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COPAC Open Forum
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The Rural Development Division (SDA), Rome and the FAO Subregional Office for Central and Eastern Europe (SEUR), Budapest, Hungary have launched a joint project, entitled Institutional Patterns of Rural Development in the Countries of Central and Eastern Europe. The project is financed by SDA and SEUR from their Regular Programme funds.
The project focuses on the institutional aspects of rural/agricultural development, including the following, closely interrelated technical areas: the status of land transactions, land tenure types, farm management types, (private, cooperative, corporate, etc.) and non-agricultural rural institutions/oragnizations, (off-farm income generating institutions, service providers, etc.) The long term objectives of the project is to develop post-transitional institutional models of rural development for the specific conditions of the former centrally planned economies of Central and Eastern Europe.
The project is being implemented in two phases. Phase 1 was carried out from November 1998 to July 1999 and aimed to assess the present status of institutional changes, and national institutional policies/strategies and establish institutional development patterns in selected pilot/strategic countries. It covered four countries in the sub-region, representing a cross-section of all former centrally planned economies in CEE. In the framework of the project country studies were prepared by national authors from Hungary, Lithuania, Poland and Romania.
This first "pilot" phase is scheduled to be followed by an implementation phase during which the programme will be extended to further countries and will conclude in the preparation of a normative output to serve, inter alia, as a basis for future FAO assistance in the sub-region. However, the methodolgy and final work programme for Phase 2 will be designed based on experiences gained through Phase 1, which requires a thorough and consolidated assessment of the four country studies prepared so far and preparation of a revised concept paper and schedule of activies for follow-up.
This report summarizes the findings of the four country studies mentioned above, with particular emphasis on institutions that have a direct bearing on cooperative development in the recspective countries.
As part of the transition from a centrally planned to a market oriented economy, the Governments of all four countries decided to abolish landed property of the state and collective farms soon after they had opted for the introduction of market economic principles. While each country applied different procedures to achieve this objective, it can be genarally stated that the privatization of landed property and the development of land markets has not been implemented in a well designed, systematic manner. In all four countries under review the Governments have frequently introduced changes and amendments to legal provisions regarding land transactions which indicates their lack of experience in market economy and perhaps their incapacity to conceive the implications of their political decisions.
Without discussing the process of reform implementation, the effects of the adjustment process on the land tenure structures of the countries concerned can be summarized as follows:
In Hungary, the polarized agrarian structure with the preponderance of large-scale farms, the existence of a large number of fragmented dwarf holdings and the lack of medium-sized farms has been maintained. There are about 2 600 large scale farms with an average size of 1 800 ha which cultivate 52 % of the agricultural land. The remaining 48 % belong to the private farm sector and are owned by 1.8 million households. Eighty percent of them own less than 1 ha.
In Poland, structural transformation of arable land (mainly in the form of lease arrangements) embraced more than 4.5 million ha, i.e. 24 % of all arable land. The transformation process created a potentially strong sector of privately managed large scale farms, covering at present about 12 % of arable land. The peasant farm sector which covers 82 % of arable land increased its area by only 2.4 % through purchase or lease of land. The main purchasers were small and very small farmers. The major reason for this development is the lack of interest of peasants in increasing the area of their farms which in turn may be explained by the low efficiency of the agricultural sector, i.e. the high costs of inputs compared to the low prices obtained for agricultural products.
In Lithuania, the abolition of the state and collective farm sector was achieved rather rapidly covering by January 1993 some 80 % of this property. As a result of the privatization process, 196 000 family farms were established until early 1997. Their number is constantly growing. In the course of privatizing the property of large scale enterprises by creating shareholding companies and distributing shares to its former operators, a total of 4300 agricultural companies had originally been created, however, their number is constantly decreasing and in early 1998 amounted to only 1 800. The majority of these companies were liquidated by the decision of the shareholders to cease activities. Following the enactment of a new law in 1997, members of agricultural companies are encouraged to establish family farms and their number is expected to increase.
In Romania, the Land Law of 1991 established two types of land ownership; namely that of the private sector, administering 12.3 million ha agricultural land and that of the state sector which manages 2.4 million ha. The private sector is composed of a) family farms with an average size of 2.3 ha, covering more than three quarters of private property land, b) land of family associations with an average size of 132 ha and c) land of legal associations with a size of 435 ha. There is a high share of subsistence farms with less than 3 ha (72 % of all private farms) and a low share of farms larger than 10 ha (0.3 %). The largest part of the land of the state sector is managed by joint stock commercial companies in which the state has the majority of the share capital. They have an average size of 3 370 ha. These companies are in a difficult financial and technical situation and most of the private 250 000 shareholders do not receive the dividends to which they are entitled.
The development of land markets is equally heterogeneous. As a general trend, it can be observed that the introduction of private land ownership enabled the creation or, in the case of Poland, the reinforcement of such markets.
In Hungary, an unlimited land market was established in 1989 and allowed a group of capital owners to purchase public land at low prices. The land lease market is well developed. Some 52 % of the land fund is cultivated by legal entities on a lease basis.
The land market in Lithuania is in its initial stages. The size of holdings sold is usually small amounting to an average of 2.6 ha. Active trade takes place in areas close to cities and in attractive locations. Because of legal limitations juridical persons, i.e. larger agricultural enterprises cannot become land owners. They can, however, resort to the land lease market which is well developed and more active than the land sale market. Some 440 000 land use units have been established on leased state land covering 43 % of all agricultural land.
In Poland, the formation of a land market is influenced by an oversupply of land resulting from the liquidation of state farms. This applies in particular to regions with a large share of state farms. As a result, quite a specific land market emerged dominated more by administrative decisions and rules, rather than by market principles and mechanisms. The process of complete privatization embraced only about 15 % of big farms land, while the rest is not yet covered by the privatization process and so far, only private management of farms has been achieved. In recent years, however, the situation has undergone important changes. The process of transformation of state farms is coming to an end and an effective land market begins to gain importance.
The land market in Romania has started to operate legally only in 1998. The average size of land sale-purchase contracts is 1.3 ha. Land prices are relatively low due to a general lack of interest in buying land, the low price for agricultural products and the lack of capital and credit for buying land.
Economic activities of rural populations are becoming increasingly diversified in the countries of CEE. According to the country study of Poland, a particular feature of contemporary agriculture, mainly of developed countries is the process of "disagrarisation" of the national economy on the one hand, and the "explosion" of rural areas economy and a development of various forms of economic activity related and unrelated to agriculture on the other. Although Poland, as a result of the socialist agricultural policies, remains undoubtedly far behind in the process of disagrarisation of the national economy, these processes resulting from the logic of functioning of modern economic systems take place in the Polish economy as well and the systemic transformation of the nineties brought about their dramatic acceleration.
In Lithuania, nearly 90% of rural dwellers are involved in agriculture. Nevertheless a considerable part of them obtain additional income from other activities, the majority of whom are owners of small, up to 5 ha, plots. About 49% of non-farm enterprises in rural areas are involved in trade and public catering. In many places, rural crafts based on local raw materials prevail. In the terms processing, the most important activities are slaughtering, meat processing and timber processing. These activities are mainly carried out by small enterprises with the average number of up to five employees. The development of non-agricultural enterprises in rural areas are influenced by geographic location, natural features, self-government institutions, business infractructures and other factors. However, suburban areas have the largest number of such enterprises because of a larger market and the convenience of arranging administrative formalities of enterprise registration. Similarly, in the regions with soils of low fertility, rural people are more inclined to diversify their activities. It is important to note that these small enterprises use primitive ways of input supply and selling their products mainly due to lack of appropriate organizations. In an attempt to avoid the involvement of middlemen, they sell directly to consumers or through retail trade channels and public markets.
Services are generally underdeveloped and service providers are missing in the rural areas of CEE countries. In Hungary, the Ministry of Agriculture, realizing the importance of the demand of private farms for services and the necessity of the improvement of production standard, encourages the re-launching and extension of integration activities by large-scale farms, promotes the organization of marketing and purchasing co-operatives based on the initiatives of private producers and has established and operates a consulting network covering the entire country.
The consulting (extension network was set up in 1994 with the aim to provide farmers with adequate information regarding the establishment and running private farms, including both technological and other production related questions and information about tender possibilities
In Hungary, the consulting (extension) service is provided by a dual system. Basic services are provieded free of charge financed from the state budget. This network was initially operated by the Ministry of Agriculture, later by the Chamber of Agriculture. Recently it has been managed by the Ministry of Agriculture and Rural Development and has an extended scope activities. Services are carried out by agricultural experts with a university degree called village agronomists. Consulting operates on a territorial basis. One village agronomist usually covers 1 to 8 settlements. At present, the network is composed of 650 individual village agronomists.
In addition, there also exists a private consulting network. This includes experts listed in the Directory of Consultants who carry out their services for compensation as entrepreneurs. The costs of the services are partly reimbursed by the state budget. Until 1995, this cost refund was only available for registered private and corporate agricultural but it has now been extended to small-scale agricultural producers as well.
Besides the above, the Ministry of Agriculture and Rural Development subsidizes secondary schools and universities of agriculture in modernizing their tuition system and teaching material so that students could obtain knowledge corresponding to the transformed circumstances. The role of educational institutions is also very important in extension proper. The development of village tourism -especially agro-tourism- is a relatively new field which, since 1997, has been treated as one of the most important tasks of rural development. At present, the Ministry subsidizes advertising activities and special consulting on this field.
The report form Lithuania focuses on non-farm services in rural areas. In this respect, the majority of servicing enterprises are involved in car repair and maintenance. There are few enterprises providing services for family life which is explained by low population density and low purchasing power in rural areas. In the course of the economic reform, significant changes in rural social infrastructure have occured. First of all many services of rural social infrastructure (with the exception of education and health care) were privatized and not all of the new owners managed to ensure an efficient functioning of these services. As a result, their activities were ceased or changed. The number of shops, baths and enterprises providing services for family life has decreased. The number of pupils in village schools is decreasing. Provision of public transport for rural dwellers goes into decline.
In Romania, the collapse of the centralized and planned economy has also generated a strong economic, social and mainly institutional crisis in all sectors. The institutional crisis contributed to the delay of many expected reforms. From an institutional point of view, rural development problems are quite dispersed and they are indirectly approached by a series of government structures: the Department for Local Public Administration; the Department of economic reform monitoring within the Council for Reform concentrating on macro-economic and structural problems; the Romanian Development Agency, responsible for foreign investment promotion and elaboration of policies for small and medium - sized companies development; the Ministry of Agriculture and Food; the Ministry of Public Works and Territory Planning for developing local infrastructure in conformity with territory planning programs. At the same time, local problems are also dealt with by certain decentralized/local public services, subordinated either to the Ministry of Agriculture and Food or other local government agencies co-ordinated by the county prefectures. However, the role of all these structures is rather limited due to the lack of well-defined and coherent objectives regarding rural development and to the lack of communication among various institutions concerned. Nevertheless, some good results have also been obtained during institutional reforms in Romania, such as a number of partnership structures established mainly foreign assistance.
Generally speaking, the countries of CEE are caracterised by two types of civil society organizations: On one hand, a significant number of old organizations survived and operate, although to a larger or lesser extent reformed, under the new conditions. On the other hand, an increasing number of new organizations emerge with a great variety of activities.
After restoration of independence in Lithuania, more than 40 different membership based agricultural, food producer and specialist professional unions, associations and societies have been established. Some of them are newly founded, others continue activities and traditions of rural organizations that were functioning before. The Lithuanian Farmers' Union is the main organization representing the interests of farmers. It unites about 40 thousand farmers. The Union has its own structural subdivisions in districts and provides its members with information and consultations. The Lithuanian Association of Agricultural Companies represents the interests of agricultural companies and enterprises, takes care of the improvement of their activities, education and management skills. The members of the Association are the strongest and most efficient agricultutal enterprises. The Lithuanian Confederation of Agricultural Trade Unions had nearly 30 thousand members at the beginning of 1995. Since then, however, their membership has decreased. Meat, milk, grain, sugar and food production enterprises, growers of certain agricultural crops and animals, agros-ervice and land reclamation enterprises have also united into associations. The unions have been established by agricultural engineers, agronomists, zootechnicians, beekeepers, economists and land owners. Individuals and farmers have set up societies to facilitae exchange of information on the production of specific productsa such as caraway, cranberries, mushrooms, herbs, strawberries, snails, quails, rabbits, etc. The number of their members is not exactly known because some farmers participate in the activities of several organizations.
In Hungary, establishment of working committees exploring and mediating the special problems of rural territories and representing their interests is encouraged. Such committees, together with rural development organizations at different levels are supposed to participate as equal partners in the preparation and implemenation of rural development programmes. The rural development working committees will also develop close collaboration with sub-regional development associations established at the beginning of the 90s. These organizations, established mainly on the initiative of local governments of settlements, have already prepared and carried out several rural development programmes. This is in line with the aims of the Government to build rural development on local initiatives.For the realization of this objective, the civil society organizations, whose number has been increasing and scope of activities expanding, have a significant role to play. One of the positive examples is the"Village Parliament" established on the initiative of several civil organizations. Local Governments, organizations of sub-regions, counties and regions are represented in the Village Parliament. Another initiative is the Hungarian Telehouse Association which is of special importance in improving the flow of information in small settlements and villages. One further field of operation of civil organizations is the development of backward sub-regions in critical position, aiming to establish local enterprises and create workplaces as well as strengthen village communities (e.g. Csereháti Association). Initiatives to revitalize and maintain cultural traditions are also very successful. In many settlements, there are non-profit organizations subsidized by local Governments serving social functions.
Romania considers that a modern democratic society presupposes the existence of a pluralistic system of institutios. This was the main reason for the establishment of the Foundation for Civil Society Development (FCSD) in 1994 as non-government organization. The Foundation's mission is to contribute to civil society development in Romania through the support to NGOs. For accomplishing its mission and goals, FCSD developed four programs: Funding Program, Centre for NGO Development, Training and Development Program and Research Program.
In 1998, the Centre of Resources for NGOs was established with PHARE assistance, through FCSD and in partnership with the Farmers' Association of Romania, the Private Farmers' Federation and the Romanian Society of Horticulturists. Among the actions undertaken by the Centre of Resources for NGOs, 294 NGOs or NGO branches from the rural have been identified for support at national, county and local levels. Rural NGOs are involved in a great variety of activities in Romania and include associations for livestock raising; crop growing; processing of raw materials; food industry; milling and bakery; agricultural services; rural economic development activities; partnership activities; soil protection and conservation; protection and conservation of forests and waters; agricultural training and consultancy in agribusiness.
The most important rural NGOs and their main activities are as follows: The Farmers' Association of Romania, established in 1996, is meant to protect private farmers´ interests for the development of crop and livestock production and to promote the marketing of surplus products at profitable prices. As a young organization, the Association is still in the process of development and consolidation taking place "bottom-up" determined by farmers´ needs. At present, the association has branches in 34 counties and it has about 800 members (natural and legal persons). The Federation of Private Farmers of Romania (FAPR) was established in 1991 to help consolidate private agriculture in the country.Members affiliated to FAPR account for 45% of agricultural land. The Romanian Livestock Society aims to contribute to livestock development by periodical sector analyses and organization of round tables, workshops, livestock fairs. The Federation of Mountain Farmers-Dorna supports households in the mountaineous areas through maintaining stores with low-price merchandise, granting mutual aid for investments, purchasing agricultural machinery, organizing local handicraft activities for women and providing machinery services for farmers. The General Association of Cattle Breeders of Romania promotes the introduction of modern technologies in cattle raising, establishment of profitable small and medium-sized farms and organizes livestock fairs and auctions. The Romanian Society of Horticulturists,with branches in 39 counties, safegurds horticulturists' and vine-grower' rights, stimulates private initiative, disseminates documentation and information on horticultural management and marketing, organizes professional training courses, fairs, exhibitions, contests and workshops. The National Association of Landowners and Shareholders endeavours to improve legislation, facilitate the procurement of equipment, animals, seeds, fertilizers and organize young farmers' agricultural practice abroad. The National Association of Milling and Bakery Industries contributes to development of private milling and bakery sector, elaborates studies and projects, provides consultancy and other services and promotes co-operation with foreign partners. The Society of Agriculture Without Frontiers, in view of EU integration of the Romanian agriculture, supplies information for private farmers and facilitates contracts with foreign companies. Last but no least, the Foundation for Rural Associations promotes the development of a modern co-operative system in agriculture providing legal, technical and economic assistance to private farmers in the process of establishing co-operatives.
The most general observation one can make in reviewing the above, is the fact that not much has been said about cooperatives. This is in part explained by general nature of the FAO project that aims to cover the broadest range possible of rural institutions and does not specifically focus on cooperatives. However, even if we take this into due consideration, it is rather evident from the four country studies that cooperatives have lost relative significance in the sub-region in particular in comparison with their roles in the former centrally planned economies of the countries in question. The explanation for this situation is obviously much more complex than just the overall scope of the study.
No doubt, one of the reason is that many old cooperatives, in particular, large scale cooperative farms have been either dissolved or transformed even if they remained "corporate" enterprises, such as limited liability companies or joint stock companies. At the same time, although there are successful cases and positive examples in each of the countries, there has not been a massive emergence new cooperatives in agriculture. Furthermore, newly established rural and/or farmer self-help organizations tend to avoid calling themselves cooperatives even if in technical terms they perform cooperative functions. A case in point is Romania where a great number and variety of associations came into being but only one of them, the Foundation for Rural Associations, aims at promoting the development of a modern co-operative system of private farmers in agriculture. Obviously, this reluctance towards using the term cooperative has a lot to do with negative past experience with parastatal cooperative organizations.
Notwithstanding the current "cooperative vacuum", in the long term genuine co-operatives will, for sure, become indispensable institutions of agricultural and rural development in Central and Eastern Europe. By way of examples, the following areas of potential cooperative action could be mentioned: Consolidated tenure of highly fragmented landed properties could be promoted by establishing "land renting" cooperatives well known in pre-war Hungary. It goes without saying that provision of various services through cooperatives is a proven and natural way of action the World over. It is made particularly important in CEE by the fact that the dismantling of former large-scale cooperative farms created an hiatus of service providers not replaced so far by either the private or the public sectors. This applies to agricultural as well as non-agricultural services, such as extension, health and children care, etc.
The most important area of cooperative action in agriculture has traditionally been and remains the provision of services in the up-stream and down-stream sectors. In other words, cooperatives have a crucial role to play in input supply for primary production, including capital, and in promoting value-added production through processing and marketing the additional revenue of which is channelled back to the farmers themselves. The only way to fully achieve this objective is through the establishment of farmer-owned cooperative enterprises that are able to offer a tangible "trade-off" to the farmers for their contribution as cooperative members.
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Updated: 20 November 1999
