The impact of economic crisis upon Romanian agro-food system: challenges and possible solution.
Ignat, Raluca
Abstract: The added value of Romanian agricultural production
decreased between 2008 and 2009 by 24.1%, while the EU's decreased
by 12.3%. With an utilized agricultural area in 2008 of 0,411 ha per
capita, about twice the European average which is 0,212 ha, Romania gets
agricultural production far below the EU-27. There may be at least six
agricultural development model. There is no future for classical
solutions for Romanian agriculture, considering years to be recovered.
There is a creative approach to constitute cross-border associations of
farmers that will boost economic "performance in the sector will
conduct to regional economic growth.
Key words: agriculture, agricultural development model producers
associations, rural development, crisis
1. INTRODUCTION
Questions about agriculture and rural development's importance
are not few. The issues consist in determining their role in strategic
development. The agricultural development history may be divided into
three periods: between 1950 and 1960, when economics defined
agricultural development by increasing output/capita; in the 70s, when
economists from developed countries replaced these theories with
empirical studies on rural areas and used, for the first time, for this
fields, income, distribution, employees; the 80s and 90s that brought
another approach: the agricultural development to be based on food
security and sustainability (Staatz, J. M., Eicher, C. K., 1998: pp. 8).
Nowadays we discuss about sustainable development, competitiveness and a
convergent policy towards these goals. Both national and European public
policies aim these objectives. And both agriculture and rural
development are reshaped from another perspective: the possible
solutions for obtaining higher economic results.
Models for agricultural development become much more important.
Literature review offers at least six models for agricultural
development: frontier model, conservation model, urban-industrial impact
model, diffusion model, high-payoff input model, induced innovation model (Ruttan, W. V, 1998: pp. 155). Following, the research question
normally comes: what would be the best solution for Romanian
agriculture? EU intervenes to support agriculture in different ways, but
the solutions are not identical for each country. Each acts in a
justified manner in order to preserve traditions and individual and
group competitiveness of domestic farmers. Actions are, yet, under the
CAP.
The study is based on documentation on the existing models of
development of agriculture and rural areas. A solution for Romanian
agriculture and rural development has been proposed.
2. ROMANIAN AGRICULTURE POST CRISIS
A pertinent analysis of agro-food sector in the pre and post crisis
is necessary. On the one hand, the economic context is one of these
elements. In Romania in 2010, GDP/capita was 5700 Euro, comparing to
24500 Euro, the average of EU-27 (Eurostat, Basic figures on the EU,
2011, pp. 3). The unemployment rate in the EU-27 was 9.6% in the last
half of 2010, versus 7.4% in Romania the same period (Eurostat, Basic
figures on the EU, 2011, pp. 5).
The added value of agricultural production decreased between 2008
and 2009 by 24.1%, while the EU's decreased by 12.3%. But, it seems
that we are used to have this situation. We are hiding behind
unnecessary excuses like there is a difference of years to recover
between Romania and other EU countries, although not many solutions were
tried during the previous years. And yet: in year 2010, real
agricultural output in Europe grew 9.9%, compared with the mitigation of
the previous years.
On the other hand, agro-food system has features that distinguish
it from the rest of total sectors: depends to a large extent by
environmental and weather conditions. With an utilized agricultural area
in 2008 of 0,411 ha per capita, about twice the European average which
is 0,212 ha, Romania gets agricultural production far below the EU-27.
Thus, agricultural price index between 2008 and 2011 has increased
considerably. This is inevitably painful for the actors on the
products' chain. The effect is propagated. Scissors prices acted
since 1929 is too high in our country's agriculture, and has a bad
huge impact on this sector and causes large imbalances. Moreover, total
investment fell by 2,9% between first semester of 2010 and first
semester of 2011, and the investments in agriculture represents only
5,4% of the total. It is very little compared to the needs of this
sector. This is another crisis effect upon agriculture. More or less
direct effects were propagated in the chain: the SMEs decreasing number;
the jobs' supply in this sector is reducing; the fertilizer,
chemical fertilizers, pesticides' costs are rising, the loans for
agriculture, even loans in progress, are increasing their costs; the
production costs are increasing, conducting to an obviously spread
effect.
In addition, food industry, most often, was unable to absorb
agricultural production, especially in the fruit and vegetables sector.
The absence of insurances in the system should be added, because of
difficult conditions imposed by the financial actors, and lack of
financial power of agricultural producers and processors.
3. ROMANIAN AGRICULTURE's CHALLENGES
We could even say that public policies have been CAP reactive and
not anticipatory. The Romanian agriculture, as well as, Romanian
rurality faces several challenges:
a) lack of a clear, easy to follow policy, with annual plans and
specific purpose for the farmer, even if the strategy exists, meaning
National Programme for Rural Development.
b) unbalanced access in time and space of pre-accession and to the
structural funds causes of social and economic differences, and in
addition, excessive bureaucracy to access EU funds.
For example, the number of approved and financed projects broken
down by regions on Measure 322 "Village renewal and development,
improving basic services for rural economy and population and
enhancement of rural heritage" of the National Rural Development
Programme of Romania, is very different on regions, taking into
considerations both their number and value, leading to differentiation
of regions according to these concerned objectives.
c) existence of a vicious circle in which the Romanian farmer is
situated (Figure 1) which does not allow him to perform or to become
competitive. The challenge is to find niches where it may intervene.
d) the existence of unprofitable mentality of farmers. Perhaps the
most sensitive problem of the Romanian agriculture is the small
agricultural area of individual farms 3,5 ha, compared to 12,6 ha as the
EU-27 average. Farmers have displayed reticence to associative
solutions, given recent, communist period history.
e) the existence of poor road, rail, public service, water and
sanitation, communications infrastructure
[FIGURE 1 OMITTED]
4. A POSSIBLE SOLUTION: CROSS-BORDER ASSOCIATIONS OF FARMERS
Establishing some forms of cross-border cooperation to provide
farmers the services that they need, and also, to meet other economic
needs that they feel has some innovative aspects than the other projects
of this kind. Cross-border associations of farmers should be established
within the EU, at Romania's borders with Hungary or Bulgaria. In
those areas European interests are identical, the legal framework is
harmonized and the countries may access structural funds for common
purposes.
Cross-border cooperation involves joint efforts and meetings
between farmers of different nationalities in order for them to reach
certain purposes: use of techniques, purchase with raw materials,
marketing and trade, labour etc. Associations stimulate culture,
traditions, and economic and social cross-border exchanges. The impact
upon the region could also be given by the intensification of trade
relations that will propagate in all fields:
--social--through business relations and friendship which the
farmers will develop;
--economic--development of related activities: transport, tourism,
consulting and other types of services;
--financially--using banking services to organize and conduct
business;
--tax--through local taxes that local authorities will collect from
cross-border associations;
--cultural--through participation at common socio-cultural events:
fairs, exhibitions etc.
Investors in agriculture are likely to find developing solutions in
cross-border partnerships for the provision with raw materials and the
access of new markets.
Starting from these premises, it is important to develop
institutionalized forms of cooperation to boost the cross-border
economic relations and, ultimately, to increase regional economic
performance of agriculture.
The overall objective of setting up these associations is to foster
cross-border cooperation and increase the economic performance of
regional agriculture, and, to increase the income for local authoritie.
Also, the cross-border associations aim:
--to stimulate the exchange of technical knowledge among farmers on
agricultural production;
--to encourage the know-how transfer for crop, husbandry,
marketing, farm management etc.;
--to boost cooperation relations between members of the association
at any level.
This model may be replicated on as many as possible cross-border
regions. And it may address to several needs of the farmers.
The limitations of the model are given by the aversions against
associative forms in agriculture of the Romanian farmers due to
psychological and historical reasons. But the innovative character of
this model consists in the cross-border approach, and this may be its
challenging advantage in order to transform the Romanian farmer into its
followers.
5. CONCLUSION
The challenges facing Romanian agriculture are neither few nor
small. They come from a historical perspective and still propagate.
Not only global economic crisis has had effects on the results of
our country agriculture, but agriculture itself, couldn't give the
expected results. Putting pressures on the sector by saying that it is
the Romanian economic great expectation is unjustified. In addition,
efforts made to support the sector's financing are minimized by the
farmers' inability, more or less, to make payments, for the
beneficiaries. They are in a vicious circle, and they hardly may find
solutions to break it.
Integrated efforts are needed in order to offer the chance of
knowledge transfer. The high-payoff model which cross-border
associations in agriculture are based on could bring added value for the
agriculture's performance.
The presented solution tries to answer to these problems and to
adapt to international agricultural development models.
6. ACKNOWLEDGEMENTS
This work was cofinanced from the European Social Fund through
Sectorial Operational Programme Human Resources Development 2007-2013,
project number POSDRU89/1.5/S/59184 "Performance and excellence in
postdoctoral research in Romanian economics science domain".
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