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2. The agricultural sector

2.1 Population in agriculture and contribution of the sector to GDP

The relevance of agriculture to the region is confirmed by the size of the population in the agricultural sector, estimated in 1998 to be about 16.2% of the total population. Thirteen countries in the region have more than 20% of the population in agriculture, namely Albania (49.5%), Macedonia (FYR) (49.0%), Tajikistan (35.1%), Turkmenistan (34.1%), Uzbekistan (29.0%), Azerbaijan (27.5%), Kyrgyzstan (26.9%), Moldova (24.6%), Ukraine (21.8%), Belarus (21%), Georgia (21%), Kazakhstan (20.7%) and Poland (20.5%). Ten other countries have an agricultural population between 10 and 20%. Countries with less than 10% include Croatia (9.7%), Czech Republic (8.7%), Slovakia (9.6%), Bulgaria (8.6%), Bosnia and Herzegovina (6.1%) and Slovenia (2.3%) (FAOSTAT Agricultural Data, 1999).

Projections of the population in agriculture for 2020 show a considerable reduction of 42.2%, down to 37.6 million people. In fact, in many countries, rural populations have already been abandoning farming land, seeking better economic prospects in urban areas. Due to the restricted career prospects and remuneration, lack of comfort and amenities offered in rural areas, the younger generation have also demonstrated disenchantment or indifference towards all forms of agriculture. However, for 2020, the percentage of the agricultural population in the total population is forecast to reach about 9.3% for the region.

Another indication of the importance of the agricultural sector is its contribution to GDP, which has been estimated for 1998 as follows:

2.2 Other characteristics of the region

The transition to the market economy also required that agricultural land be privatized. In some countries, this was preceded by a “land restitution” phase in order to avoid legal problems with former owners. These processes have been carried out using different criteria and following various modalities (e.g. distribution). However, they have not been immune from problems, some of which remain to be solved. It should be noted that land privatization does not necessarily mean that a private farmer owns the land, but rather that farmers can decide what to grow and how to conduct business. In many places, land privatization has resulted in long-term leases, with land remaining state property (e.g. in Belarus, Kazakhstan, Russian Federation, Ukraine, Uzbekistan).

At the national production level, farmers are now faced with a new political and economic environment, comprising transfer of responsibilities and decision-making to the farm level. The speed of this transfer depends on various factors, including the development of support institutions and the willingness and ability of farmers to manage new responsibilities. Farmers not only enjoy the freedom to decide what to produce and how to produce it (which they did not have in the past), but also have to take responsibility for and bear the risk of making those decisions. The types of farm management decisions taken by governments and farmers in the transition to market economy farming are illustrated below.

Before transition

During transition

Market economy

With few exceptions (Albania, Kyrgyzstan, Slovenia, Turkmenistan and Uzbekistan) agricultural output in the region was characterized by a decline during the 1990s, but the trend was not uniform: some had a rapid decline in the first years, followed by a slow recovery; others experienced a decline only in recent years. In 1999, the agricultural production index, with base 1989-91 = 100, had fallen below 50 for 3 countries (Bosnia and Herzegovina, Estonia and Latvia). It stood between 50 and 75 for 12 countries, and between 75 and 100 for 11 countries, whereas for 3 countries it was over 100 (Albania, Macedonia (FYR) and Turkey). In many countries, there was also a substantial change in the cropping pattern.

Although the agricultural profiles vary from country to country, the region’s agricultural resource base is subject to a number of common constraints. The most pressing is the low income of farmers and the size of the agricultural population. Other constraints that affect all countries and limit productivity are fragmented landholdings, the high cost of agricultural inputs (fertilizers, pesticides, herbicides and energy), equipment and machinery that should be renewed, a lack of credit facilities, inadequate infrastructure, such as transport, communication, research, extension services, marketing systems, and, finally, a decline in the competence of technical staff, which is beginning to appear in several locations as a result of departures and limited funds for training.

Crop and livestock farming are the main agricultural pursuits of most small farmers in the region, and wheat, barley, maize and potatoes dominate agricultural production. Wheat and potatoes are the staple food crops, and barley is the major feed source and, to a lesser extent, a human food in practically every country where it is grown. There has been rapid progress in genetic improvement of these two crops, especially in more favourable agricultural areas. However, the new improved varieties and quality seeds are seldom accessible to farmers, who generally have to operate with limited financial resources.

In order to increase productivity, agricultural policies should continue to promote the use of improved seed varieties that are adapted and accepted by most farmers working under agriculturally constrained conditions, lowering at the same time their cost.

2.3 Dependence on food imports

The region has a record of import and export of food items, first within the region itself because of the integration that existed until the late 1980s, and thereafter as a result of the transition to the market economy. This trend has been accelerated by the establishment of independent states in the FSU, in the Balkans and the creation of the Czech and the Slovak Republics. As no country in the region is fully self-sufficient in the production of food items, the balance required for consumption must be imported.

Countries that are, or are becoming, more industrialized, sell their industrial products to buy food items, a few sell oil or natural gas, the others sell some of their agricultural products to purchase the missing food items. Food shortages that occurred in the past were offset by imports, including considerable quantities obtained under special terms (e.g. sale of grain to finance the support of state institutions). Food shortages of these years have been met through both commercial imports and special assistance (e.g. from WFP).

It is hoped that the situation is unlikely to deteriorate in the future. To the contrary, through sustainable agriculture and adequate investments in agricultural infrastructures and inputs, imports of food items should remain within normal requirements.

2.4 National agricultural policies

In view of the importance of agriculture, the State in a centrally planned economy cannot avoid direct responsibility for planning, monitoring and directing the agricultural sector of the country. At present, governments and the public sector are committed to implement a smooth and practically oriented transition to a market economy. They have to manage the change and use the limited resources available while continuing to plan and carry out activities that have not been privatized.

They all recognize the importance of agriculture in the economy and assign food security a high priority in national policy plans, economic reform and sustainable agricultural development. The transition has required structural adjustment programmes based on new legislative and institutional support, targets of economic liberalization and market-oriented reforms.

Some countries started with the transition and all its requirements almost immediately; they are now well advanced in the process. Others have either delayed their transition or have met with difficulties and therefore have not made as much progress. However, everywhere the efficiency of implementing the changes has been constrained by technical, financial, social and infrastructural limitations, and agricultural markets are still, in many cases, heavily regulated in the region. In the Russian Federation, the beginning of changes coincided with the independence of many republics of the FSU, in particular Ukraine, and with the discovery of a different and weaker agricultural sector than the former USSR; it is now a grain importing country.

In many countries at the beginning of the transition, prices of basic food items were controlled to keep the cost of living down; in other countries, producer prices for wheat, barley and agricultural inputs were subsidized. At a later stage, there have been reductions in producer price supports for cereals, pulses and other selected crops; an increase in interest rates; and a reduction in, or the complete elimination of, direct and indirect input subsidies. In general, national agricultural policies will continue to nurture adequate agricultural production, income to farmers and competitiveness on the market. Several CEEC are adjusting their policies and legislation in order to join the EU (Frohberg, 2000; Matthews, 1996).

2.5 Land tenure

Under the system of centrally planned economies, there were, in general, state farms, collective farms and small farms. The first two were the largest sector, and were able to cultivate large areas of land; the third were small, with limited land assigned to them. Land ownership was usually banned, and where it survived it was limited to very small farms or plots. Land was assigned by the state, and there were instructions on the crops to grow; on limited portions of individual land, farmers or workers of state farms could grow whatever they wished to grow.

With the transition to a market economy, the agricultural sector was privatized. In most countries this started with the upstream supply sector, which provided agricultural inputs, and the downstream processing sector (agro-industries, etc.). It was soon followed by the privatization of land, which gave farmers the freedom of planting the crops they deemed most profitable or possible. In most cases, the privatization resulted in leasing the land rather than transfer of ownership, and when the piece of land was not identified immediately, recipients were given certificates for some surface within a wider area (Lerman, 2000).

The process of privatization started to face difficulties almost immediately. Where there were claims (real or potential) from former owners, governments decided to precede the privatization with a “restitution” exercise. In all cases, criteria had to be established, which varied according to location. Usually, they required that the person receiving land had to be a national of the country and a farmer (or the worker of a state farm).

Members of former collective farms who became members of private cooperatives did not encounter significant problems because inter alia they obtained all existing structures, equipment and machinery for common use. They could organize themselves to undertake a joint activity, or could divide themselves into smaller and more manageable groups, as many did. Those who were assigned individual pieces of land were less favoured in terms of available structures, but could unite into voluntary groups or create new private cooperatives.

Occasionally, the criteria used caused difficulties. For example, in order to give equal treatment to everybody, the allocation included several tiny plots, often distant one from the other, because one was up-hill, one close to the wood, another close to the river, etc. Marginal land was also included in order to accommodate everybody. In some cases, the piece of land was part of a very large field, but consisted of a strip 75 cm wide and 4 km long. In other cases, the plots were over 35 km from where people lived, or the land was given to persons who had never practised farming. In some countries, land that was offered for sale remained unsold, and cadastral values and notions were ignored. The complexity of the matter came to the surface at the time of registration of the entitlements to lease or to ownership. By the end of 1999, many countries had already completed the privatization process, but not necessarily the registration process.

The consequence of this privatization is an enormous growth in the number of small farms with excessive fragmentation. The smaller the farm, the higher its vulnerability, and limitations in obtaining credit, agricultural inputs at reasonable prices, technical and management advice, reaching the right market and selling products at remunerative prices. Many of these farms are reverting to subsistence farming and are becoming part-time farms or are simply being abandoned. The income from agricultural land, particularly if it is from marginal land, is not attractive enough to stimulate a land market. Prices of land are low due to weak demand.

The consolidation of small farms into larger and more economically viable units will take time. In many places, it has not yet begun, because the privatization-registration phase is not yet completed. Adjustments are, however, taking place, on a provisional basis, through rental arrangements.

2.6 Rural infrastructure

The rural infrastructure has been significantly modified by the transition. The privatization of the farming activity usually followed that of input suppliers and of agro-industries. Land fragmentation could not be avoided, and where farmers did not join in new private cooperatives, using all the existing assets on their land, access to and efficient use of fixed agricultural installations became a problem. It has proven difficult to continue with maintenance works as in the past, particularly for irrigation and transportation. In many countries, farm equipment is obsolescent, and in poor running condition. Lack of agrochemical use has resulted in lower yields. Inadequate pest control led to outbreaks of pests, including locusts in Albania and Kazakhstan.

Institutions have decentralized service units, laboratories, stores, etc., but in many countries, technical and support personnel are poorly paid (e.g. a monthly salary of US$ 25 or less). Credit for the agricultural sector is almost non-existent, or viewed as very risky by national financial institutions.

2.7 Irrigation and infrastructure improvement for food security

Since the transition began there has been a considerable reduction in the level of financial resources available for the maintenance of the existing irrigation infrastructure. The uncertainty caused by the initial phase of privatization of land, on the one hand, and of irrigation structures, on the other, left irrigated fields with only the water supply that could be provided without major works. In some countries, like Estonia, Latvia and Lithuania, the main problem became that of surface water that could not be drained away, whereas in dryer countries the problem was that of water that could no longer reach certain fields.

In some places, the reason for poor irrigation performance was that the equipment had become obsolete and the cost of energy extremely high, but in nearly all cases the irrigation system had not been maintained at full efficiency and repaired after heavy damage. Sometimes it was the small farmers that could not afford to pay the high cost of maintenance and water supply; in other cases it was not clear who had to pay. There were also cases where some village communities were uncooperative towards adjoining communities. The overall result was that areas remaining without an efficient irrigation system suffered from falling yields and reduced incomes. These areas will remain marginal until the irrigation system is restored or until they can plant other crops (or a different variety of the same crop) that need less water and yet can produce an equivalent income.

The restoration of irrigation systems is therefore as important as the supply and proper use of agricultural inputs. Where improved seed varieties require more water, the issue becomes more critical. The example of water supply can be extended to the entire agricultural system, where the rate of replacement of equipment and the maintenance of structures have been poor.

In general, countries of the region need to develop land and water management policies that promote soil and water conservation and utilization, together with other natural resource management practices. The first step should be the restoration of irrigation systems. Without investment in water distribution infrastructure, supported by reformed institutions where necessary, the prospects for improving food production are limited.

The success of irrigated agriculture also hinges on appropriate technology. Policies should encourage the development of a local irrigation industry, including a manufacturing base and servicing sector. The correct use of irrigation water can also protect soils from erosion and preserve soil fertility. Technology is also needed to reduce water and soil pollution.

FAO is well placed to use its technical and advisory services to help countries negotiate for water rights and assist countries in developing small-, medium- and large-scale irrigation programmes, which could increase sustainable food production levels.

2.8 Availability of agricultural inputs

To maximize their genetic potential, improved seeds often require purchased inputs, such as fertilizers, pesticides, herbicides and irrigation water. In the region, the cost of agricultural inputs increased more rapidly than the price of products at the farm gate. This reduced farmers’ incomes and consequently their resources for purchasing new inputs for the following season. In many situations, this resulted in the use of less pesticides, herbicides and fertilizers; retention of obsolete operational machinery and equipment; postponement of major maintenance works; and sometimes reduction in irrigated area.

Shortage or the high cost of fuel, or both, can reduce the area planted, as reported for the 1999-2000 season in Armenia, Belarus, Georgia and Tajikistan. The same situation limits severely the delivery of products to locations where they can be favourably marketed. Some governments have retained control of input supply and distribution. While this may facilitate the application of low prices, it may prevent prices reaching the lower price levels that might be obtained through a truly competitive input market; this and similar situations create significant barriers for private companies wishing to enter the input market. However, the move towards a market-oriented economy, though slow, seems unavoidable, with a modified role of the state in the agricultural sector.

The lack of adequate credit facilities and the extreme difficulty of using land, future crops or warehoused harvests as collateral, leave farmers and most of the agricultural sector in a precarious situation. In some countries, local authorities and seed breeders reported a decline in the use of certified seed, resulting in lower seed replacement rate, and a consequent fall in crop yields and volume of production. In more serious circumstances, such as civil strife or belligerence, there have also been shortages of seed.

Sometimes the inputs are available, but farmers do not have sufficient resources to buy what they need. This has been the case for tractors produced in Belarus, which are almost entirely exported because of lack of a real national market.

Changes in agricultural policies will inevitably affect the cost of crop production and may further reduce the number of farmers capable of affording the required agricultural inputs to maximize crop yields. Even now, the majority of farmers in the region, especially those working under marginal conditions, have been unable to purchase inputs even where subsidized by governments. However, it has been argued that the supply of inputs such as fertilizers is less critical than the benefits small-scale farmers derive from improved seed, provided that the seed varieties offered are well-adapted to the small-farm environment and the low-input crop-management practices of traditional production systems.

2.9 Quality seed and agricultural development

The availability to farmers of good quality seeds of a wide range of varieties and crops is one of the major keys for achieving food security in the region. Some of the direct benefits accruing to farmers from the distribution and use of good quality seed of improved varieties include enhanced productivity, higher harvest index, reduced risks from pest and disease pressure, and higher profits. Seed is also critical to the optimal use of natural resources and, according to its provenance and the breeding goal, seed determines the requirements for inputs such as pesticides, fertilizer and agricultural technology. When production increases through the use of improved varieties in a given area, self-employment potential through processing, marketing and related activities can bring about a general improvement in the quality of life.

While the state, the private sector and farmers are aware of the importance of high quality seed, there have been instances where, for lack of financial resources, farmers have been unable to renew their seed stocks, and the seed obtained off-market was not of desirable quality, or there was simply no seed available. For the 1999-2000 crop season, FAO/GIEWS estimated a shortage of seed in Azerbaijan, Mongolia, Russian Federation and Tajikistan. Conversely, in a number of countries, it was noted that selected imports of grain were subsequently traded as commercial seed and that breeder seed had been sold as certified or commercial seed.

2.10 Role of women in agricultural development

Under centrally planned economies, all countries of the region had attained a high occupational level for women, in the economy as a whole. Reports from the World Bank indicate that the employment ratio of women to men varied from 0.6 (Bosnia and Herzegovina) to 1.0 (Belarus, Estonia, Latvia and the Russian Federation). That ratio does not show whether women occupy higher-level positions or if it applies to all economic sectors. Obviously, women play an important role on family farms, but there are also indications that they assume sometimes leading roles in private cooperative farms and in rural communities.

In several countries of the region, there is an appreciable number of women among the administrative, technical and scientific staff of institutions and centres associated with the seed sector. Several of them occupy key positions, for example women professionals head the national seed inspection and control bodies of Hungary and Poland.

2.11 Agricultural extension services

Agricultural production has close linkages with extension. It is the responsibility of the extension services to provide advice to farmers regarding seed selection, treatment and storage, and to share information regarding the release of new varieties and to demonstrate their characteristics. Without an effective extension system responsive to farmers’ needs, it would be difficult to develop a seed supply system. Extension can also serve as a feedback mechanism, as agents are exposed at first hand to farmers’ impressions of new technology or cultivars.

Before the transition period, each production unit in many countries of the region employed a cadre of support staff in extension, which eliminated the need for a separate (state) extension service (Brent and Adams, 2000). With the transition, the situation has resulted in the large enterprises (where they remained in operation) still employing their own technical support staff, while the emerging private farmer has been receiving very little technical support, because adequate extension services are not available or have still to be established. Some private farmers rely on the large enterprises, others on the input supply firms, but most remain in a technology vacuum (Brent and Adams, 2000). The problem is being addressed by governments and by some donor-supported projects. Nevertheless, while commercial producers can be expected to pay for these services in the future, the smaller-scale, subsistence-oriented farmer will find it difficult to pay for them. The solution could be through the direct involvement of farmers' associations.

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