public goods and services, and compensations were used in 63 RF regions (in away from programs that distort incentives. 2000 ­ in 49 regions) · Subsidies and support for agriculture have fallen from 0.52% of GDP in 1995 (3.8% of gross ag. output) to 0.19% in 2000 (1.58% of GAO). · Problem is not the amount of support for agriculture, but its form ­ poor policy in directing subsidies (unjustified subsidies to some sub- sectors, with subsidies administered in distortionary forms), debt write offs, commodity credits at regional level--and lack of focus on supporting private farms 141 POLICY STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies · Attempts to introduce protectionism measures · Continue to push toward joining WTO. Do not are growing. Russia imposed a sugar import tariff- introduce quantitative controls inconsistent with rate quota regime. In 2003 quotas are introduced rules of WTO. In context of WTO accession, for beef, pork and poultry meat. pressure regions to dismantle barriers. · Negotiations on accession to WTO continue, · Prevent attempts to close domestic food but there is no clear target date for conclusion. markets (mostly meat) to protect domestic Regional policies create additional obstacles for agricultural producers. WTO accession, as well as large disparities in · Refrain from requesting more food aid, except incentives among regions. for limited targeted aid administered by · Large-scale food aid in 1999 (and on a smaller humanitarian NGOs. scale in 2000 ) disrupted markets. C. Taxation · Overall problems in agriculture similar to other · Evaluate agricultural provisions of proposed sectors, but income easier to hide in this sector. documents with regard to tax reform. Monitor Current Tax Code limits tax exemptions and rights enforcement of restrictions on discriminatory ad of subnational jurisdictions to impose ad hoc hoc local taxes. taxes. It does not allow agricultural producers to evade taxes, but provide them with fewer and less distorting taxes. Starting February 1, 2002, a unified agricultural tax is introduced. It is based on the results of the cadastre evaluation of lands. A decision on implementation of a unified agricultural tax is made by each RF subject. This tax covers approximately ¼ of all taxes and dues paid by agricultural producers. Local Administrations have right to reduce tax rate for selected categories of agricultural producers. The MOA considers that the system of agricultural taxation, including a unified agricultural tax, needs to be improved. The ministry opposes the attempt to introduce a property tax for agricultural producers and shift land taxes from organizations to physical persons. 142 POLICY STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm As of January 1, 2002, 633 mln. ha were used Removal of remaining obstacles to development Restructuring by enterprises, organizations and indi viduals of a private land market. for agricultural production. Only 20% of this · Evaluate state farms remaining on list of land (129 mln. ha) were in private ownership of unprivatized. Reduce number remaining in public which 112.6 mln. ha are land shares (including sector. Complete drawing up of contracts between 26.4 mln. ha of unclaimed shares), used with shareholders and users of land (enterprises). little difference in practice from the old system. Include registration of land shares in system of · Distribution of land to enterprises and their land registration. shareholders undertaken through a series of · Pass regional land laws to enforce the Federal Presidential decrees since 1992. But most of Law on Agricultural Land Turnover. these enterprises continue to operate as they did under the old system, and require large subsidies. · Follow the approved procedures for Land tenure is ambiguous, since rights of restructuring and/or liquidation of insolvent farm enterprises and shareholders not fully specified enterprises, with hard budget constraints so that through contracts governing land use. Ability of resulting enterprises have incentives and capacity these enterprises to re-structure is also impeded by to engage in commercial activities. Develop debt debt overhang and the fact that they are the sole work-out procedures that will split off legitimate providers of some social services in their areas. social services and place them with the public · At the end of 90s new types of agribusinesses sector. emerged (agrofirms and agroholdings) on the basis · Speed up improvements in land registration as a of purchases of control stock or creation of branch priority to developing a fully functional land establishments, or other forms of investors' market. involvement in farm business. · Establish and disseminate procedures for land § TheFederalLawon Financial Rehabilitation transactions, including mortgage, leasing as well of Agricultural Producers (2002) followed by as purchase and sale. the Governmental Resolution (January, 2003) established a sound base for debt · Establish a framework for the dissemination of restructuring. land market information. · Private land ownership recognized and protected by the Law on Agricultural Land Turnover approved in July 2002. By the beginning of 2003 only 6 Russian regions adopted local laws to implement the Federal law on Agricultural Land Turnover. · Land markets are largely inactive due to legal ambiguity regarding transactions and lack of clarity on procedures, absence of mortgage market, and general unprofitability of agriculture. Only 6% of all land transactions (0.3 mln. out of 5.56 mln. transactions) account for actual free market land sales. 143 POLICY STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Agro- Considerable progress in privatization, but Removal of legal and institutional constraints processing and Services investment remains low, transactions costs are to market development. for Agriculture. high, and much of the processing industry is · Enforce bankruptcy provisions in food not competitive with regard to price and processing. quality. Starting 2000, processing industry and grain elevators became attractive to private · Enforce prohibitions on restrictions of inter- banking and industrial capital. regional trade. Tie federal assistance on · Foreign participation in marketing and agricultural support programs to reduced procurement by provincial governments. agroprocessing is lower than desirable. · Interventionist activities--especially of local · Create farmer/processor market information systems. and provincial governments--discourage investment and new entry by continued subsidies · Expand and upgrade public facilities for output to inefficient old enterprises. marketing (farmers' markets, wholesale markets, · Development of information system and etc.). marketing infrastructure in the food chain is · Improve collection and dissemination of market inadequate. information. Many producers still dependent on local Phase out local government procurement schemes, "commodity credit" schemes that keep them and stop the new scheme on federal level. Any locked into Soviet-style input supply and procurement should be cash-based. marketing arrangements and non-cash trade. Some proposals to renew large-scale procurement on federal level. 4. Rural Financing SBS-Agro Bank is bankrupt. Some regions Development of multiple channels for rural have taken over local branches. SBS-Agro has finance. been resurrected as Rossel'khoz Bank as a · Phase out state owned Rossel'khoz Bank, and major channel of subsidized credit to while it is operational, limit its funding to low agriculture. Before 2001, the Government levels (through the MOA) administered programs of soft loans (rates about 25 percent of · Improve the system of soft lending to commercial rates) and equipment leasing to agriculture. Continue shift to interest subsidies in agriculture. Currently, the State subsidizes the place of direct government credit. Introduce a interest rate on commercial bank loans to program for gradual transformation to regular agriculture. commercial lending. · Effectiveness of banking system compromised · Identify and remedy deficiencies in the legal by banking and macroeconomic crisis in 1998. framework for collateralizing moveable property. · Banks refrain from lending to most of Pass Warehouse Receipt Law. agricultural enterprises. · Design and implement a program to facilitate · New federal leasing scheme will in principle expansion of leasing of agricultural equipment by the private sector, with a sunset clause for allow greater participation of private sector termination of public support for the activity companies in the federal subsidy program, a positive step. However, there is a danger that · Support activities to reduce the transactions leasing will remain dominated by the successor costs that rural lenders and borrowers face, such as organization ­ Rosagroleasing. information and evaluation of risk. · Some credit cooperatives and credit unions are · Encourage development of credit coops and developing, but legislative framework still needs cooperative banks with appropriate legislation improvement. · The law on warehouse receipt is not approved. 144 POLICY STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Reform Institutional reforms are uneven, with excessive Reduce local involvement in procurement and local intervention refocus research and education · Ministry of Agriculture is still organized to · Ministry of Agriculture needs institutional re- focus on traditional roles rather than to provide structuring and strengthening on the basis of its governmental services to meet requirements of a changing functions under the administrative market economy. reform · Access to information and advisory services · Improvement in market information systems is insufficient to support competitive production and underway, and needs strengthening marketing · Increased funding and reorganization of · Agricultural research is underfunded and agricultural research is needed to focus on insufficiently linked with international partners increased competitiveness and international · Local administrations retain an excessive role in integration market intervention · Local administrations should reduce · Agricultural education has not been procurement for regional stocks and conduct revitalized, and remains under the jurisdiction of remaining procurement on competitive basis the Ministry of Agriculture · Agricultural education should be refocused to Proposals to allow Producers' Unions to perform address rural labor mobility more generally, and governmental roles in licensing and controlling should be managed under the Ministry of new entry Education. Refrain from giving public sector functions (licensing and control) to producers ' unions 145 TAJIKISTAN Total Population 5.90 mil. Food and agriculture in GDP 2001 21.% Agricultural output in 2001 as Rural Population 71.5% Active labor in Food and Agriculture 71 % percentage of 1995 level 76% Total Area (ha) 14.3 mil. (2001) Agriculture area: 1.1 mil. Food and agriculture Livestock production in 2000as Arable land of Total 8.2% in exports (2002) 18% percentage of 1995 level 46% Land in imports (2000) 21% Orchards area, 8% Traditionally a major exporter of cotton Share of livestock in agriculture Viticulture area 7% and in addition processed and (2002) 43% Irrigated area of AL 72% unprocessed fruits, vegetables, nuts, Arable area in private use (2002) GDP 2002 6 (E) silk, and wine, and a net importer of: independent peasant family and 51 % GNPper Capita (2002) <170 grain, sugar and vegetable oil. Now Cooperative/associations Tajik SOMONI to US$ 3.1=1 $ there is a shift in cropping pattern and (Dekhan) farms (2002) 2003 meets its grain needs mostly through domestic production ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Framework for The peace in the country and policy Creation of an enabling environment for Agriculture environment has Improved considerably. private sector development and Recent experience suggests that real GDP implementation of a competitive and fair growth of 4-5 percent annually could be agricultural markets. Enhance private achieved over the next few years. The sector role in rural development. Government although is seriously engaged in the privatization of agricultural sector by · Continuation of macro-economic privatization of the state and collective farms adjustment operations and capacity building and enterprises by and large it has remained to implement market oriented agricultural in paper due to outstanding farm debt, has policies; such as liberalization of all prices formulated PRSP oriented planning for and phasing out producer subsidies. alleviation of poverty. · Improve incentives for water savings, · The government's overall development and cost recovery in Irrigation and in approach for the sector is to reverse the decline in Operations and Maintenance of the agricultural production, and to promote an infrastructure and transferring of the efficient production under private sector. management and water distribution to · Prices of wheat, fruits, vegetables and livestock water user's associations products and inputs have been fully liberalized. Farm input and out put market has been · Intensification of the activities for liberalized. privatization of the remaining state and A. Prices/Subsidies · Although cotton market is stated to have been collective farms in a transparent and more liberalized and all the ginneries in the country equitable manner and estoppel of large- have been privatized the government continue to scale transfer of land to cotton firms on long interfere in the cotton production and marketing term leases. through administrative coercion, future contracts · Old cotton Debt resolution and allocation to cartels, fuel allocation, water allocation and in of land to farmers and provision of full licensing for export. freedom to farmers to select crop structure · Grain and cotton prices have reached almost of their choice and encourage investment in international prices and the trend continues cotton sector and improve incentive during 2002. But farm gate price for the cotton structure and reduce role of the state in continues to be extremely low (less than 30%). credit allocation to farms for cotton · Water Use charges for irrigation was raised by production. 50% but collection continues to be poor, Power · Promote viable agro-processing for Irrigation water continues to be subsidized. industry, and competitive agricultural Bread prices fully liberalized, universal bread markets in the private sector. Provide secure subsidy has been replaced with targeted food trade routes from farm to markets and subsidies to the vulnerable groups. eliminate inter- raion border restrictions. 146 ISSUE STATUS OF REFORMS OBJECTIVES, PROPOSED ACTIONS B. Trade Policies · Privatization of all the 23 cotton ginneries have · Abolish domestic reserve requirements. been completed. Privatization of another set of 230 SMEs have been completed . · Monitor progress of cotton stock exchange and expand linkage to regional and world markets · There has been some progress in liberalization of and promote conditions for active free standing free trade for cotton, however, subtle control of forward trading activities for cotton. the government in export of cotton through licensing and in providing directed credit for · Remove remaining export licensing and production or the guarantee for future contract quotas. production through state controlled banking · Remove convoluted licensing procedures for continue to exist. cotton. Open up the market for cotton through · Licensing requirements for the import of "Cotton exchange" or an association of cotton agricultural inputs and export of all agricultural traders and processors and producers. exports however has been eliminated. · Adopt a transparent trade policy C. Taxation · Land registration fee has been reduced from $ · Simplify the taxation system, organize wider 80 to less than $ 7, and compulsory registration of information campaign to educate the people about persons engaged in farm production activity as the tax policy and the taxation system. juridical persons have been eliminated, thus promoting the privatization of the farming sector. · Strengthen the Government capacity in formulation and implementation of appropriate · Taxes on the agricultural sector: e.g. VAT, import and export tax policies and publicize it. production tax, land tax, irrigation tax, transport tax; road tax, safety-net tax, health tax, and water · Rationalize cotton sales tax policy, Monitor tax, and are now being rationalized and the government policies of the reduction of all simplified. export taxes and duties for agricultural products. · Registration requirement for all those engaged · Eliminate restrictions and Government policing in marketing of agricultural products continue to of inter-raion movement of farm inputs and out. exist and are convoluted. · Develop a customs reform program which · Cotton exports taxed at 25% of FOB price. includes: (i) revision of the Customs code; (ii) revision of Customs procedures and regulations · Regulations governing customs administration and strengthen the internal audit function; (iii) a need improvement, and some inefficient and plan for the modernization of Customs over a next lengthy customs procedures leave room for two year period. iv) adopt revision of the discretion and corruption. Customs code; (v) reform Customs procedures and regulations and strengthen the internal audit · Convoluted procedure for calculating VAT and function; and (vi) start modernization of Customs the Tax system for individual or small scale working system making it more transparant. traders, cooperatives and corporate entities in agriculture providing farm support services continue to manifest. 147 ISSUE STATUS OF REFORMS OBJECTIVES, PROPOSED ACTIONS 2. Land Reform and Farm Progress is being made under farm land Development of transparent, participatory Restructuring privatization and farm restructuring approaches for equitable distribution of land use rights of the lands of large state and · Government has passed a Land Code, Although collective farms, establishment of a system for land is the exclusive property of the state, now the systematic registration of right to land use, law permits for long term (30 to 90 years) tenure on creation of transparent, fair and competitive land leasing that can be transferred or bequeathed. land lease markets. Primary land users have tenure of unlimited duration or life-long inheritable tenure. · Improve the legal framework for land reform Secondary land users are lessees of land plots. by (a) allowing security of land tenure with There are four types of land tenure :(a) Land tenure rights to exit, and formalizing clear rights to of unlimited duration, which is available to state- own and sell land; (b) constituting a run and co-operative agricultural enterprises, and participatory and transparent mechanism for other enterprises and associations. (b) Life-long determination of land and non-land assets for Inheritable Tenure, which is available to physical individuals and their allocation; (c) persons or groups of citizens to establish dekhan developing mechanisms to use land lease farms or to take up other "traditional farming rights/ other assets (including mobile) as activity."; (c) Land Use (term based), which is collateral. available to secondary users for general use only and (d) Land lease, which is available to secondary · Modernize the land tenure registration users for a term of 20 years (if from a private systems and titling services in the immediate primary holder) or 10 years (if from the land to short term to develop a functioning land reserve funds) for a price not to exceed the land tax lease market. Enhance public access to land rates. use right records · Most state and collective farms (210 of the 600) · Reform the legal framework for individuals, except the pedigree farms, have been converted into cooperatives and corporate entities in Dekhan farms or associations, but majority of them agriculture to provide for transparency, have not changed their mode of operation. autonomy and framework for easy Privatization of majority of ex-state and collective restructuring of farms and agencies and farms are stalled as these farms are in debt and in enterprises providing farm support services. precarious financial condition as the farms had · Develop a variety of private farming borrowed under future contract for cultivating approaches and provide legal and cotton with the state guarantee. appropriate institutional support services for · Degree of commitment to land privatization and their creation and sustainability. farm restructuring varies across the country · Rehabilitate critical irrigation and drainage depending on the local leadership for privatization infrastructure and reduce reliance on high and commitment of hukumat (Raion energy consuming pumped systems, except administration) for privatization. where there can be scope for introduction of · Secure land tenure registration and titling high value crops and no alternatives exist for services and supporting mechanisms is progressing other commercial crops; and develop gravity well but still long way to go. based irrigation systems with protective irrigation approach and introduce better · Privatization of Majority of ex-state and rainfed farming systems. collective farms that are cultivating cotton under future contract with state guarantee are in debt and in precarious financial condition. 148 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 3. Competitive Agro- New privatization law passed by parliament and Incentive for private ownership, formulation and processing and the new procedures are expected to improve the implementation of transparent legal and Services for legal framework and privatization of agro- privatization procedures for the development of a Agriculture. processing sector. fair, competitive agro-processing and input supply · markets. Government continues to retain partial to majority ownership in most agro-enterprises. · Develop and implement a plan for complete · privatization of all agro-processing and input Foreign participation in marketing and agro- service enterprises, undertake case by case processing is minimal. privatization, with participation of both domestic · Potential of state and collective farms becoming and foreign investors. major shareholders of food processing · Create enabling policy environment to attract enterprises. private foreign investment; improve legal system · low quality outmoded products, poor demand for contract enforcement and market for the products High level of indebtedness, and transparency. low capacity utilization are major impediments. · Develop and implement anti-monopoly · Convoluted licensing procedures, absence of legislation. Implement monitoring and regulatory incentive and harassment of tax authorities of mechanisms of the privatization process to newly emerging and venturing entrepreneurs prevent oligopsony comprising both domestic and foreign cotton ginnery owners. · Promote research and development of new products, packaging and marketing to meet outside markets. 4. Rural Financing A functioning broad based rural financial system Creation of viable market oriented financial is still evolving. institutions to serve the agricultural sector · The banking sector continues to be very weak · Strengthen regulatory and enforcement Share of top four banks amounts to > 85% of mechanisms in National Bank of Tajikistan to the total assets in the banking system. enable the creation and development of rural · State agricultural bank (AGROPROMBANK) savings and credit institutions has been reorganized in to two (i) a commercial · End the difference between loan and credit in bank (Agroinvestbank) and (ii) the Agrobank determining the taxation and transactions. (with the old outstanding dues). But both system continues with high involvement of the · Promote self-sustaining, collateral based rural Government including the future contracts savings and credit institutions and provide operations, directed credit in cotton in incentive for creation of member owned rural collaboration with external bank funding. savings and credit associations. Support the establishment of a variety of rural credit delivery · Although a Bank restructuring agreement was mechanisms including the micro-credit drawn between the four major banks and the institutions. National Bank of Tajikistan very little progress · Eliminate State Guarantee that encourages non- has been made towards outstanding loan payments. Enhance competition among banks by collection and overhead reduction. High interest facilitating entry and exit and imposing minimal rates and the lack of dependable collateral capitalization requirements for the banks. seriously limit commercial lending · · Improve corporate governance, management and Most of the state run agro- processing agencies terms of o wnership, eliminate Directors and /marketing enterprises are in serious liquidity managers who are primarily from Soviet crisis. nomenclature who lack experience in a market · Financing through Agroprombank has almost driven, profit oriented banking system. come to grinding halt. · Liquidate Agrobank or restructure into an · Micro credit schemes are being implemented in autonomous commercially viable rural financial selective regions through NGO's, CARE- institution and train loan officers in market international, AKF, Save the Children, Mercy oriented agricultural lending ; implement Corps. accepted accounting principles and prudent 149 Corps. banking practices. · The regulatory framework needs to be clarified · Develop and implement mechanisms to promote with respect to the prudential requirements of private input/output marketing and trading non-bank FIs, including credit associations and services. Develop human resources in the rural credit organizations banking sector. · Enact amendments. Further develop the existing regulatory framework for credit associations and rural credit associations. Issue easy-to-understand guidelines for establishment and regulations of non-bank financial institutions. 150 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 5. Institutional Reform Reforms to restructure government institutions Redefinition of the roles of public and private are progress but very slow. sector institutions to support competitive, market oriented agriculture sector. · Public sector Input supply agencies seize to function as they face serious budget crunch, and · Reorganize and improve quality of public are being replaced by the private sector agencies agricultural administration to the needs of a but very slowly mainly due to the suppressing and market economy. stifling unclear national tax system and thus a serious void created seriously affecting the · Take up and complete the reform of agricultural farming sector education and research to provide strong scientific backstopping to the emerging market based · Ministry of Agriculture MOA continue to private sector agriculture development. operate in the Government structure oriented to fixing of production targets (cotton ands grain). · Establish public information system to provide better understanding of rights of individuals and Thanks to serious budget crunch, MOA staff strength has been reduced drastically. voluntary groups regarding the process of determination and allocation of shares at the grass · Agricultural Research, Extension and Education roots level. system have not yet developed to serve the emerging private farmers and privatized farms · Develop a strategy and establish an institutional continue to adopt old farming technology, mechanism for implementation of a multi-stage system of management for the rational basis for Research scientists of Academy of Agril. Sciences are not exposure to Global Scientific land use rights distribution by defining the roles, Advancement and access to information on functions and authority of the State Land Committee, Raion administration, Ministry of modern production technology are limited. Justice, and the Agrarian Reform Commissions at · Institutional Information system and research Jomaot, Raions, Oblasts and State level. support required to promote a market based agriculture is not in place. 151 UZBEKISTAN Total Population 24.2 mil Food and agriculture in GDP Agricultural output in 2001 as Rural Population 58 % 2001 30.2% percentage of 1990 levels: 105.2% Food and agriculture in Crop production 108.5% Total Area 44.9 mil. ha active labor force (2001) 37.8% Livestock production 102.9% Agriculture area: 26.7 mil. ha Food and agriculture Share of livestock in agriculture (2001) 48.5% Arable land 4.05 mil. ha in export (2000) 32.9% Agricultural area in private use (2001) 28% Orchards, vineyards 0.3 mil. ha in import (2000) 12.3% Share of household plots and private 66% Pasture & Forest 23.8 mil. ha Second largest exporter of farms in total agricultural output (2001) Irrigated 3.3 mil. ha cotton lint. ISSUES STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Government committed to Distortion free, efficient and internationally competitive Framework for transformation to market economy, but agricultural sector. Agriculture slowly. A. Production · The state order system has been replaced · Replace the current system of setting production targets for controls by a state procurement system, under which grain and cotton with a policy of recommendations on crop obligatory sales to the state will not exceed rotation aimed at the improvement of soil quality. 50% of actual production of cotton and This is expected to be phased in over time as the share of grain private farms in cotton and wheat production grows. Production of other crops and livestock products has been liberalized. B. Prices/Subsidies · Government promulgated in 2002 (in · Above the fixed procurement quota for cotton, producers principle) the policy of allowing the other should have the right in practice to toll the remaining volume half of production to be sold independently of raw cotton for a specified tolling fee and retain the cotton by farms, but this was implemented mainly fiber to sell at market prices. for grain. The sale of cotton fiber above · After meeting the state procurement quota for wheat, planned cotton procurement levels (those enterprises and individual farmers should have the right to sell above the first 50% of production) was in wheat, produced above the quota, on the internal market and at fact still purchased by state owned free market prices. This is largely current practice and should ginneries, as alternative private sector continue to be observed. purchasing rules were not set out clearly · After implementing the above two measures, remaining enough prior to the 2002 cotton harvest. agricultural input subsidies should be eliminated over the next Implicit taxation in 2001 was reduced to two to three years. about $400 million (from about $800 million in 2000), while implicit subsidies were reduced also to about $400 million, leaving the net taxation of the sector at zero (prior to debt write-off) for the first time in the past ten years. C. Trade Policies · Traditional international markets for · Remove all quantitative (non-tariff) trade restrictions. cotton maintained, but little trading outside · Accelerate the emergence of private sector processors and FSU countries for non-cotton products. traders by privatizing state owned agribusinesses and · Export of cotton fiber by non-state encouraging new entrants. entities is no longer proscribed but in practice it is still highly controlled. 152 ISSUES STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Government committed to transforming A farming system based on private ownership or long -term Farm Restructuring agriculture into an efficient and dynamic leases with irrevocable rights to inherit, pledge and sub- sector. lease. · The Land Code restricts agricultural land · Provide information service for rural communities. holding rights to lease hold only. · Execute the next stage of transformation of the remaining · Transformation of cooperative farms to shirkat (cooperative) farms in a transparent and equitable private operators has accelerated manner by allowing members the right to opt for a significant significantly over 1999-2002. expansion of their household plot and by carefully scrutinizing the rationale for expanding the number of private farmers in the context of local demographic characteristics. 3. Competitive Agro- Government intends to transfer Efficient, privately owned agrobusiness firms subject to Processing and processing enterprises to private control, market forces, and agro-processing industries with high Services for improve efficiency of utilization and quality products which can compete in world markets. Full Agriculture conserve water supplies, and liberalize transition of production and distribution functions, with the input sub-sector. free access of new foreign and domestic operators. · Little progress in privatization in the Enactment and enforcement of law to improve cotton ginning sector, but the remaining management and conservation of scarce water resources. areas of agro-industry are being privatized · Specify strategy for privatizing cotton ginneries. at an accelerated rate. · Decentralized management of water resources and support · Proposing to revise water law and require creation of water users associations on all farms (latter has creation of water users associations. begun to accelerate on liquidated shirkat lands). · Delayed introduction and enforcement of · Develop a multi-year plan to introduce higher irrigation economic water charges. water tariffs to achieve 100% cost recovery of the O & M costs · Despite deregulation, inputs distribution of irrigation and drainage over ten years remain effectively under monopoly control. · Introduce measures for disaggregating monopoly input suppliers and privatizing them. 4. Rural Finance Government policy is to reorganize Viable financial institutions serving the agricultural and financial services on commercial lines. rural sector efficiently. · Preparation for reorganization of state · Identify viable commercial banking operations for owned banks is stalled. developing rural financial services. · Some private banks emerging (e.g. · Encourage self-help credit associations. Hamkorbank) which are active in the rural · Apply positive real interest rates for all credit funds and sector. allow credit advanced under state procurement transactions to be accessed for purchases outside the state input supply system. 5. Institutional Government policy is to simplify Efficient and effective public sector administration and Framework structure and reduce size of agriculture support for private agriculture. and water ministry. · Focus public services on policy formulation (currently · Agriculture and water resources improving), demand driven research, information and reorganized under single Ministry of evaluation. Agriculture and Water Resources (MAWR). · Encourage evolution of private sector support services · Existing departments MAWR being (occurring under the Rural Enterprise Support Project). reorganized to improve support for farmers. 153 TURKMENISTAN Total Population 4.3 million Food and agriculture in GDP Agricultural output in 2000 as Rural Population 55 % (1998) 25% percentage of 1989-91 levels 95% Food and agriculture in active Livestock output in 2000 as Total Area 49.1 million ha. labor force (1998) 45% percentage of 1989-91 levels 116% Agriculture area: 40.3 million ha. Food and agriculture Share of livestock in agriculture (2000) 45% Arable land 4% in export (1997) 47% Agricultural area in private use (2000 - Pasture and in import (1997) 19% household plots and private farms) 16% Meadows 81% Share of private farms and household Forested 4% Exporter of cotton fiber, plots in total agricultural output (2000) 38% textiles, and karakul skins, Agricultural area under family lease 70% smaller net importer of food ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic High levels of government intervention in Phase out Government control of agricultural Framework for Agriculture agriculture, including: state orders for 100% markets and emphasize market production and wheat and cotton; high implicit taxation support services for emerging private farmers. through low producer prices; and subsidies for agricultural inputs. A. Prices/Subsidies · Adopt a program of macroeconomic · Measured inflation is relatively low (under stabilization and unify the current multiple 20% annually), but suppressed inflation may exchange rates. imply a higher actual rate. · Adopt program to raise producer prices for · Foreign exchange controls continue and the cotton and wheat to border price levels over two manat is over valued at the official exchange years and reduce state orders by 75% over a four rate. year period. · Main products of the crop sector, cotton and · Phase out input subsides over two years and wheat, are controlled through state orders at stimulate procurement and distribution of inputs prices which are approximately 60% of border by private sector operators. prices. · Develop a multi-year plan to introduce higher · Inputs for cotton and wheat production are irrigation water tariffs to achieve 100% cost subsidized by 50%. recovery of the O & M costs of irrigation and · No significant payments for irrigation water. drainage over ten years. B. Trade Policies · Imports and exports registered through state · Eliminate registration requirement for imports commodity exchange, which amounts to defacto and exports. licensing requirement. · Allow export of cotton by private intermediaries · Government controls all cotton exports. eliminate price controls on outputs. · Minimum export prices for hides and skins. C. Taxation · Implicit taxation high through state order · Phase out implicit taxation through state orders system and export controls, but little explicit and export controls. taxation. · Gradually increase land tax as state orders · Private owners pay a land tax, but collection reduced. sporadic. · Use land tax to pay for rural social services eliminating mandatory payments to farm associations now providing social services. 154 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm Land Reform is Making Progress Accelerate the Pace of Land Reform and Restructuring · Roughly 85% of land in peasant associations Private Farmer Support. allocated to households via leaseholds (10 to 15 · Provide leases for at least 20 years to encourage years duration). voluntary commitment by farmers. · About 8% of land in individual private farms. · Adopt complementary reforms so that private · Leaseholds convertible to ownership upon owners can function in market environment. successful performance for two years. · Make the conversion process transparent by clarifying the requirements which new farmers must meet to have the leased land converted to ownership. 3. Competitive State Control of All Inputs Services and Adopt and Implement Program of Agroprocessing and Services Agroprocessing -businesses Privatization and Demonopolization. for Agriculture · Most processing and services handled by state · Encourage privatization and demonopolization enterprises organized into large associations. of existing agribusiness companies and · Little privatization. associations. · Cost recovery for selected inputs such as · Remove barriers to new entry in processing and animal health services has been introduced. services. 4. Rural Financing High Dependence on Subsidized and Directed Reduce Subsidized Credit and Introduce Credit through Government Controlled Commercial Banking Practices Banks. · Reduce subsidy element of directed credit and · High dependence on subsidized credit stimulate the development of commercial rural · Daikhan Bank is the designated credit agency financial services. for farm leaseholders. It has little risky debt · Conduct financial audit and develop corporate from the past, but is not yet engaged in genuine plan for Daikhan Bank. intermediation. 5. Institutional Framework Non-transparent Budgeting and Inadequate Consolidate Government Budget and Increase Resource Allocations to Public Institutions Expenditures for Public Goods · Extra budgetary Agricultural Development · Consolidate costs and revenues from sector into Fund manages sectoral financial flows in non- general budget and abolish Agricultural transparent fashion. Development Fund. · Frequent institutional reorganization and high · Remove authority of local administration to turnover of administrative staff in response to interfere in decisions regarding production and declining sectoral performance. marketing. · Frequent local government interference in · As resources permit, develop agricultural production decisions research and extension to serve needs of agents in · Research and extension much reduced a market economy. 155 BELARUS Total Population 9.95 m Agriculture and Forestry in GDP 9.5% Agricultural output in 2001 as Rural Population 29.3 % Agriculture and Forestry in active percentage of 1990 level 73% labor 14.1% Livestock production in 2000 as Total Area 20.76 m ha Food and agriculture percentage of 1990 level n.a. Agriculture area: 8.99 m ha in exports 8.1% Share of livestock in agriculture 46.6% Arable land 63% in imports 12.1% · Share of private land in total Orchards 2% · agricultural land^ 15.6% Pastures/meadow 35% · Traditionally net exporter of · Share of private farms in total livestock products, potatoes, agricultural land 0.9% Forested 39% and flax. Share of private sector in total 39.4% agricultural output^ Note: All data are as of the end-2002, unless otherwise is stated. ^Refer to households' plots and private farms. ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 1. Macro-economic Agricultural markets are under Government Competitive and functioning agricultural Framework for Agriculture control. markets without Government intervention. · Progress in reforming the agribusiness sector in A. Prices/Subsidies · The further reduce the level of central and early 1990s was made at the national level by regional state orders imposed upon the farms for reducing and removing administrative controls the 2002 agricultural year to a limited number of over pricing, processing, procurement and commodities and eventually to phase out all state distribution. However, these early reforms have orders and place any necessary state procurement been reversed since 1995. on a competitive open bidding basis. · The Program of reform in Belarus' agri - · To liberalize all agricultural prices. industrial complex was approved by the Presidential Decree of May 14, 2001, and was · Loosen the hold of the regional administrations granted the status of a state program. The and their agriculture departments over enterprises Program acknowledges that Belarusian agriculture in the sector, in order to ensure that the state's is currently in crisis. The focus of agricultural decisions on price liberalization are respected. reform has been on the vertical integration of · Phase-out producer subsidies. producers and on streamlining the agro-service · Repeal the resolution requiring the delivery of a organizations. The goal of the reform is to limit certain share of produced livestock and milk losses and to gradually balance revenues and products to state owned facilities for processing expenditures. According to the Civil Code, and revoke the licensing requirement for direct kolkhoz is no longer acknowledged as a legal sale of these products. form. Kolkhozes must be transformed into a collective by July 2003. Sovkhozes will be · Eliminate all formal and informal barriers in transformed into a unitary company, later into a domestic trade. joint-stock company. · Whilst the average share of state orders in agricultural production is gradually reducing from more than 50% in 1998 to 11.6% in 2002 , for certain products the share of state orders remains high : up to 75% for flax fibre, 70% for sugar beet, 48% for rape seeds. · Prices of agricultural products, subject to delivery for republican needs are regulated by setting their minimum levels. During 2002 some liberalization of prices for agricultural products took place. 156 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS · Direct financial support of agriculture amounted to Rbl 630 bn (or about 2.5% GDP) in 2002. The republican budget contributed Rbl 130 bn , the agricultural fund financed by agricultural tax contributed Rbl 300 bn and the local stabilization funds provided Rbl 200 bn. The agricultural companies also benefited from debt restructuring. In April 2002, energy debts of Rbl 450 bn were restructured, with write-offs and repayments until 2006. An unspecified amount of banking debts were restructured as well. Although quasi-fiscal operations by the Central Bank (NBB) for support of agriculture had been eliminated in 2001, the burden had been shifted to commercial banks. B. Trade Policies · Requirements to register export contracts for · Refrain from intervening in agricultural import many agricultural and food products. Registration and export markets with the exception of for the current period is carried out only under interventions acceptable under the WTO. condition of the fulfillment of state orders in the previous period. · Eliminate minimum export price requirement. · Break up monopolistic trading organization. · Minimum export price are applied to selected food products (pork, beef, dry milk, skin of horned · Privatize all trading enterprises to eliminate cattle, flax fiber). The minimum export prices are implicit de facto price controls by state owners. not applied for exports to Russian Federation. · Imports of chemical means of crop protection is subject of licensing · On February 2001 the temporary (till September 2002) ban on imports of flour and processing of non-originated from Belarus flour without special temporary license. The ban was reintroduced for the period March-December 2003. · Surrender requirement exists for 30% of export earnings. C. Taxation · Overall tax on agricultural wages is 30.5%, less · Guarantee the consistency of agricultural profit compared to other sectors (36%). tax with the rest of businesses like food industry. · Agricultural enterprises are exempted from · Fair and non-discriminatory system of taxation. profit tax on agricultural production. Profit on non-agricultural activities (like processing) is levied at the same rate as on non-agricultural enterprises ­ 24% (before 2002 ­ 30%). Profit tax at rate 15% is applied to enterprises with annual balance profit no more than 5,000 minimum wages and number of employees industry - up to 200; science -up to 100; construction, other sectors of material production, catering and private services - up to 50; other sectors of non- material production ­ up to 25. · 15% payment from profits to the Centralization Fund of the Ministry of Agriculture had been cancelled in 1997. · Land tax is adjusted annually and set at about US$1.46/ha in 2001 and US$1.67/ha in 2002. 157 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 2. Land Reform and Farm Land reform and farm restructuring are still at A farming system based mainly on private Restructuring a very early stage. ownership of land and a working land market · Restructuring of large-scale farms still moves for efficient and fair asset transfer. very slowly (only about 358 large-scale farms or · Implement a consistent policy for restructuring 15% of their total number have been restructured and privatization of large collective and remaining so far). state owned farms. · Most state farms were transformed into · Develop and implement a consistent policy to collective agricultural enterpris es without privatize the land of large farms. changing their mode of operation. · Support emerging private fa rming and guarantee · The number of private farms is small and is fair conditions for those who wish to start decreasing since 1995: whilst in 1995 the number individual farming. of farms was 3029 it had been reduced to 2399 by · Allow downsizing of livestock sector. the beginning of 2003. Only about 1% of cultivated land belongs to farms. · Create the legal and technical conditions for a functioning market for agricultural land. · Housing and household land, about 15% of total · Develop mortgage procedures for land, other agricultural land, was given for full private ownership. real estate, and moveable assets. The mortgage law should allow lessees to mortgage their · Maximum private land ownership is 1 ha per leasehold interest. person, but it can be freely traded. · Adopt a resolution to establish a single registry · The rest of agricultural land remains in state of land and other real estate. ownership. · Develop an enabling environment to stimulate · Financial situation of agricultural enterprises has increased off-farm employment in rural areas. been worsening. More than 50% of total number of agricultural enterprises are loss-making. · Safeguard an acceptable level of rural social services during the period of restructuring and privatization of large-scale farms. 3. Competitive Little progress, as major privatization program Competitive, privately owned processing, input Agroprocessing and has yet to come. supply and service subsectors. Services for Agriculture · Majority of enterprises in the agriculture input · Implement an overall program of privatization and food marketing subsectors are still owned and without delay in agroprocessing and input supply. operated by the state-owned companies or by the · Demonopolize state corporations (associations) local municipality. and privatize them individually by plant or unit. · The privatization of agroprocessing and input · Open participation in privatization to all supply industries is at a standstill. As of end-2002, investors. about one quarter of total number of republican properties of these sectors had been transformed · Adopt anti-monopoly legislation. (corporatized) · Facilitate foreign investment by implementing foreign investment laws. · On communal level, 80% of agri-processing enterprises had been transformed (mostly, · Remove all explicit and implicit price controls corporized and some ­ privatized), over 50% of while assuring a competitive market structure. input supply enterprises had been transformed (practically exclusively by corporatization). · There is minimal foreign participation in the process of privatization. 4. Rural Financing The existing financial system subsidizes the Viable financial institutions efficiently serving agricultural sector. the agricultural sector. · Both primary agriculture and agroprocessing · Prepare an action plan to revitalize financial have serious liquidity crises and rely on services. Government credit and soft credit from the · Implement pilot projects to establish village banking system. 158 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS banking system. credit unions. · The effective private agricultural banking · Restructure Agrobank. system is absent. · Phase-out subsidized credits to agricultural producers. 5. Institutional Framework The role of the government in agriculture has Efficient and effective public sector not changed appreciably since the initiation of administration and support services. the reform. · Prepare and implement a program of re- · There have been only minor changes in the organization of public administration in Soviet type Government structure related to agriculture. agriculture. · Simplify the structure of governmental · The research/education system has not adjusted organizations corresponding to the reduced role of to emerging new conditions. the public sector responsibilities in agriculture. · Public activities (government research- · Review the agricultural education and research education) in agriculture are seriously hampered system. by budgetary difficulties. · Support the emergence of private farm advisory · A western type agricultural extension system services. does not exist. · Strengthen infrastructure and transportation systems in the rural areas. 159 160 C. STATISTICAL ANNEX Caucasus Armenia, Azerbaijan, Georgia Central Asia Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan Euro CIS Belarus, Moldova, Russia, Ukraine EU Accession (10) Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia Other Central Europe Albania, Bosnia, Croatia, Macedonia, Yugoslavia Turkey Turkey The source for all tables in the Statistical Annex: FAOstat [http://www.fao.org] 161 Table 1: Cereals Table 1a: Area of Cereals Cultivation[million ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 142.50 135.94 127.98 109.57 106.62 110.50 115.44 118.26 Total CEE + CIS 128.77 121.81 114.05 95.47 93.52 97.27 102.37 104.27 Total CEE 27.65 28.67 27.10 28.06 25.91 27.08 28.08 26.55 Total CIS 101.12 93.14 86.95 67.41 67.61 70.19 74.29 77.72 EU Accession (10) 23.85 24.68 23.49 24.19 22.42 23.44 24.07 22.97 Other CEE 3.80 3.99 3.61 3.87 3.49 3.65 4.01 2.09 Euro CIS 75.48 69.76 67.01 51.53 52.18 53.41 56.65 58.88 Caucasus 1.07 1.05 1.06 1.14 1.05 1.17 1.37 1.36 Central Asia 24.56 22.33 18.87 14.74 14.38 15.62 16.27 15.77 Turkey 13.73 14.13 13.94 14.10 13.10 13.23 13.08 13.98 World 709.15 695.65 707.03 680.23 670.51 669.90 667.51 658.22 Table 1b: Yields of Cereals [tons per ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 2.03 1.88 1.78 2.43 2.44 2.20 2.44 2.48 Total CEE + CIS 2.02 1.87 1.74 2.45 2.53 2.22 2.54 2.52 Total CEE 2.71 3.00 2.98 3.41 3.43 2.93 3.31 2.65 Total CIS 1.83 1.53 1.35 1.81 1.94 1.74 2.03 2.05 EU Accession (10) 2.66 2.94 2.93 3.29 3.22 2.89 3.31 3.37 Other CEE 3.08 3.36 3.32 3.53 3.63 2.98 3.30 3.68 Euro CIS 1.97 1.71 1.47 2.00 1.85 1.95 2.31 2.40 Caucasus 1.98 1.64 1.85 1.64 1.98 1.57 1.80 2.25 Central Asia 1.40 0.95 0.91 1.78 1.98 1.70 1.98 1.92 Turkey 2.12 1.91 2.11 2.35 1.98 2.11 1.96 2.28 World 2.78 2.81 2.93 3.06 3.10 3.07 3.09 3.08 Table 1c: Total Production of Cereals [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 289.16 255.22 227.94 218.92 220.51 214.57 271.83 280.87 Total CEE + CIS 260.01 228.21 198.59 185.74 194.55 186.69 246.26 248.93 Total CEE 75.07 86.07 80.85 90.45 86.84 71.35 93.57 88.98 Total CIS 184.94 142.13 117.74 95.29 107.71 115.34 152.69 159.95 EU Accession (10) 63.37 72.67 68.89 75.97 72.82 60.69 78.90 74.50 Other CEE 11.70 13.40 11.96 14.48 14.02 10.66 14.67 14.47 Euro CIS 148.38 119.11 98.53 79.54 83.35 94.69 129.44 130.77 Caucasus 2.13 1.71 1.96 1.85 2.16 2.07 2.82 3.25 Central Asia 34.43 21.31 17.25 13.90 22.21 18.58 20.43 20.42 Turkey 29.16 27.01 29.34 33.18 25.96 27.87 25.57 31.94 World 1972.99 1956.82 2069.50 2082.72 2081.58 2057.79 2061.79 2029.38 162 Table 2: Wheat Table 2a: Area of Wheat Cultivation [million ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 64.69 61.74 65.39 58.58 56.06 57.66 62.63 65.15 Total CEE + CIS 55.22 51.94 56.04 49.18 47.41 48.96 54.03 55.75 Total CEE 8.62 10.41 9.30 10.33 8.78 9.84 11.05 10.00 Total CIS 46.59 41.53 46.75 38.85 38.62 39.12 42.98 45.75 EU Accession (10) 7.43 8.89 8.20 8.93 7.69 8.59 9.60 8.77 Other CEE 1.19 1.52 1.09 1.40 1.09 1.25 1.45 1.23 Euro CIS 30.99 27.10 32.25 26.22 26.44 25.59 28.70 30.15 Caucasus 0.62 0.62 0.63 0.76 0.65 0.71 0.89 0.89 Central Asia 14.98 13.81 13.87 11.87 11.54 12.83 13.39 13.18 Turkey 9.47 9.80 9.35 9.40 8.65 8.70 8.60 9.40 World 222.46 215.16 229.68 220.07 212.53 213.20 212.20 210.59 Table 2b: Yields of Wheat [tons per ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 2.10 1.81 1.67 2.43 2.35 2.26 2.40 2.83 Total CEE + CIS 2.11 1.81 1.62 2.46 2.44 2.32 2.51 2.96 Total CEE 3.21 3.30 2.94 3.37 3.12 3.11 3.16 3.32 Total CIS 1.90 1.44 1.35 1.86 1.99 1.79 2.08 2.12 EU Accession (10) 3.23 3.29 2.97 3.35 3.14 3.17 3.38 3.59 Other CEE 3.10 3.36 2.71 3.39 3.10 3.04 2.94 3.18 Euro CIS 2.16 1.73 1.55 2.18 1.98 2.06 2.32 2.60 Caucasus 2.04 1.57 1.71 1.58 2.00 1.61 1.94 2.43 Central Asia 1.37 0.86 0.89 1.83 1.98 1.69 1.97 1.92 Turkey 2.04 1.79 1.98 2.23 1.91 2.01 1.86 2.23 World 2.54 2.45 2.54 2.69 2.76 2.74 2.71 2.72 Table 2c: Total Production of Wheat [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 135.68 111.60 109.11 112.21 110.86 110.98 141.81 151.99 Total CEE + CIS 116.36 94.08 90.60 91.21 94.36 93.48 125.81 130.99 Total CEE 27.70 34.35 27.36 35.22 29.14 30.72 37.95 33.98 Total CIS 88.67 59.73 63.24 55.99 65.23 62.76 87.86 97.00 EU Accession (10) 24.01 29.27 24.41 30.16 25.63 26.70 33.27 29.89 Other CEE 3.69 5.09 2.95 5.06 3.50 4.01 4.67 4.09 Euro CIS 66.93 46.87 49.85 43.65 46.09 46.28 69.93 73.38 Caucasus 1.28 0.98 1.08 1.20 1.31 1.42 2.03 2.28 Central Asia 20.46 11.88 12.31 11.14 17.83 15.07 15.90 16.39 Turkey 19.32 17.51 18.52 21.00 16.50 17.50 16.00 21.00 World 565.11 527.05 583.68 592.66 587.03 583.60 575.84 572.87 163 Table 3: Coarse Grains Table 3a: Area of Coarse Grains Cultivation[million ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 77.10 73.61 62.00 50.50 50.00 52.27 52.34 52.65 Total CEE + CIS 72.89 69.31 57.47 45.86 45.62 47.82 47.94 48.15 Total CEE 18.99 18.25 17.78 17.72 17.11 17.23 17.01 16.54 Total CIS 53.89 51.06 39.68 28.14 28.51 30.59 30.92 31.61 EU Accession (10) 16.39 15.78 15.27 15.25 14.73 14.84 14.45 14.20 Other CEE 2.60 2.47 2.51 2.47 2.39 2.39 2.56 2.34 Euro CIS 44.20 42.45 34.56 25.15 25.55 27.63 27.76 28.56 Caucasus 0.45 0.42 0.43 0.38 0.40 0.45 0.47 0.46 Central Asia 9.24 8.20 4.69 2.61 2.55 2.51 2.69 2.471 Turkey 4.21 4.29 4.53 4.64 4.37 4.45 4.40 4.49 World 339.45 333.44 327.10 308.64 301.34 302.69 304.12 300.47 Table 3b: Yields of Coarse Grains [tons per ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 1.96 1.93 1.89 2.36 2.42 2.13 2.37 2.30 Total CEE + CIS 1.94 1.91 1.86 2.32 2.49 2.11 2.42 2.30 Total CEE 2.49 2.83 3.00 3.41 3.55 2.81 3.35 3.30 Total CIS 1.75 1.58 1.34 1.58 1.78 1.64 1.80 1.95 EU Accession (10) 2.40 2.75 2.91 3.25 3.26 2.67 3.21 3.23 Other CEE 3.06 3.36 3.58 3.58 3.85 2.95 3.49 3.92 Euro CIS 1.82 1.69 1.39 1.88 1.75 1.90 2.23 2.25 Caucasus 1.90 1.75 2.03 1.54 1.97 1.42 1.64 2.66 Central Asia 1.39 1.04 0.89 1.33 1.62 1.60 1.54 1.87 Turkey 2.28 2.17 2.33 2.55 2.08 2.25 2.10 2.34 World 2.59 2.67 2.80 2.95 2.94 2.89 2.96 2.93 Table 3c: Total Production of Coarse Grains [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 151.22 141.88 117.26 105.22 108.04 102.05 128.36 127.44 Total CEE + CIS 141.59 132.58 106.71 93.35 98.92 92.04 119.15 116.89 Total CEE 47.26 51.68 53.43 55.19 57.66 40.59 55.58 54.96 Total CIS 94.33 80.90 53.28 38.16 41.26 51.45 63.57 61.93 EU Accession (10) 39.29 43.37 44.44 45.79 47.16 33.96 45.60 44.59 Other CEE 7.96 8.31 8.99 9.40 10.50 6.63 9.97 10.37 Euro CIS 80.61 71.63 48.21 35.41 36.75 47.74 58.91 56.82 Caucasus 0.85 0.74 0.88 0.64 0.83 0.63 0.75 0.95 Central Asia 12.88 8.53 4.19 2.11 3.68 3.08 3.91 3.74 Turkey 9.62 9.30 10.55 11.87 9.12 10.02 9.22 10.54 World 879.64 890.95 917.50 911.26 884.65 875.94 900.80 880.22 164 Table 4: Maize Table 4a: Area of Maize Cultivation[million ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 10.83 9.41 9.74 9.69 9.50 10.61 10.22 10.09 Total CEE + CIS 10.31 8.93 9.19 9.14 8.97 10.06 9.67 9.48 Total CEE 7.67 7.04 7.18 6.94 6.88 7.19 7.14 7.14 Total CIS 2.64 1.89 2.01 2.20 2.09 2.87 2.53 2.57 EU Accession (10) 5.46 4.97 5.09 4.91 4.90 5.21 4.98 4.99 Other CEE 2.21 2.07 2.09 2.04 1.98 1.99 2.16 1.91 Euro CIS 2.21 1.46 1.65 1.81 1.64 2.41 2.10 2.11 Caucasus 0.11 0.15 0.16 0.22 0.25 0.26 0.25 0.21 Central Asia 0.33 0.28 0.20 0.17 0.20 0.21 0.18 0.24 Turkey 0.52 0.49 0.55 0.55 0.53 0.55 0.55 0.60 World 137.06 138.43 139.41 138.79 138.37 138.07 137.86 138.75 Table 4b: Yields of Maize [tons per ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 2.83 3.20 3.43 3.31 3.51 2.93 3.48 3.86 Total CEE + CIS 2.75 3.17 3.42 3.14 3.45 2.76 3.42 3.70 Total CEE 2.78 3.41 3.68 3.88 4.20 3.14 3.75 4.00 Total CIS 2.68 2.24 2.49 2.65 2.96 2.50 3.19 3.30 EU Accession (10) 2.59 3.34 3.58 3.62 3.91 2.89 3.51 3.76 Other CEE 3.24 3.58 3.92 4.13 4.49 3.39 4.00 4.56 Euro CIS 2.55 2.10 2.40 2.48 2.48 2.58 3.46 3.07 Caucasus 2.29 2.42 3.21 2.54 3.25 1.96 2.43 3.30 Central Asia 3.72 2.92 2.70 2.92 3.14 2.96 3.69 3.40 Turkey 4.24 3.81 3.64 4.18 3.81 3.82 3.82 4.16 World 3.89 4.11 4.22 4.43 4.38 4.30 4.38 4.34 Table 4c: Total Production of Maize [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 30.62 30.13 33.42 33.75 38.60 28.03 36.37 39.72 Total CEE + CIS 28.39 28.28 31.42 31.45 36.60 25.93 34.27 37.23 Total CEE 21.32 24.05 26.40 26.07 31.32 18.39 27.55 28.73 Total CIS 7.08 4.23 5.02 5.38 5.28 7.54 6.72 8.49 EU Accession (10) 14.17 16.62 18.20 17.74 21.75 12.65 18.48 19.38 Other CEE 7.15 7.43 8.20 8.33 9.57 5.73 9.07 9.35 Euro CIS 5.62 3.06 3.97 4.37 3.96 6.45 5.67 6.92 Caucasus 0.25 0.36 0.51 0.45 0.60 0.34 0.34 0.43 Central Asia 1.21 0.81 0.55 0.56 0.72 0.75 0.70 0.90 Turkey 2.23 1.85 2.00 2.30 2.00 2.10 2.10 2.50 World 533.44 569.34 588.87 615.16 606.13 593.76 604.19 602.58 165 Table 5: Oil Crops Table 5a: Area of Oil Crops Cultivation[million ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 14.85 14.19 15.86 15.97 18.88 17.16 16.27 16.59 Total CEE + CIS 12.89 12.30 13.84 13.96 16.84 15.13 14.24 14.61 Total CEE 3.06 2.80 3.32 3.67 4.50 3.63 3.37 3.66 Total CIS 9.83 9.50 10.52 10.29 12.35 11.50 10.87 10.95 EU Accession (10) 2.62 2.44 2.89 3.27 4.02 3.16 2.89 3.26 Other CEE 0.44 0.36 0.43 0.40 0.48 0.47 0.48 0.43 Euro CIS 6.48 6.27 7.38 7.24 9.26 8.54 7.61 7.98 Caucasus 0.25 0.23 0.25 0.20 0.16 0.11 0.16 0.09 Central Asia 3.10 3.00 2.89 2.84 2.93 2.84 3.09 1.42 Turkey 1.97 1.89 2.02 2.02 2.03 2.03 2.03 1.97 World 188.36 199.42 203.42 216.36 222.91 221.11 223.31 220.78 Table 5b: Yields of Oil Crops [tons per ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 0.38 0.36 0.36 0.34 0.34 0.32 0.36 0.56 Total CEE + CIS 0.38 0.35 0.34 0.32 0.34 0.31 0.35 0.58 Total CEE 0.55 0.59 0.56 0.51 0.52 0.47 0.54 0.65 Total CIS 0.33 0.28 0.27 0.19 0.21 0.21 0.23 0.34 EU Accession (10) 0.56 0.60 0.56 0.57 0.57 0.55 0.61 0.70 Other CEE 0.52 0.51 0.56 0.44 0.47 0.39 0.48 0.50 Euro CIS 0.39 0.31 0.31 0.32 0.34 0.40 0.34 0.37 Caucasus 0.14 0.13 0.10 0.09 0.12 0.07 0.16 0.15 Central Asia 0.22 0.22 0.16 0.16 0.17 0.16 0.19 0.17 Turkey 0.38 0.43 0.48 0.48 0.36 0.36 0.36 0.47 World 0.42 0.44 0.46 0.47 0.49 0.50 0.50 0.51 Table 5c: Total Production of Oil Crops [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 5.71 5.10 5.64 6.06 7.20 6.49 5.87 6.98 Total CEE + CIS 4.95 4.29 4.68 5.09 6.46 5.75 5.13 6.04 Total CEE 1.69 1.64 1.87 2.12 2.65 1.88 2.14 2.27 Total CIS 3.26 2.65 2.81 2.96 3.81 3.87 2.99 3.77 EU Accession (10) 1.47 1.45 1.63 1.90 2.40 1.69 1.83 2.03 Other CEE 0.23 0.19 0.24 0.22 0.26 0.19 0.31 0.24 Euro CIS 2.53 1.95 2.31 2.45 3.21 3.36 2.36 3.19 Caucasus 0.03 0.03 0.03 0.02 0.03 0.01 0.03 0.02 Central Asia 0.69 0.66 0.47 0.50 0.57 0.49 0.61 0.25 Turkey 0.76 0.82 0.96 0.97 0.74 0.74 0.74 0.94 World 78.75 88.44 93.27 102.68 109.30 109.66 110.89 112.50 166 Table 6: Rape and Sunflower Seed Table 6a: Area of Rape and Sunflower Seed Cultivation [million ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 8.32 8.55 10.24 10.46 13.30 11.80 10.61 11.35 Total CEE + CIS 7.72 7.96 9.66 9.92 12.76 11.26 10.07 10.82 Total CEE 2.48 2.42 2.93 3.15 3.92 3.12 2.90 3.18 Total CIS 5.24 5.54 6.73 6.77 8.83 8.14 7.17 8.74 EU Accession (10) 2.21 2.20 2.66 2.94 3.67 2.91 2.64 2.97 Other CEE 0.27 0.22 0.27 0.21 0.26 0.20 0.26 0.20 Euro CIS 4.89 5.20 6.38 6.50 8.54 7.85 6.84 7.26 Caucasus 0.01 0.02 0.03 0.05 0.06 0.01 0.07 0.03 Central Asia 0.33 0.33 0.31 0.22 0.24 0.27 0.27 0.33 Turkey 0.61 0.59 0.58 0.55 0.54 0.54 0.54 0.54 World 38.29 41.35 42.23 46.63 51.15 46.86 42.46 41.25 Table 6b: Yields of Rape and Sunflower Seed [tons per ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 1.30 1.07 1.04 1.12 1.12 1.03 1.20 1.50 Total CEE + CIS 1.28 1.06 1.02 1.03 1.04 0.94 1.15 1.42 Total CEE 1.60 1.60 1.50 1.67 1.57 1.52 1.92 1.66 Total CIS 1.13 0.82 0.81 0.60 0.70 0.56 0.63 0.95 EU Accession (10) 1.58 1.59 1.47 1.55 1.58 1.42 1.69 1.72 Other CEE 1.75 1.71 1.79 1.79 1.56 1.62 2.15 1.47 Euro CIS 1.17 0.85 0.85 0.88 0.89 1.01 0.81 0.98 Caucasus 0.59 0.43 0.12 0.49 0.68 0.23 0.63 0.53 Central Asia 0.48 0.39 0.24 0.43 0.52 0.42 0.45 0.48 Turkey 1.56 1.26 1.36 1.58 1.48 1.48 1.48 1.48 World 1.26 1.25 1.31 1.31 1.41 1.40 1.36 1.36 Table 6c: Total Production of Rape and Sunflower Seed [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 10.81 9.18 10.65 11.63 14.73 13.35 11.54 13.84 Total CEE + CIS 9.86 8.44 9.87 10.77 13.93 12.55 10.74 13.04 Total CEE 3.96 3.87 4.40 4.93 6.18 4.47 5.04 5.33 Total CIS 5.90 4.57 5.47 5.84 7.75 8.09 5.70 7.40 EU Accession (10) 3.49 3.50 3.92 4.55 5.78 4.13 4.47 4.93 Other CEE 0.47 0.37 0.48 0.38 0.40 0.33 0.56 0.389 Euro CIS 5.74 4.43 5.39 5.72 7.59 7.97 5.54 7.49 Caucasus 0.01 0.01 0.00 0.02 0.04 0.00 0.04 0.02 Central Asia 0.16 0.13 0.07 0.09 0.12 0.12 0.12 0.19 Turkey 0.95 0.74 0.78 0.86 0.80 0.80 0.80 0.80 World 48.37 51.67 55.22 60.93 72.23 65.75 57.54 57.02 167 Table 7: Sugar Beets Table 7a: Area of Sugar Beet Cultivation[million ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 4.58 4.13 4.00 3.14 3.16 2.72 2.87 2.68 Total CEE + CIS 4.18 3.72 3.58 2.64 2.66 2.31 2.45 2.25 Total CEE 1.03 0.90 1.00 0.86 0.76 0.65 0.65 0.63 Total CIS 3.15 2.82 2.57 1.78 1.90 1.66 1.80 1.62 EU Accession (10) 0.91 0.81 0.91 0.77 0.66 0.58 0.56 0.56 Other CEE 0.12 0.09 0.09 0.09 0.10 0.07 0.09 0.08 Euro CIS 3.06 2.71 2.45 1.72 1.84 1.61 1.74 1.57 Caucasus 0.00 0.04 0.08 0.00 0.00 0.00 0.00 0.00 Central Asia 0.09 0.07 0.05 0.05 0.06 0.05 0.05 0.04 Turkey 0.40 0.41 0.42 0.51 0.50 0.42 0.42 0.43 World 8.42 8.01 7.71 6.78 6.62 5.95 6.11 6.04 Table 7b: Yields of Sugar Beets [tons per ha] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 22.11 20.54 23.40 22.96 24.03 23.03 25.13 26.14 Total CEE + CIS 20.58 19.33 22.10 18.74 20.06 19.56 22.07 26.03 Total CEE 26.54 29.53 36.20 29.86 29.77 25.52 31.51 33.20 Total CIS 18.64 16.06 16.59 11.32 13.59 15.58 15.78 20.50 EU Accession (10) 26.09 29.20 36.16 31.35 30.48 27.71 33.20 32.19 Other CEE 30.08 32.51 36.64 28.37 29.06 23.33 29.83 29.86 Euro CIS 18.78 16.48 17.19 20.10 18.07 23.63 21.19 21.95 Caucasus n.a. n.a. n.a. 5.11 12.82 13.43 13.37 13.30 Central Asia 14.13 8.42 11.10 8.76 9.87 9.68 12.77 11.87 Turkey 38.17 31.42 34.42 44.08 43.91 40.42 40.42 29.88 World 33.37 31.76 34.48 38.83 40.08 41.09 39.13 40.79 Table 7c: Total Production of Sugar Beets [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 101.15 84.92 93.55 83.32 81.11 70.92 76.79 96.99 Total CEE + CIS 86.03 71.97 79.01 61.03 59.11 54.07 59.94 58.37 Total CEE 27.28 26.69 36.33 31.02 26.50 22.65 26.26 25.19 Total CIS 58.75 45.28 42.68 30.02 32.61 31.42 33.68 33.17 EU Accession (10) 23.78 23.71 32.85 27.69 22.85 20.98 22.60 21.83 Other CEE 3.49 2.98 3.48 3.33 3.65 1.67 3.66 3.36 Euro CIS 57.42 44.69 42.10 29.20 31.49 30.51 32.65 32.16 Caucasus n.a. n.a. n.a. 0.04 0.07 0.07 0.07 0.07 Central Asia 1.31 0.57 0.53 0.77 1.06 0.83 0.96 0.89 Turkey 15.13 12.94 14.54 22.28 22.00 16.85 16.85 13.00 World 280.98 254.35 265.93 263.14 265.47 244.48 239.09 246.47 168 Table 8: Milk Table 8a: Number of Milk Cows [million head] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 58.16 56.12 51.33 44.61 43.29 43.15 42.25 40.44 Total CEE + CIS 52.09 50.04 45.36 39.13 37.79 37.65 36.75 35.35 Total CEE 12.39 11.06 10.45 9.63 9.39 9.01 8.94 8.65 Total CIS 39.69 38.98 34.91 29.49 28.40 28.64 27.82 26.70 EU Accession (10) 10.27 8.91 8.31 7.50 7.44 7.00 6.93 6.83 Other CEE 2.12 2.16 2.14 2.13 1.95 2.00 2.00 1.81 Euro CIS 31.15 29.99 26.44 22.21 20.95 20.91 20.09 18.78 Caucasus 1.53 1.47 1.58 1.70 1.76 1.92 1.91 1.95 Central Asia 7.01 7.52 6.89 5.58 5.70 5.81 5.82 3.57 Turkey 6.07 6.08 5.97 5.49 5.50 5.50 5.50 5.08 World 226.34 226.65 230.95 223.50 222.65 223.60 223.26 224.61 Table 8b: Cow Milk Production [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 128.85 119.71 108.43 104.68 103.03 101.17 102.68 105.49 Total CEE + CIS 120.13 110.58 98.96 95.85 94.23 92.37 93.88 97.00 Total CEE 34.72 31.78 31.72 32.75 32.48 31.75 32.02 31.92 Total CIS 85.41 78.79 67.24 63.10 61.75 60.63 61.86 65.08 EU Accession (10) 31.09 28.22 27.80 28.57 28.51 28.04 28.31 28.02 Other CEE 3.62 3.56 3.92 4.18 3.97 3.71 3.71 3.89 Euro CIS 72.98 66.29 56.76 52.31 50.42 48.91 50.06 52.75 Caucasus 1.62 1.59 1.79 2.00 2.09 2.11 2.13 2.33 Central Asia 10.81 10.91 8.70 8.79 9.23 9.61 9.68 6.45 Turkey 8.72 9.13 9.47 8.83 8.80 8.80 8.80 8.49 World 460.53 461.14 469.57 478.62 483.37 489.81 494.61 502.32 169 Table 9: Ruminant Meat Table 9a: Total Number of Cattle [million head] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 147.33 133.82 114.59 96.75 91.26 87.69 86.52 84.87 Total CEE + CIS 135.36 121.91 102.81 85.57 80.23 76.79 75.72 74.32 Total CEE 28.39 23.38 21.34 20.21 19.44 18.28 17.86 16.88 Total CIS 106.97 98.53 81.46 65.36 60.78 58.51 57.86 57.43 EU Accession (10) 24.43 19.56 17.55 16.44 15.72 14.93 14.23 13.72 Other CEE 3.96 3.82 3.79 3.77 3.72 3.35 3.63 1.44 Euro CIS 85.98 77.29 63.03 49.63 45.34 42.87 41.84 41.02 Caucasus 3.60 3.05 3.15 3.34 3.43 3.55 3.67 3.71 Central Asia 17.39 18.19 15.28 12.39 12.01 12.09 12.35 12.41 Turkey 11.97 11.91 11.79 11.19 11.03 10.90 10.80 10.92 World 1,302.571,318.49 1,331.83 1331.24 1332.21 1342.79 1351.89 1366.66 Table 9b: Total Number of Sheep and Goats [million heads] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 222.96 197.63 152.02 122.30 117.00 116.76 116.97 11.26 Total CEE + CIS 171.77 149.96 109.12 83.68 79.51 79.27 79.48 78.67 Total CEE 36.91 30.25 27.09 24.11 23.29 22.54 22.10 20.66 Total CIS 134.86 119.71 82.03 59.57 56.22 56.73 57.38 57.95 EU Accession (10) 27.16 19.85 17.76 15.58 14.96 14.46 13.99 13.39 Other CEE 9.74 10.40 9.33 8.53 8.33 8.09 8.11 4.29 Euro CIS 64.81 52.32 33.81 22.45 18.85 18.82 18.62 18.29 Caucasus 7.82 6.23 5.97 6.64 7.36 7.71 7.14 7.77 Central Asia 62.24 61.15 42.25 30.48 30.01 30.19 31.62 30.16 Turkey 51.20 47.67 42.90 38.61 37.49 37.49 37.49 37.48 World 1,751.991,756.791,766.63 1751.72 1767.33 1781.75 1750.78 1748.84 Table 9c: Total Production of Ruminant Meat [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 10.97 9.85 8.13 7.15 6.56 6.50 6.51 6.25 Total CEE + CIS 10.30 9.16 7.46 6.42 5.82 5.76 5.77 5.57 Total CEE 2.38 1.86 1.67 1.46 1.36 1.30 1.22 1.19 Total CIS 7.93 7.30 5.79 4.95 4.46 4.46 4.55 4.37 EU Accession (10) 2.00 1.49 1.27 1.20 1.13 1.06 0.98 0.97 Other CEE 0.38 0.37 0.40 0.26 0.24 0.24 0.24 2.23 Euro CIS 6.23 5.48 4.26 3.54 3.11 3.09 3.11 29.89 Caucasus 0.17 0.15 0.17 0.17 0.16 0.18 0.25 0.19 Central Asia 1.53 1.67 1.36 1.24 1.18 1.19 1.19 1.18 Turkey 0.67 0.69 0.67 0.73 0.73 0.74 0.75 0.68 World 62.90 63.52 64.81 65.77 67.40 68.00 68.08 72.52 170 Table 10: Pork Table 10a: Total Number of Pigs [million head] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 124.90 103.21 91.22 79.57 80.64 77.32 71.96 72.05 Total CEE + CIS 124.89 103.20 91.22 79.57 80.63 77.31 71.96 72.05 Total CEE 59.94 50.29 48.04 46.75 47.19 42.95 41.36 41.89 Total CIS 64.94 52.91 43.18 32.82 33.44 34.36 30.60 30.15 EU Accession (10) 54.07 44.75 41.96 41.01 41.02 37.25 35.39 36.39 Other CEE 5.88 5.55 6.08 5.74 6.17 5.70 5.96 9.12 Euro CIS 59.68 49.20 40.68 31.31 31.84 32.64 28.75 28.23 Caucasus 1.09 0.49 0.46 0.41 0.48 0.50 0.52 0.54 Central Asia 4.17 3.21 2.03 1.10 1.13 1.22 1.33 3.15 Turkey 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 World 869.80 883.02 859.34 876.22 905.73 910.35 927.52 1205.65 Table 10b: Total Production of Pork [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 10.60 8.48 8.44 7.83 7.83 7.61 7.32 7.19 Total CEE + CIS 10.60 8.48 8.43 7.83 7.83 7.61 7.31 7.19 Total CEE 5.83 4.89 5.40 5.10 5.13 4.82 4.56 4.39 Total CIS 4.78 3.59 3.03 2.73 2.71 2.80 2.75 2.80 EU Accession (10) 5.08 4.22 4.59 4.39 4.40 4.08 3.88 3.74 Other CEE 0.74 0.67 0.81 0.71 0.73 0.74 0.68 0.65 Euro CIS 4.40 3.33 2.83 2.55 2.51 2.57 2.53 2.53 Caucasus 0.08 0.06 0.05 0.05 0.05 0.04 0.05 0.04 Central Asia 0.30 0.20 0.15 0.13 0.15 0.18 0.17 0.23 Turkey 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 World 72.91 77.71 78.54 87.62 88.76 89.61 91.96 94.18 171 Table 11: Poultry Table 11a: Number of Poultry [billion head] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 1.64 1.41 1.13 1.09 1.14 1.14 1.12 1.09 Total CEE + CIS 1.50 1.23 0.99 0.91 0.90 0.89 0.88 0.87 Total CEE 0.38 0.30 0.31 0.30 0.30 0.29 0.30 0.27 Total CIS 1.12 0.93 0.68 0.61 0.60 0.60 0.58 0.60 EU Accession (10) 0.32 0.25 0.26 0.25 0.25 0.24 0.26 0.23 Other CEE 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 Euro CIS 0.96 0.81 0.61 0.54 0.53 0.53 0.51 0.56 Caucasus 0.04 0.03 0.03 0.03 0.03 0.03 0.03 0.03 Central Asia 0.12 0.09 0.04 0.04 0.04 0.04 0.04 0.04 Turkey 0.15 0.18 0.14 0.18 0.24 0.24 0.24 0.24 World 12.51 13.69 14.84 14.58 15.29 15.86 16.24 16.32 Table 11b: Production of Poultry Meat [million tons] 1992 1994 1996 1998 1999 2000 2001 2002 Total ECA (CEE+CIS+Turkey) 4.33 3.60 3.21 3.46 3.70 3.74 3.90 4.33 Total CEE + CIS 3.89 3.11 2.77 2.95 3.04 3.08 3.24 3.71 Total CEE 1.54 1.51 1.71 1.89 1.92 1.94 2.08 2.28 Total CIS 2.35 1.60 1.07 1.05 1.11 1.14 1.16 1.42 EU Accession (10) 1.37 1.34 1.52 1.73 1.77 1.79 1.93 2.13 Other CEE 0.17 0.16 0.18 0.16 0.15 0.15 0.15 0.15 Euro CIS 2.09 1.45 0.98 0.97 1.03 1.04 1.05 1.32 Caucasus 0.05 0.03 0.03 0.03 0.03 0.03 0.04 0.04 Central Asia 0.21 0.12 0.06 0.05 0.06 0.06 0.06 0.06 Turkey 0.44 0.49 0.44 0.51 0.66 0.66 0.66 0.63 World 45.31 50.63 56.06 62.01 65.27 67.58 68.84 73.87 172 Other Working Papers in this Series This paper is the thirty-seventh in a series of papers published by the ECA Environmentally and Socially Sustainable Development Unit. For additional information on this, or forthcoming papers in the series, please contact Ms. Maria Gabitan at (202) 458-1213. ECSSD Working Paper #1: Agricultural Reforms and Protection of Sensitive Ecosystems: A Challenging Agenda for Slovenia - April 2, 1998 ECSSD Working Paper #2: Agricultural Research in Central and Eastern Europe and the Former Soviet Union: Issues in Transition - April 2, 1998 ECSSD Working Paper #3: Irrigation Development in Eastern Europe and the Former Soviet Union ­ June 8, 1998 ECSSD Working Paper #4: Estimating Industrial Pollution in Latvia ­ July 28, 1998 ECSSD Working Paper #5: The Estonian Rural Sector: The Challenge in Preparing for EU Accession ­ August 10, 1998 ECSSD Working Paper #6: Rural Development in Eastern Europe and Central Asia: Progress to Date and Strategic Directions for ECA ­ August 17, 1998 ECSSD Working Paper #7: Agricultural Price Policy Impacts in Poland ­ October 20, 1998 ECSSD Working Paper #8: Northern Poland Regional Development: Review of Initial Results and Participatory Process ­ January 15, 1999 ECSSD Working Paper #9: Hungary: A Successful Agriculture and Food Economy in Constant Search For Higher Competitiveness ­ January 15, 1999 ECSSD Working Paper #10: Agricultural Higher Education in Transforming Central and Eastern Europe ­ January 27, 1999 ECSSD Working Paper #11: A Guide to Competitive Research Grant Schemes for Agriculture in ECA Countries ­ February 11, 1999 ECSSD Working Paper #12: Older People in Transition Economies: An Overview of their Plight ­ April 21, 1999 ECSSD Working Paper #13: The Agrarian Economies of Central and Eastern Europe and the Commonwealth of Independent States ­ April 26, 1999 ECSSD Working Paper #14: Poland: Complying with EU Environmental Legislation ­ June 10, 1999 ECSSD Working Paper #15: Belarus: Agricultural Policy Update ­ June 28, 1999 ECSSD Working Paper #16: Lithuania: Adjustments of Agricultural and Trade Policies ­ June 28, 1999 ECSSD Working Paper #17: Armenia's Private Agriculture: 1998 Survey of Family Farms ­ September 1, 1999 ECSSD Working Paper #18: Romania: Forestry Sector: Status, Values, and the Need for Reform ­ October 10, 1999 ECSSD Working Paper #19: Kosovo: Relaunching the Rural Economy ­ November 5, 1999 ECSSD Working Paper #20: Ukraine: Privatization and Corporate Governance in the Agroprocessing Sector ­ Status and Critical Constraints in 1998 - December 1, 1999 ECSSD Working Paper #21: The Slovak Republic: Grain Market Policy and Accession to the European Union ­ January 3, 2000 ECSSD Working Paper #22: Kosovo: Damage Assessment in Agriculture ­ May 5, 2000 ECSSD Working Paper #23: Structural Change in the Farming Sectors in Central and Eastern Europe: Lessons for EU Accession ­ Second World Bank/FAO Workshop July 27-29, 1999 ­ Country Case Studies ­ March 20, 2000 ECSSD Working Paper #24: The Agrarian Economies of Central- Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress ­ June 3, 2000 ECSSD Working Paper #25: A Review of the Grain Marketing Sector in Kazakhstan and Ukraine: Constraints Confronting the Future Development of the Sector ­ June 29, 2000 ECSSD Working Paper #26: Georgia: A Update of Agricultural Developments ­ July 31, 2000 ECSSD Working Paper #27: Farm Debt in the CIS: A Multi-Country Study of Major Causes and Proposed Solutions ­ Moldova Country Study ­ September 19, 2000 ECSSD Working Paper #28: Farm Debt in the CIS: A Multi-Country Study of Major Causes and Proposed Solutions ­ Ukraine Country Study ­ September 26, 2000 ECSSD Working Paper #29: Cultural Assets in Support of Transition in the Europe and Central Asia: An Operational Perspective, January 17, 2001 ECSSD Working Paper #30: Bulgaria: The Challenges of Complying with EU Environmental Directives, March 29, 2001 ECSSD Working Paper #31: The Agrarian Economies of Central-Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress in 2000, May 25, 2001 ECSSD Working Paper #32: Conflict and Changes in Kosovo: Impact on Institutions and Society, June 7, 2001 ECSSD Working Paper #33: Mountain Rangeland and Forest Sector Note, September 10, 2001 ECSSD Working Paper #34: Knowledge Transfer in Agriculture and Rural Development: Four Western European and North American Case Studies, December 3, 2001 ECSSD Working Paper #35: Armenia: Towards Integrated Water Resources Management, February 7, 2002 ECSSD Working Paper #36: The Agrarian Economies of Central - Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress in 2001, June 25, 2002 ECSSD Working Paper #37: The Agrarian Economies of Central - Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress in 2002, June 23, 2003