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Privatizing agricultural extension services in two new German federal states: necessary conditions emerging from experience

J. Currle and P. Schütz1

Jochen Currle is a member of the international consultancy group working on organizational and methodological issues in agricultural extension; PACTeam GbR, Hauptstr. 15, 88379 Guggenhausen, Germany; tel./fax: (+49) 750 3791; e-mail: jochen.currle@t-online.de.

Paul Schütz is senior officer and coordinator for agricultural extension and rural knowledge systems at the German Agency for Technical Cooperation (GTZ); GTZ GmbH, 65760 Eschborn, Germany; tel.: (+49) 6196 791443; e-mail: paul.schuetz@gtz.de

 

Drawing on changes in the agricultural extension systems of two new German federal states (Thuringia and Saxony-Anhalt), the authors describe different ways of privatizing extension. These experiences provide useful insights from which some general conclusions for the privatization of agricultural extension can be drawn. After analysing arguments for the public financing of extension, tools for quality management in extension are presented and measures for strengthening the public action sector by supporting the creation of farmer-managed extension groups are described.

 

La privatisation des services de vulgarisation agricole dans deux nouveaux États fédéraux allemands - facteurs déterminants à la lumière de l'expérience

S'inspirant des changements introduits par deux nouveaux États fédéraux allemands (Thuringe et Saxe-Anhalt) dans les systèmes de vulgarisation agricole, les auteurs décrivent les différentes démarches possibles en matière de privatisation de la vulgarisation agricole. Des éléments utiles ressortant de ces expériences, on peut tirer quelques conclusions générales sur la privatisation de la vulgarisation agricole. Après avoir analysé les arguments en faveur du financement de la vulgarisation par le secteur public, les auteurs proposent les outils nécessaires à une bonne gestion en matière de vulgarisation. Ils décrivent également les moyens de renforcer les mesures d'intervention du secteur public en prônant la création de groupes de vulgarisation dirigés par les exploitants eux-mêmes.

 

Privatización de los servicios de extensión agraria en dos nuevos estados federales alemanes: condiciones necesarias surgidas de la experiencia

Basándose en los cambios de los sistemas de extensión agraria de dos nuevos estados federales alemanes (Turingia y Sajonia-Anhalt), los autores describen distintas maneras de privatizar la extensión. Estas experiencias proporcionan información útil de la cual pueden extraerse algunas conclusiones generales para la privatización de la extensión agraria. Después de analizar los argumentos en pro de la financiación pública de la extensión, se presentan instrumentos para la gestión de la calidad en ella y se describen medidas para la intensificación de la actuación del sector público mediante el apoyo de la creación de grupos de extensión dirigidos por los agricultores.

 

In Germany, each of the 16 federal states (Map) is responsible for its own agricultural extension. This has meant that the organization of extension is quite varied, with major differences in the roles various actors play in financing and delivering extension services to states (Hoffmann, Kidd and Lamers, 2000). This article seeks to consider the extension systems of Thuringia and Saxony-Anhalt, two of five new German states that joined the Federal Republic of Germany after the fall of the Berlin Wall in 1989. In both states, agriculture in the post-socialist era has encountered similar difficulties, and both are converging towards very similar systems of agricultural extension. However, the ways in which they have transformed their systems have been different.




Extension in Thuringia

At present, some 4 300 individual farmers and farming enterprises cultivate 802 000 ha of arable land in the state. The large production units of the socialist era still dominate the farming sector, with some 608 000 ha (76 percent) being cultivated by 415 farming enterprises of more than 500 ha each. The remaining 194 000 ha (24 percent) belong to 3 929 farms of less than 500 ha each.
In late 1991, the agricultural administrations of the new states decided to build up state-specific, efficient extension bodies. Usually, they followed the policy advice of their designated partner states of the former West Germany and introduced extension systems similar to the ones used there. With advice from the West German state of Hesse, an official extension body was established in Thuringia in 1991. Henceforth, extension was publicly financed and delivered through 12 state agricultural offices employing about 80 agricultural advisers.
In late 1997, the state treasury instructed the agricultural administration to cut 120 staff positions (Zopf, 1998). The state agricultural extension system was an easy target. An idea to establish a private extension organization staffed by public advisers failed, as the majority decided to remain civil servants, even though this often meant changing jobs and being assigned quite different tasks and functions.
Thus, at the beginning of 1998, an awkward situation emerged in which extension was privatized but had no effective extension body, either public or private. Given this situation, agricultural administrators decided to introduce a subsidy system aimed at providing good quality extension by building up a diverse and effective private extension landscape. A personnel cost subsidy is provided for certified advisers, who do full-time advisory work, are based in Thuringia and work within state borders. The terms of the subsidy-contract are monitored, mainly through an annual report that each adviser is required to submit to the state.
Since early 2000, Thuringia has been changing its subsidy policy. Instead of task- independent financing of extension agents and companies, public financial support is being channelled directly to the farmers who call on and pay for specific advisory services. Farmers are reimbursed at a later date for a percentage of the extension fees. Hence, extension delivery and finance are much more closely linked, and there is greater accountability to farmers.
The state of Thuringia took up its new functions of regulation and quality control of the private sector by requiring the certification of agricultural advisers, based on their professional qualifications and experience. To be entered on the official register, advisers must pass an assessment which is carried out by representatives of different agricultural institutions (the Ministry of Agriculture, public research institutions and farmers', horticultural and organic farming associations). The state agricultural administration also invites advisers to attend state-financed training given by the public agricultural research institutions, as well as courses on new rules and regulations for the agricultural sector.
While private companies have taken over two main extension tasks - giving economic and production advice - the state has retained a much reduced extension service (15 of the former 80 posts have been maintained). The remaining state service has focused on its legal obligations under the new extension policy of 1998 regarding those aspects of extension that concern public goods. These include farm crisis counselling, environmental advice, development of women and families in rural areas, and advice on plant protection and human nutrition in rural areas.


Extension in Saxony-Anhalt

The structure of the agricultural sector of Saxony-Anhalt is comparable with that of Thuringia. The majority of arable land is distributed among 5 000 agricultural enterprises, each working more than 400 ha. In 1991, the administration of this state did not follow the example of its West German partner state, Lower-Saxony, by introducing the chamber of agriculture system of extension (Hoffmann, Kidd and Lamers , 2000), but decided to privatize agricultural extension services. This decision, which was taken towards the end of 1991, meant that farmers had to pay for advice from a small number of private advisers who were certified by the federal certification scheme.
However, the political will existed to build up an efficient extension body as well as to support agriculture and rural areas during the difficult years of restructuring and adaptation to the new political conditions. This led to the strategy of maintaining some public sector involvement, although in a very different form. Farmers and farm enterprises who call on advisers are reimbursed for part of the amount they pay for the advisers' services. Such direct and task-dependent public payments reached 80 percent of their total budget allocations in 1992, but were reduced gradually, and by 1998 had fallen to 30 percent.
Reimbursement can be obtained under a contracting arrangement between a farmer and an extension agent or company. Farmers can also claim a subsidy if they belong to a type of farmers' organization know as an "extension circle" with an employed adviser (Hoffmann, Kidd and Lamers, 2000).
The certification procedure for any extension worker who wants to be registered, and thus publicly recommended by the state agricultural administration, is comparable with the one described for Thuringia. As in Thuringia, registered advisers are invited to attend state-organized courses on new public rules for the agricultural sector. In addition, a monthly extension leaflet, published by the agricultural administration, keeps them informed about the political and administrative framework of the agricultural sector.
The measures taken by the state to provide high-quality agricultural extension services are not, as in Thuringia, accompanied by annual reports submitted by advisers. In Saxony-Anhalt, the state mainly provides the conditions for good extension work, while leaving control of actual extension performance with the farmers (Zack, 1998).
In contrast to Thuringia, Saxony-Anhalt no longer delivers any public extension services. It may be seen as adopting a financial rather than an organizational approach to some aspects of its responsibility for public goods. An example is farm crisis intervention; wherever there may be an acute danger of bankruptcy, the state guarantees a reimbursement of 100 percent of the extension costs. Covering the full costs of social safety-net advice is designed to avoid potential financial disincentives for farmers seeking help in such situations. However, it is not yet clear whether this strategy is sufficient in itself to help farmers out of a crisis, as many farmers only seek help when it is too late. Discussions are currently ongoing within the state agricultural administration as to whether such services should be publicly delivered, partly in order that advisers may be able to operate more proactively.


Conclusions for the privatization of extension

When reviewing the discussion of extension privatization a number of highly relevant questions arise concerning the situation specificity of privatization and the persisting role of the state. Some comments that are useful for this discussion can be made in the light of the experiences of Thuringia and Saxony-Anhalt.

Specific extension systems for specific agricultural sectors

In both states, the agricultural sector is exclusively market-oriented and dominated by large farms - a situation that is very favourable for the privatization of extension services. However, in 1998, after privatization in Thuringia (which did not introduce direct, task-specific reimbursements for farmers), requests for extension decreased dramatically. During the last year of the free public extension service, 80 percent of farmers sought advice in one form or another. With the introduction of private extension services in January 1998, this figure dropped to about 13 percent (731 farms). Larger farms (more than 500 ha) made up half this number. Thus, around 88 percent of larger farming enterprises have paid for advice, compared with only 9.3 percent of smaller farms.
Saxony-Anhalt did not experience such a dramatic collapse in demand under its system, in which farmers were directly reimbursed for payments for extension advice received. However, experts warn that a 30 percent reimbursement of extension costs may be the minimum threshold at which most farmers would still be willing to seek the advice they need. A considerable decrease in the number of extension contracts is feared (Zack, 1998).
The conclusions of these developments are twofold:

Subsidizing extension companies can be a useful tool for building up a private extension structure during a transition period. However, privatization strategies should not make a simple choice between task-dependent and task-independent subsidies. The objectives may be very different and the integration of different forms of subsidy may allow the system to develop in a more balanced and sound manner during transition. Certainly though, as a long-term measure, subsidies to extension services are best channelled directly to the farmers in a task-dependent manner. Furthermore, the proportion of reimbursement has to vary, considering the specific agricultural sector and the political will to influence this structure.


The state's persisting role in a privatized extension landscape

Financial support for agricultural extension

Closely related to the experiences described in the previous sections of this article is the question of whether the state should give financial support to agricultural extension at all. As the experiences of both Thuringia and Saxony-Anhalt demonstrate, agricultural extension can have a number of social impacts (discussed later in the article). Government will do well to reflect whether to give up an instrument of governance by total withdrawal of funding.
The first impact, which has already been highlighted, is the influence of financial extension support on the agricultural sector and, closely related to this, on rural livelihoods. Financial support of extension is intended to steer the land concentration process and, thus, affect the number of people who are able to make a living in the rural areas.
Social policy is closely related to this process, and in both of the cases described the state has taken measures to prevent a social crisis that may accompany the concentration process in agriculture.
A third policy area, and one where public and private interests may conflict, is environmental protection. The farmer's interest may often end with a healthy economic balance sheet for the farm enterprise. To attain this "private good" the farmer is ready to pay, while ultimate responsibility for the "public good" of a sustainable environment falls to the state (Beynon et al., 1998). In Thuringia, the state administration drew a dividing line by radically privatizing the private good services of economic and production advice, directing public finances towards the provision of the public good services of environmental extension. In Saxony-Anhalt, the division is not so clear. However, the state uses the argument that agricultural extension advice is relevant to the natural environment, and to rural areas as a whole, to justify public funding support to private extension services (Zack, 1998).

Measures for high-quality extension

Another important question that responsible policy practitioners ask when discussing scenarios of privatization or contracting out is how to maintain high standards in agricultural extension. The examples indicate two areas that can be influenced by policy choice: personnel and performance.
As the example of Thuringia shows, the entire "institutional knowledge" of the public extension structure can be lost through privatization when former government advisers are not ready to work under different conditions. The reluctance of Thuringian public service advisers to join a privatized extension company was owing to two main factors. The first of these was the short time period within which decisions and plans had to be made. The decision to reduce the provision of publicly provided extension was made in late 1997 and was to be implemented shortly afterwards, in January 1998. There was too little time, either for the affected individuals to reorient themselves to the new circumstances or for a soundly structured privatized extension company, which could give the advisers a real perspective on the new agricultural landscape, to develop. Related to the speed of the reform process was the lack of any real chance for advisers to bring their professional ideas and personal opinions to bear. Given this lack of consultation and the rapidity of the reforms, advisers preferred to opt for job security in the public administration rather than the professional challenge of the private sector.
The conclusion to be drawn is obvious: if retaining the knowledge and experience possessed by public advisers in the agricultural extension system is a priority, it is important to reorient the structure slowly and in collaboration with those whose jobs are affected. This does not mean that the final goal of privatization should be abandoned. Rather it means that those who are directly affected by agricultural extension reform need to have a genuine say about the steps to be taken in order to reach what is often a common goal: more effective and efficient service delivery.
A key measure, which both the states implemented in order to guarantee high standards of quality, was the certification of private advisers. The criteria set (higher education, previous experience as an adviser, being based in the region and independence from any input or marketing-related companies) focus on advisers' professional and personal ability. The procedure (certifying sessions with the representatives of relevant organizations from the farming sector) aims at transparency, joint responsibility and appointing advisers who are acceptable to potential future clients. The federally certified list gives farmers a real choice of adviser, thus reinforcing the market mechanisms of accountability and regulation, while also providing the conditions for financial reimbursement.
Following certification, the agricultural administrations of both states consider it the professional duty of advisers to keep up-to-date with knowledge developments in their fields. However, as policy and administrative regulations always have a strong influence on the nature of advice and decision-making, the state offers regular courses, including refresher courses, on the relevant legislation and administrative procedures. As a means of ensuring quality management, organized information transfer from the public administration to the privatized extension services seems to be indispensable.
Actual extension performance is another quality criterion that it is important to manage. This is mostly a question of control mechanisms. In a privatized extension landscape, one such basic mechanism is the client's request. Good performers are always in demand. In Thuringia, besides the basic quality control mechanism of customer demand, the state still plays a role in controlling performance by monitoring the annual report that each adviser is required to submit.
When the state subsidy of extension workers is replaced by the task-dependent reimbursement system of Saxony-Anhalt, the monitoring measure is likely to be set aside (Grygo, 1996). However, there are at least two situations in which continuing performance control on the part of the state is advisable:


Applicability of Northern experiences to the South

Public sector service reform is a topic of much debate in many countries of the South. Uganda, for example, is considering contracting out its advisory services, while Egypt is contemplating the introduction of vouchers for extension in certain commodities. Chile is practising a voucher system, and Peru has privatized extension in high-potential coastal areas.
In the case of agricultural extension, the observations of Kidd et al. (2000), who urge a more pragmatic approach to extension service delivery, are worth noting:

Hence, the discussion on privatization of agricultural extension services should focus less on simply choosing between either private or public extension services. There exist many possibilities for integrating the public, private (for-profit and not-for-profit) and the third sector of farmers groups and associations (including paraprofessionals and community-appointed grassroots agents).... Situation specificity is paramount in defining effective strategies for future extension delivery.

Should developing countries be considering the privatization of extension, they need to look carefully at the factors contributing to the success of the German reforms:

While all countries can learn from each other's experiences, every measure to privatize agricultural extension is taken in a specific situation, and the policy reform context under consideration needs to be analysed carefully beforehand. The concrete examples of privatized extension systems described here can probably not be transferred as such, but this article has attempted to draw some general conclusions from them in the hope that these may help readers to formulate alternative strategies for action that will bring positive change to their countries' agricultural sectors and the livelihoods of rural people.


1 The authors gratefully acknowledge the comments and suggestions of Andrew D. Kidd of PACTeam and Hohenheim University, Germany.


References

Beynon, J., Akroyd, S., Duncan, A. & Jones, S. 1998. Financing the future. Options for agricultural research and extension in sub-Saharan Africa. Oxford, United Kingdom, OPM.

Grygo, H. 1996. Agricultural advice - quo vadis? Ausbildung und Beratung, 5: 88-89. (in German)

Hoffmann, V., Kidd, A. & Lamers, J. 2000. Reforming the organisation of agricultural extension in Germany: Lessons for other countries. AgRen Network Paper No. 98. London, Overseas Development Institute, Agricultural Research and Extension Network.

Katz, E. 1999. The three Cs: conditions for a functioning voucher systems in agricultural extension. LBL-Berater/innen-News. Lindau.

Kidd, A., Lamers, J.P.A. & Hoffmann, V. 1997. Towards pluralism in agricultural extension. A growing challenge to the public and private sectors. Entwicklung & Ländlicher Raum, 3/97: 7-10.

Kidd, A.D., Lamers, J.P.A., Ficarelli, & P.P. Hoffmann, V. 2000. Privatising agricultural extension: caveat emptor. Journal of Rural Studies, 16: 95-102.

Lanz, M. 1993. Bases for group advice in the agricultural sector. Berichte über Landwirtschaft, 71: 98-105.

Schütz, P. 1999. Public/private funding - private delivery. Services for Rural Development Issue No. 3, 1999. Eschborn, Germany, GTZ.

Zack, P. 1998. The organization of advisory aystems in Saxony-Anhalt. Paper presented at the 37th IALB Conference, Dresden, 19 June 1998. (in German)

Zopf, I. 1998. Advisory models for the new States - Freistaat Thüringen. Paper presented at the 37th IALB Conference, Dresden, 19 June 1998. (in German, unpublished)


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