33584 ECSSD Environmentally and Socially Sustainable Development The World Bank Working Paper No. 40 June 30, 2005 The Agrarian Economies of Central-Eastern Europe and the Commonwealth of Independent States An Update on Status and Progress in 2004 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 authors and should be used and cited accordingly. The findings, interpretations and conclusions are the authors’ own and should not be attributed to the World Bank, its Board of Directors, its management, or any member countries. ii Contents Foreword ....................................................................................................................................... iv Preface .............................................................................................................................................v Executive Summary ..................................................................................................................... vi A. Overall Analysis I. The Reform Process in the Rural Sector .........................................................................1 II. Uneven Reform Progress in Central Eastern Europe and the CIS ..................................8 B. Policy Matrices .......................................................................................................................12 Advanced Reformers ................................................................................................................12 Bulgaria ..............................................................................................................................13 Romania .............................................................................................................................17 Armenia..............................................................................................................................24 Albania ...............................................................................................................................29 Croatia ................................................................................................................................32 Kyrgyz Republic ................................................................................................................36 Macedonia ..........................................................................................................................40 Serbia & Montenegro .........................................................................................................44 Moderate Reformers .................................................................................................................50 Azerbaijan ..........................................................................................................................51 Bosnia Herzegovina ...........................................................................................................58 Russia .................................................................................................................................63 Kazakhstan .........................................................................................................................69 Ukraine ...............................................................................................................................74 Moldova .............................................................................................................................80 Georgia ...............................................................................................................................88 Slow Reformers .........................................................................................................................92 Tajikistan............................................................................................................................93 Uzbekistan........................................................................................................................100 Belarus .............................................................................................................................103 Turkmenistan ...................................................................................................................107 iii C. Statistical Annex: Food & Agriculture in Central and Eastern Europe and the CIS ..110 Table 1: Cereals ...............................................................................................................111 Table 2: Wheat .................................................................................................................112 Table 3: Course Grains ....................................................................................................113 Table 4: Maize .................................................................................................................114 Table 5: Oil Crops ............................................................................................................115 Table 6: Rape and Sunflower Seed ..................................................................................116 Table 7: Sugar beet ..........................................................................................................117 Table 8: Milk....................................................................................................................118 Table 9: Ruminant Meat ..................................................................................................119 Table 10: Pork ..................................................................................................................120 Table 11: Poultry..............................................................................................................121 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 World Bank’s monitoring process provides unique benchmark information for studying problems of this difficult transition in Eastern Europe and Central Asia and for the development of specific agricultural projects in the individual countries of the region. This year marks the eighth time that the Bank has reviewed the situation of agriculture and agricultural policy reforms in the ECA region. This activity has been implemented on the basis of a budget provided by the Chief Economist for regional studies. This volume, however, also marks the first year that eight of the ECA countries were not reviewed—as they became members of the European Union as of May 1, 2004. Their agricultural and rural development policies are now fully governed by EU Common Agricultural Policy (CAP) and therefore no longer fall under the transition category. Our assessment of agricultural policies in the nineteen remaining countries is based on a country-specific analysis prepared by World Bank staff members and local consultants most intimately involved in agricultural reforms in these countries. To evaluate the status of reforms, the World Bank developed a special methodology 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 are supplemented with an aggregated statistical database derived from the FAO agricultural database. June 30, 2005 Laura Tuck Director, ECSSD v Preface This volume is a compilation of a year’s work analyzing rural sector policy developments covering the Europe and Central Asia (ECA) region. The study is focused on agricultural policies, specifically actions required to progress in the transition process. Although we recognize the importance of the social and natural resource management aspects of 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 Holger Kray in drafting the summary analysis, updating the statistical data base and compiling the country-specific policy matrices into a consistent framework. Country-specific matrices were prepared for all the countries in the region except the EU member countries, and Turkey. The individual country policy matrices were prepared by the following Task Managers: Albania (J. Lampietti), Armenia (F. Jungbluth), Azerbaijan (W. Sutton, R. Chirag-Zade), Belarus (B. Shamsiev), Bosnia and Herzegovina (R. Jaisaard), Bulgaria (A. Georgieva), Croatia (A. Nacev), Georgia (R. Jaisaard), Kazakhstan (M. Guadagni), Kyrgyz Republic (G. Schreiber), FYR Macedonia (T. Konishi), Moldova (W. Sutton), Romania (G. Ionita), Russia (V. Matusevich), Serbia and Montenegro (T. Arin), Tajikistan (T. Sampath, B. Shamsiev), Turkmenistan (M. Lundell, B. Shamsiev), Ukraine (A. Kaliberda), and Uzbekistan (M. Guadagni, B. Shamsiev). Laura Tuck, Sector Director (ECSSD) and Benoit Blarel, Sector Manager (ECSSD) provided valuable comments and suggestions throughout the study. vi Executive Summary This paper provides a brief overview of agricultural economies in the ECA region between 1999 and 2004. It updates the information presented in the World Bank Discussion Paper no. 3871 and the ECSSD Working Papers no. 132, 243, 32,4 365, 376, and 387 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. According to our analysis, countries belonging to the advanced reformer group (total reform score above 7.0) continued their progress in reforming their agricultural policies. It is not surprising that this group is led by the two EU acceding countries, Bulgaria and Romania. It has to be mentioned, however, that—according to our indicators—their level of preparedness is less than the level reached by the EU-8 countries two years prior to accession. In this group we also find Albania and Armenia which implemented significant reforms in the late-90s but since then have not progresses further. Progress in Serbia and Montenegro is quite remarkable, but not surprising taking into account the history of this country. The performance of the moderate reformer group (total reform score below 7.0 and above 6.0) is less homogeneous regarding the direction of change. Bosnia-Herzegovina, the Russian Federation, and Ukraine made measurable progress in their agricultural reforms in 2004. Moldova and Georgia reversed slightly, while in Azerbaijan our scores do not indicate any progress for the last four years. The slow reformer group (total reform score below 6.0) has not changed much, both regarding composition and performance during the last years. These countries have made little change to their agricultural policy framework and basically operate with a rather low degree of market- oriented reforms. In aggregate, our analysis for 2004 indicates a further differentiation between CEE and CIS countries in the pace of agricultural reform.  The possibility of EU membership has accelerated reforms in the EU acceding and candidate countries, notably in Romania, Bulgaria, and Croatia that were lagging somewhat behind the new EU member counties. The agriculture policy agenda in the CEE is characterized by 1 Csaki, 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. 2 Csaki, 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. 3 Csaki, 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. 4 Csaki, 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. 5 Csaki, 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. 6 Csaki, C. and Zuschlag, A. The Agrarian Economies of Central-Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress – 2002, June 2003, The World Bank. 7 Csaki, C. and Zuschlag, A. The Agrarian Economies of Central-Eastern Europe and the Commonwealth of Independent States: An Update on Status and Progress – 2003, June 2004, The World Bank. vii 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 measurable progress has been achieved. Some of the smaller countries in the CIS such as Armenia, Azerbaijan, and Georgia, which had accelerated the reforms in the previous few years, have not taken further steps in 2004. At the lower end of the reform scale, Uzbekistan and Tajikistan also made some progress, but slowed somewhat in 2004. 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 I. The Reform Process in the Rural Sector 1. 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 2. 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. 3. 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 18. Our analysis intentionally emphasizes “on the ground” results as opposed to pure policy reforms (which are often legislated but not implemented). 4. According to our analysis, countries belonging to the advanced reformer group (total reform score above 7.0) continued their progress in reforming their agricultural policies. It is not surprising that this group is led by the two EU acceding countries, Bulgaria and Romania. It has 8 The 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 2. These ratings were then revised in several review sessions to improve consistency of rankings. An earlier version of this analysis was presented by Csaki and Lerman, 1997. The current version of the numerical rankings was published first by Csaki and Nash, 1997 . 1 to be mentioned, however, that—according to our indicators—their level of preparedness is less than the level reached by the EU-8 countries two years prior to accession. In this group we also find Albania and Armenia which implemented significant reforms in the late-90s but since then have not progresses further. Progress in Serbia and Montenegro is quite remarkable, but not surprising taking into account the history of this country. 5. The performance of the moderate reformer group (total reform score below 7.0 and above 6.0) is less homogeneous regarding the direction of change. Bosnia-Herzegovina, the Russian Federation, and Ukraine made measurable progress in their agricultural reforms in 2004. Moldova and Georgia reversed slightly, while in Azerbaijan our scores do not indicate any progress for the last four years. 6. The slow reformer group (below 6.0) has not changed much, both regarding composition and performance during the last years. These countries have made little change to their agricultural policy framework and basically operate with a rather low degree of market-oriented reforms. 7. Our analysis of the reform performance for individual countries in 1997-2004 indicates a further differentiation between CEE and CIS countries in the pace of agricultural reform. Due to the adoption of more comprehensive transition policies, the transformation of agriculture is most advanced in Central Europe and, in particular, in the countries that became members of EU in 20049. In fact, in the remaining CEE countries in the current analysis the reform process is also quite advanced (Figure 1). The possibility of EU membership has accelerated reforms in the leading EU acceding and candidate countries, most notably in Bulgaria, Romania, and Croatia The agriculture policy agenda in these countries is characterized by efforts to complete the transition, to cope with the increased social problems in rural areas, and to prepare for the implementation of EU CAP market and rural development policies. 8. 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 measurable progress has been achieved. 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 2004. At the lower end of the reform scale, Tajikistan and Uzbekistan have also made some 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 1). 9. 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 initial expectations. The relatively rapid growth of production that characterized the Chinese 9 This volume marks the first year that the eight ECA countries which became members of the EU in 2004 were not reviewed. Their agricultural and rural development policies are now fully governed by EU Common Agricultural Policy (CAP) and therefore no longer fall under the transition category. 2 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:  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. 3 Table 1: Status of Agricultural Reforms in CEE and CIS Countries at the end of 2004 1 = centrally planned economy 10 = completed market reforms Prices & Markets Land Market Agro-Processing Rural Finance Institutions Total Score 2002 2004 2003 2002 2001 2000 1999 2004 2003 2002 2001 2000 1999 2004 2003 2002 2001 2000 1999 2004 2003 2002 2001 2000 1999 2004 2003 2002 2001 2000 1999 2004 2003 2001 2000 1999 Bulgaria 9 8 8 9 9 9 9 8 8 8 8 8 9 9 9 8 8 8 7 7 7 7 7 6 9 9 8 8 8 7 8.6 8.2 8.0 8.0 8.0 7.6 Romania 8 7 8 7 7 7 8 8 8 8 8 8 9 8 8 8 8 7 8 7 7 7 6 6 8 7 7 7 6 5 8.2 7.4 7.6 7.4 7.0 6.6 Armenia 8 8 8 8 8 7 9 9 8 8 8 8 8 8 8 8 8 7 7 7 7 7 7 7 7 6 6 6 6 7 7.8 7.6 7.4 7.4 7.4 7.2 Albania 9 9 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 7 7 7 7 6 5 7 7 7 7 6 5 7.8 7.8 7.6 7.6 7.2 6.8 Croatia 8 7 7 7 7 6 7 8 8 7 7 6 9 8 8 7 7 7 7 6 6 6 6 6 8 8 8 8 8 8 7.8 7.4 7.4 7.0 7.0 6.6 Kyrgyz Rep 8 8 7 7 7 7 8 8 7 7 7 7 7 6 6 6 6 6 7 7 7 6 6 6 7 6 6 5 5 6 7.4 7.0 6.6 6.2 6.2 6.4 Macedonia 8 8 8 8 8 8 7 7 7 7 7 7 7 6 6 6 6 7 7 6 6 5 5 4 7 7 7 7 7 7 7.2 6.8 6.8 6.6 6.6 6.6 Serbia&M 8 7 7 6 3 - 7 7 7 5 5 - 7 6 6 5 3 - 6 6 5 3 3 - 7 7 7 5 4 - 7.0 6.6 6.4 4.8 3.6 - Azerbaijan 7 8 8 8 8 7 9 8 8 8 8 8 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 5 5 5 6.6 6.6 6.6 6.6 6.4 6.2 Bosnia HG 7 7 7 7 6 6 7 6 6 7 6 6 6 6 6 6 6 6 7 6 6 6 6 6 5 5 5 5 5 5 6.4 6.0 6.0 6.2 5.8 5.8 Russia 6 6 6 6 6 6 5 5 5 5 5 5 9 8 8 8 7 7 6 5 5 5 5 5 5 5 5 5 5 5 6.2 5.8 5.8 5.8 5.6 5.6 Kazakhstan 5 6 6 6 6 6 5 5 5 5 5 5 8 7 7 7 6 6 8 7 6 6 6 6 5 5 5 5 5 5 6.2 6.0 5.8 5.8 5.6 5.6 Ukraine 6 6 6 7 6 6 6 6 6 6 6 6 8 7 7 7 7 6 7 6 6 6 6 5 4 4 4 4 4 4 6.2 5.8 5.8 6.0 5.8 5.4 Moldova 6 6 7 7 7 7 7 7 7 7 8 7 6 6 6 6 6 6 7 7 7 6 6 5 4 4 4 4 5 5 6.0 6.0 6.2 6.0 6.4 6.0 Georgia 8 8 9 9 8 8 7 6 6 7 7 6 5 5 5 5 5 5 6 6 6 7 6 6 4 4 4 5 5 5 6.0 5.8 6.0 6.6 6.2 6.0 Tajikistan 6 6 6 6 6 5 6 7 6 6 6 5 5 5 5 5 5 5 5 4 3 3 2 2 4 4 4 4 4 4 5.2 5.2 4.8 4.8 4.6 4.2 Uzbekistan 4 4 5 4 3 3 5 5 4 4 4 2 5 4 4 4 3 1 3 3 3 2 2 1 3 3 3 3 3 3 4.0 3.8 3.8 3.4 3.0 2.0 Belarus 3 2 2 2 2 2 2 2 2 2 2 2 3 2 2 2 2 2 2 2 2 2 2 2 3 2 1 1 1 1 2.6 2.0 1.8 1.8 1.8 1.8 Turkmenistan 2 3 2 2 2 2 2 2 3 3 3 3 2 2 2 2 1 1 1 1 1 1 1 1 2 2 2 2 2 3 1.8 2.0 2.0 2.0 1.8 2.0 AVERAGE 6.6 6.5 6.6 6.5 6.2 6.1 6.5 6.4 6.3 6.2 6.2 5.9 6.7 6.2 6.2 6.0 5.7 5.6 6.0 5.6 5.4 5.2 4.9 4.7 5.5 5.3 5.2 5.1 4.9 5.0 6.3 6.0 5.9 5.8 5.6 5.5 Source: World Bank Estimates 4 Table 2: Key to Numerical Ratings Used in Table 1 Reform Privatization of Area Market Conforming Institutional Land Reform Agroprocessing and Rural Financial Systems Policy Environment Framework Scores Input Supply 1-2 Direct state control of prices System dominated by Monopolistic state owned Soviet type system, with Institutions of command and markets. large-scale farms. industries. “Agrobank” as the sole economy. financing channel. 3-4 Deregulation with Legal framework for land Spontaneous privatization New banking regulations Modest restructuring of indicative prices, and price privatization and farm and mass privatization in are introduced; little or no government and public controls; significant NTB restructuring in place, design of early commercial banking. institutions. on imports or exports. implementation launched implementation stage. only recently. 5-6 Mainly liberalized markets Advanced stage of land Implementation of Restructuring of existing Partly restructured constrained by the absence privatization, but large- privatization programs in banking system, governmental and local of competition and some scale farm restructuring is progress. emergence of commercial institutions. remaining controls on trade not fully complete. banks. policy. 7-8 All command economic Most land privatized, but Majority of industries Emergence of financial Government structure has type interventions are titling is not finished and privatized with a institutions serving been refocused while removed. Market and trade land market not fully framework conducive for agriculture. research, extensions, and policies are in compliance functioning. foreign direct investment. education are being with WTO; however, reorganized. domestic markets are not fully developed. 9-10 Competitive markets with Farming structure based Privatized agro-industries Efficient financial system Efficient public market conforming trade on private ownership and and input supply, with for agriculture, agro- institutions focused on and agricultural policies, active land markets. improved international industries, and services. the needs of private and no more than modest competitiveness. agriculture. protection. Source: World Bank. 5  Many issues related to land markets remain unresolved, particularly in the 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. 10. 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 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 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. 11. 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 6 levels, and has not significantly increased since, although a gentle upward trend can be observed in CEE countries since the mid 1990s. 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 new EU-member 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. 12. 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 Albania 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. 7 Figure 1: Reform Trends Advanced Reformers 10 2000 Reform Score 8 2001 6 2002 4 2003 2 2004 0 R Al Bu Ar C Ky M Se om ro ac b m r lg rb an gy at en ed ar an & ia ia z M ia ia on ia R ep ia Moderate Reformers 7 2000 Reform Score 7 2001 6 6 2002 6 6 2003 6 5 2004 5 5 Bo R U Az Ka M G us kr eo ol er sn za a do si rg ba in ia kh a va ia e i H s ja ta G n n Slow Reformers 5 2000 Reform Score 4 2001 3 2002 2 2003 1 2004 0 Ta Uz Be Tu jik rk be la ru m is ki ta en s st n an is ta n Source: World Bank Estimates 8 II. Uneven Reform Progress in Central Eastern Europe and the CIS 13. 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.  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. Bilateral negotiations between the EU Commission and Bulgaria and Romania on the agricultural chapter have recently been closed and consensus has been reached on the detailed EU offer as to the type of CAP-related support it intends to offer the new entrants. However, the strategy that the countries preparing for EU membership will select in introducing the EU’s CAP remains to be seen. In many of the 2004 new EU member states EU accession had been used as a justification to increase support to agriculture prior to EU accession. 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.  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 continue 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 existing large scale farming have undergone significant change, became privately owned, and adapted to market economy conditions. In some countries, 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 remain priority areas for further reform. In a few countries, a heated debate is ongoing regarding the ownership of land by companies and foreign nationals. 9  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 only very few countries of the former Soviet Union. This is the case for Armenia, Georgia, and Kyrgyz Republic 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 the new EU member countries 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 new EU member countries, significant foreign direct investment (FDI) has flown into modernizing the agroprocessing sector. The share of total FDI directed 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. 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 de-monopolization of the agroprocessing industry has resulted in restructuring and increased efficiency of the food-processing sector. An emerging recovery based on the restructuring of ownership is observed especially in Russia and Ukraine. 10 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 many Central European and CIS countries. In the CEE countries, the financing of agriculture has improved considerably since 1994, but still remains relatively weak. The new private financing institutions require managerial capacity building and are financially vulnerable. In recent years, however, a significant share of the banking sector became foreign owned – this resulting in improved efficiency and profitability. The creation of an agriculture-oriented rural banking network has been progressing, resulting in the establishment and increasingly active operation of agricultural credit co-operatives and financial institutions specializing in rural areas.  In the great majority of CIS countries the rural financial system is not yet fully adjusted to the needs of a market 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 Moldova, and the number of loans extended by the processing industry is growing. e) Institutional reforms proceed slower than all other reform areas 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 further transformation in these countries. Reforms toward the ability to effectively integrate into the common market and to operate in the EU Common Market Organization still remain the most pressing priorities. In addition to technical and human capacity building in public administration, further qualitative development is required in practically all areas of the institutional systems for market-oriented 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. Due to the general economic recession and disruption it 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, in collecting taxes, and establishing the basic conditions for macro-economic stability. Underpaid and unmotivated civil servants often strive to supplement their incomes through corruption. Training and research centers suffer from severe financial problems. 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 appear to be improving, and significant improvements can be observed in some individual countries. 11 B. Policy Matrices Advanced Reformers (countries with a ranking score of 7.0 or above) Bulgaria Romania Armenia Albania Croatia Kyrgyz Republic Macedonia Serbia & Montenegro 12 BULGARIA 2004 Total Agric. sector in GDP (2003) 10% Agricultural output in 2003 in Population(2003) 7.8 mil Agric. sector in active labor, percent of 1990 89.2% Rural incl. subsist. farming (2003) 25% Population(2003) 30.2 % Food and agriculture Share of livestock in agriculture in exports (2003) 10.5% (2003) 36.2% Total Area 11.1 m. ha in imports (2003) 5.6% Agriculture area: 5.79 m. ha Traditionally net exporter: Share of independent farms Arable land 56% (3.239m.ha) tobacco, sunflower seed, dairy (2003) 99% Orchards 2.9% products, wine, fruits and Irrigated 1.2% vegetables. Forested 30% (of total area) *Source: National Statistical Institute, MAF Agrostatistics, Annual Agrarian Report ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Prices are liberalized; free trade policy; Continue policy of stabilization and Framework for currency board has controlled inflation since liberal markets; 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, where and most prices were fully liberalized in 1998. the government still determines minimum • Price and trade restrictions and impediments, purchase prices. especially export taxes and licensing have been largely eliminated. B. Trade Policies • Taxes on agricultural exports and discretionary • Continue liberal trade regime import duty exemptions eliminated. An export • Continue compliance with WTO principles. tax, and later, export ban on wheat were • Keep tariffs on fertilizer imports and other temporarily introduced in 2003 following the agricultural inputs low. weak crop, but were lifted in 2004. • Proceed with introduction of CAP- • However since 2003 new tariffs were conforming policies. introduced for export certificates from the National Grain Service (1.5lv/t) and for phytosanitary certificates (2lv/t) which grain exporters claim are for purely fiscal purposes and which discourage exports. • Foreign trade regime fairly liberal. Tariffs are determined on the basis of international agreements such as the WTO, these with the EU, CEFTA and bilateral free trade agreements. • The import tariff regime provided in recent year’s high and non-uniform protection, especially for the processing industries. Some tariffs, such as fertilizer and especially poultry meat, are very high. • Member of WTO since Dec 1, 1996. • Member of CEFTA since Jan 1, 1999. • Free trade agreements with Turkey, Macedonia, Lithuania, Israel, Estonia, Croatia. 13 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS B. Trade Policies • EU Association Agreement signed in 1995, (continued) subsequent “double zero” and “double profit” agreements signed for liberalized trade in agrifoods. • The country plans to join the EU on January 1, 2007 and introduce by that date 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. • The establishment of a Single Paying and Intervention Agency is in course, supported by an EU Phare project. • By government decree from 2004 State Fund Agriculture can extend export subsidies. The list of the products to which this is applied is determined each year by the Council of Ministers. For 2004 the products included processed fruits and vegetables, meat. The utilization of the export subsidies met with difficulties as few exporters ventured to apply due to low competitiveness in the sector. C. Taxation • Single 20% VAT applies to all products and • Lower VAT level in the medium term to services. stimulate food consumption and production; • The VAT rebate period was shortened to 30 lower VAT registration thresholds so that days from 45 days however this in practice is agricultural enterprises can claim rebate; not applied. Especially grain traders, along with reduce waiting period for rebate; improve other commodity exporters, have been affected administration of rebates so that taxpayers negatively by the long rebate period. are not penalized for non-payment at lower level of the marketing chain. 14 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and While privatization of state and collective Creation of a competitive and efficient Farm Restructuring farms is completed, large-scale emergence of farming system. efficient private farm units remains a significant challenge. • Complete the reform in land registration • Initiated in 1991, the protracted process of and cadastre system to guarantee security of land restitution and liquidation of collective tenure. farms devastated most farm assets and led to • Continue with the improvement of excessive land fragmentation. property registration and cadastre legislation • All farmland has been restituted (99%), and to promote the development of land markets most land formally titled (90%), except for • Promote an active land market and the use cases where formerly rural land is now located of land as collateral to improve access to in town centers. long-term credit. • Land transactions are picking up, especially in • Promote market-led land consolidation Dobruja and near the coast, but land prices are including by investments in rural still low, compared with Bulgaria’s Central infrastructure, pass the relevant legislation European neighbors. Land fragmentation is a and stimulate the process by various persistent problem and impediment to a more measures, proceeding from experience active land market, and to a more efficient gained from pilot projects. agriculture. • Plan and finalize the reforms in forest • With the legislative changes from February management. 2005 the purchase of land by foreign persons has been allowed following a 7 year transitional period after EU accession. • Forest land restitution is completed but debates on the most appropriate model for forest management are still underway 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 completed with the exception • Continue to make State Reserve activities of the tobacco holding Bulgartabac. more predictable and transparent by • Some progress in establishment of warehouse implementing management approaches and receipts system (500,000 mt licensed warehouse transparency measures. capacity now exists), due in part to the state • Improve market infrastructure including subsidy for storage of grain in public development of commodity exchange trade warehouse. and information systems. • Operations of the State Reserve partially • Further develop the warehouse receipts improved. GOB still makes recourse to the system. State Reserve, though the interventions are with • Update the strategy and assessment of the very limited scope and little market impact, irrigation network, and the needs for its while the Intervention Agency is still in the rehabilitation. process of being established. 15 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive • Law on Water Users’ Organizations has been • Expedite formation of water users’ Agroprocessing and passed; a new Water Agency formed, but the associations, and transfer irrigation assets to Services for state-owned irrigation company still needs to be them. Agriculture. restructured. • Restructure the Irrigation Systems (continued) Company. • SAPARD is successfully implemented as concerns the private sector measures, and • Prepare for the use of EU structural funds especially investments in agricultural holdings, by increasing the absorption capacity of agroprocessing and diversification of economic producers and local administrations that activities. would contribute to making rural areas attractive for investments 4. Rural Finance • The banking system is stable and all banks are • Improve access to rural credit for privatized, mostly by foreign banks. creditworthy borrowers by extending • Still high risk stemming from low profitability outreach of the bank and non-bank and poor credit history greatly limit access to intermediaries. credit in the sector. • Develop the legislative basis for the credit • Most working capital needs are met from cooperatives to increase small farmer access farmers’ own-sources as banks are reluctant to to credit. credit the sector; but the volume of bank credit is expanding (albeit from a low base) especially to agro-industrial firms; the term structure of loans is very slowly expanding from short term (up to 12 months) to medium term (up to 5 years). • Donor supported credit co-op network is small, but results are encouraging. 5. Institutional Agricultural institutions including research Start with a narrow focus on essential Framework and education have deteriorated, lacking priorities in public sector administration policy direction, and losing skilled staff. to ensure success. • Instead of guiding agriculture to a market- • Develop a solid information database and based system, MAF had in the past focused only statistical analysis capability for agricultural on ad hoc actions often motivated by a crisis or policy decision-making, encompassing data pressure from a special interest lobby. from diverse sources (household, commodity • Statistical information on agricultural level, sector, financial system). Provide production and prices, agro industry, and rural access to statistical/agricultural information finance, is still not very accurate though and analysis to the public. improving with the introduction of Eurostat • Rationalize agricultural services by methodology. salvaging remaining valuable assets in • Financial resources barely cover salaries and research and education. are spread too thinly over rapidly declining • Develop extension and export promotion number of centers, staff and projects. Little services to farmers, including smaller and innovative research is underway, both medium size farms lacking access to technology and equipment are outdated. commercial information sources. • Adjustment in agricultural education has been limited and public extension services are under- funded and not efficient. 16 ROMANIA 2004 Total Population 22.4 mil Agriculture in GDP (2003) 13.1 % Gross Agricultural Output Rural Population 45.6% Food and agriculture (GAO) in 2001 as percentage 91% Total Area 23.8 mil ha in active labor (2003) 41.0 % of 1989-91 level Agriculture area: 14.8 mil ha Food and agriculture Livestock production in as 91% Arable land 63.2% in exports (2003) 3.4 % Percentage of 1989-91 level Orchards, vineyards 3.2 % in imports (2003) 8.2 % Share of livestock in 33.8% with Irrigation Facilities 13 % Traditionally net exporter: live agriculture as % of GAO Arable w/o Irrigation 19% cattle and sheep, meat (pork, beef, (2003) 93.2% poultry), grains, sunflower oil, wine Agricultural land in private Forested 27.9 % use (2003) Share of independent full and part-time family farms in total 86% agricultural area (2003) ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Food and agriculture operates in a price and Maintain relatively liberal market Framework for trade environment with direct links to the system initiated under ASAL, with Agriculture world market. Weak private market minimal Government intervention. institutions, not enough price transparency, Support the development of private high transport costs and poor logistics inhibit market organizations, market market development. information systems and better infrastructure and logistics. A. Prices/Subsidies • Gradual price liberalization started in Oct-90 • Create predictable and consistent but substantial reform only after February 1997, system of Government policy when agricultural producer and consumer prices instruments for agriculture. were liberalized. No uniform minimum price • Revise existing support programs schemes exist, but after a gradual expansion of and continue improving targeting and ”premia” (initially for wheat and milk), starting reducing inefficient allocation. with 2002 subsidies are delivered on a per-ton • Avoid the use of minimal price basis to “commercial” farms regardless their programs and relate programs, if any, size (area), for major commodities (wheat, to world market prices rather than barley, sunflower, soybeans, maize, vegetables, average cost of production. fruits and milk, beef, pig and poultry meat). • Develop and support initiatives for • Producer prices close to EU levels. A large market information system (price and share of production is not marketed. Consumer output) and improved physical market prices slightly below EU levels. infrastructure (roads, • Regional price variation is significant, due to communications, marketplaces) as high transport costs, poor logistics and weak well as “soft” infrastructure arbitrage. Lack of a market information system (warehouse receipts, grain grading combined with high transactions costs systems, marketing groups, contract contribute to regionalization of domestic trade enforcement mechanisms, etc). in food products; lack of off-storage security • Develop and implement a new, combined with high interest costs of storage and demand driven, subsidy system for poor grading reduce incentives for off-farm irrigation services, based on storage. distribution of subsidies to users, following enactment of a new Law on Land Reclamation. 17 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS A. Prices/Subsidies • Subsidies (including directed subsidized (continued) credit) have reduced from a level of about $570 million at the beginning of reforms in 1997, to $316m (2000), $276m (2002) and $281m (2003). A system of general input vouchers, was put in place during 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 family 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. B. Trade Policies • Tariffs for food and agriculture products • Maintain trade policy framework reduced from a trade-weighted average of 80% implemented from 1997-99. Refrain to 27% in 1997, and to 22% in 1999: maximum from backsliding on quantitative tariffs reduced to 40-45% in 1997/98 for milk controls or temporary import duty and dairy products and some non-sensitive exemptions. commodities. By mid-1999 this was the • Pursue active policy to improve maximum for all commodities. This regime has market access for Romania food and been successfully maintained. Further reduction agriculture products, including in import tariffs for pork and poultry meat to improvement of food safety standards 22% in 2001, as to increase competition on meat to conform with EU standards. market. Temporary tariffs exemptions for cereals imports (wheat, barley, maize) were enforced for Jan-Jun 04 and reductions of import tariffs on wine, spirits, vinegar and vermouth were applied from Jan 04. • Licensing and quantitative restrictions for exports and imports removed starting Jun 97, and temporary import duty exemptions ended. Some backsliding on these measures 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; 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. • Agricultural foreign trade is privatized. 18 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS C. Taxation • Agricultural taxes are generally lower than • Improve tax administration and tax other sectors, because of large share of family collection in general. farms. Profit taxes on primary production (paid • Increase taxation of informal by incorporated farms) is 25% (this is also the segments of agriculture while regular rate). In 1997-1999, some agricultural continuing to decrease taxation of products were either tax exempt, or benefited formal sector as well as reported from a lower rate of VAT, but these exemptions personal incomes. have been eliminated, and a uniform rate of • Provide increased tax incentives for 19% now applies. investment from properly reported • An “agricultural revenue tax” (based on corporate end personal incomes. amount of land owned) was legislated in 1994, • Reduce tax disincentives to and suspended in 1997. The suspension has investment in capital goods. This been renewed in each year since 1997. The inhibits agricultural machinery Government failed in 2001 to pass a new ag. investment and limits development of land tax law (for farms holdings over 10 ha). a leasing market. While the suspension of the 1994 law was continued in 2002, starting with 2003 the tax will become effective. • The informal sector, which accounts for most agricultural production, but a much smaller portion of the marketable surplus, generally escapes direct taxation. 2. Land Reform and • A land reform was legislated in 1991, and its • Privately owned smaller and larger Farm Restructuring implementation is close to completion. Land viable farms are the dominant under former collective farms was restituted to components of farming system with the former owners and their heirs up to 10 ha, or transferable ownership rights. given to the workers of the collective farms (0.5 • Accelerate the titling of newly ha). About 9.3m. ha were restituted to about privatized land. 4.7m. persons. At end of 2002 88.4% of the • Introduce market based measures to claimants had definitive titles (covering 81% of facilitate a speedy consolidation of area to be restituted). After a long political land ownership and changes in farm debate started in 1997, a new Law on land sizes (e.g. internet based land restitution was issued in January 2000, allowing information service, as in Bulgaria). a high limit of restituted land (50 ha). This could involve support for Complicated implementation and subsequent dissemination of land market changes (an Ordinance in 2001, and a Law information, legal advice on land 2002), made this process extremely slow. transactions for those entering or • Another 2.2 mil. ha, mainly in the mountain exiting farming, or more direct and hilly areas, was not collectivized during incentives to support exit of nonviable central planning. The owners now have full farmers and entrance of potentially ownership rights over the land, and it is viable ones. operated as small-scale family farms. • Finalize liquidation of non-viable • In Oct. 97, the Parliament adopted a Law on state farms remained after the legal circulation of the land that removed the privatization and conclude concession moratorium on the land sales. Amendments to of their respective land to private the Leasing Law eased restrictions on leasing. management. 19 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and • The privately-owned land is organized in Farm Restructuring small-scale farms and (formal and informal) (continued) associations. In 2003 (December), about 5.51 mil. ha out of the total 12.78 mil. ha of private agricultural land, were organized into formal associations (aver. 351 ha each), about 0.72m ha into informal associations (about 7.5 ha each) and 6.56m 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 (organized as commercial companies) operated in 2003 about 0.18 mil. ha of arable land. 123 companies are under restructuring and sale of assets and 332 companies are under judicial liquidation. Their respective land is subject to concession to private management. 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 on 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 December 2003, the number of privatized state farms was 284. It appears that the state farms that failed to be privatized will eventually be liquidated, either judicially or administratively (through assets sales). Completion of state farm privatization remains a key unfinished task on the policy agenda.  Transactions with land are still slow and the prices small, making land sales unattractive for owners. The total area subject to land sales is of about 350,000 ha and the average price for 2003 transactions was of US$280 per hectare. 20 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive Privatization of agroprocessing, input Competitive, privately owned Agroprocessing and suppliers, storage and services was slow until agroprocessing and input supply. Services for Agriculture. 1996. An impetus to the privatization • Complete the privatization of grain process occurred in 1997, and major progress storage companies, animal farms, was made by the end of 1999. fertilizer companies, food industry • As of mid-1999, most out of a total number of companies, and state farms. 534 agro-industrial companies have been • Implement EU conforming quality privatized or placed under liquidation, including and safety standards for agricultural about two-thirds of cereals storage companies imports and exports. and most pig/poultry enterprises. The sugar and • Improve contract discipline and tobacco industries still lag in the process. market transparency. • The certified seed business was organized • Promote research and development within two commercial companies, producing of new products and markets. grain and oilseed varieties, and vegetable seed varieties. These were privatized. • Reform the land reclamation agency (SNIF), transferring assets to • All Agricultural Service Companies (including voluntary water users associations. machinery service companies, or Agnomens), have been privatized or placed under • Stimulate and support increase of liquidation. coverage of viable irrigation schemes with functional WUAs. Reform the • The upstream and downstream sectors are irrigation subsidies distribution demonopolized. However, the slow system targeting the beneficiaries privatization pace and the dominance of the (water users) instead of SNIF. MEBO privatization method, has blocked the Restructure the SNIF through infusion of capital in these companies, and establishment of a new Land maintains obsolete production methods, high Reclamation Agency and implement costs and significant marketing margins. sector reform. • In 1996, gross output of agroprocessing (except tobacco) was around 65% of the 1991 level. • 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 2003 the area covered by existing 142 WUA’s was 493,157 ha, and area with irrigation facilities transferred was 312,333 ha. • Implementation of SAPARD measure for improving processing and marketing of agricultural products (Measure 1.1) started in last part of 2002 with few applications received. In 2003, 105 projects were contracted amounting to over Euro 110m of which Euro 6.0m disbursed to date. 21 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Finance An appropriate financial system for Viable financial institutions serving privatized agriculture being developed. the agricultural sector efficiently. • Up to 1996, most of the agricultural lending • Develop bank network serving rural was provided through directed credit lines from areas. National Bank of Romania, intermediated • Promote the emergence of mainly through Banca Agricola and backed-up competitive collateral services for with state guarantees. Despite the preferential agriculture (accept land as collateral; interest rates (often with negative real rates), the develop the warehouse receipts collection rate for agriculture was worse than in system; start collateral registration; other sectors (60-70%). NBR-supplied credit develop grain grading and commodity contributed significantly to inflation. In 1997 exchanges). this practice was stopped. • Develop credit cooperatives and • In 1997, 1,050 bn Lei (US$150m) of directed other low-cost financial credit was placed on the budget and lent for intermediaries in rural areas capable grain planting (550 bn Lei) and for purchase of of serving smaller clients. domestic bread-making wheat (500 bn Lei). • Promote leasing industry by The Government continued this mechanism in reducing tax disincentives for capital 1998, but substantially reduced total credit to goods investments. $7m. 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 law to reform cooperatives has been agreed upon and the NBR assumed responsibility for regulation of credit cooperatives. • Nominal interest rates for agricultural credit averaged 25% in 2003, compared to an average inflation rate of 25%. 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. In addition, legislation for warehouse receipts has been passed and is awaiting implementation. • Banca Agricola’ s privatized contract was ratified by the GOR in early 2001. 22 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional Institutional structure was reformed, but the Promote the use of and support for Framework MOA has been slow to quality of public commercial and private services, however, is not in place. agriculture. • Ministry of Agriculture renounced its former • Complete the reorganization and role in price control or supervision and direct improve quality of public agricultural distribution of subsidies, in favor of market- administration to the needs of a oriented functions such policy formulation, market economy. MOA should spend extension, research, market information, rural less discretionary funds on subsidies development. Only tentative steps have been and more on public goods. taken in this direction, however. • Complete the reform of agricultural • Seven inter-professional organizations were extension and research. Establish a formally established (for sugar, beer, pork, sustainable research framework. wine, milk, cereals, vegetal fats), and another • Provide assistance in the six are in process of developing. development of the producer • Information system required by a market associations, stimulation of farmer based agriculture is only partially in place. marketing and input purchase groups. Price information and input use data for • Support productive investment in different types of farm units is virtually rural public infrastructure for grain nonexistent. marketing and irrigation, roads, water • Public investment in agricultural infrastructure supply, etc.. is not prioritized on the basis of economic • Prepare, in collaboration with other analysis. interested ministries, a rural water • In June 2002, the Ministry of Agriculture, supply and sanitation policy as Food and Forestry (MAFF) merged with the framework for further development of Ministry of Water and Environment Protection such investment projects financed to form the Ministry of Agriculture, Forestry, from domestic and foreign funds. Water and Environment (MAFWE). In February 2004, Based on a recent restructuring of the Government, the new Ministry of Environment and Water Management was and the MAFWE became the Ministry of Agriculture, Forestry and Rural Development. This may involve an increased attention to rural development activities but signs of such new trend are yet to emerge from the ministry. 23 ARMENIA 2004 Total Population 3.0 mil. Food and agriculture in Agricultural output in 2004 as Rural Population 35.2 % Net Material Product 2000 27% percentage of 1988 level. 100% Food and agriculture in Livestock production in 2004 Total Area 3.0 mil ha active labor (2004) 42% as percentage of 1988 level 84% Agriculture area: 1.4 mil ha Food and agriculture Share of livestock in agriculture Arable land 35% in exports (2004) 14% (2004). 45% Orchards 4.5% in imports (2004) 20% Agricultural area in private Irrigated 20.1% ownership (2004). 100% Forested 12.8% Imports: grain, sugar, vegetable oil Share of independent private and some livestock products farms in total arable area Exports: beer, wine, (2004). 100% dried/processed fruits and Share of private sector in total vegetables, cheese agricultural output (2004). 100% ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Market liberalization is Distortion free marketing and incentive Framework for Agriculture advanced, although some delays system. in full completion. A. Prices/Subsidies • Agricultural producer and • Facilitate the phase-out of irrigation consumer prices were deregulated subsidies by converting Vayots-dzpor in 1992 and state orders for all pumping scheme into a gravity schemes products eliminated in 1995. and by increasing the water tariff. • There is no direct subsidization • Increase water fee collection rates from of agriculture and food prices. the current level of 71% in 2004 to 82% in Irrigation water is still subsidized. 2005 through adoption of post-offices as The cost recovery target for 2004 method of collection. of 56% has not been reached (recoveries amounting to about 35%), due to low fee levels and to a set of factors that did not help financial sustainability of Water Users Associations (20% of energy cost, VAT on bulk water, income and property taxes charged to WUAs). Billing improved notably and is expected to improve again in 2005. Under this conditions a realistic cost-recovery target for 2005 is 45% and a realistic amount of subsidy to the sector should be about 3.7 billion drams (down from 4.4 billion drams in 2004). • 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. 24 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS B. Trade Policies • Grain and other commodities for • Pursue active trade policy to improve state reserves are procured by market access for Armenian food and commercial methods. agricultural products, especially in the FSU • Food exports no longer require and Central and Eastern Europe. licenses. • Develop a legal and regulatory framework • Tariffs reduced to low and and adopt appropriate quality standards, uniform rates. and establish an independent food testing laboratory, to promote export of • WTO member since 2003. agricultural and agro-processed products. • Landlocked location and difficult relations with neighbors pose severe obstacles to exports and imports of inputs for agriculture and processing. C. Taxation • 20% VAT (farmers are exempt). • Simplify and reduce taxation in agro- • Taxation system will change in processing and promote investments via tax line with WTO agreements in incentives. 2008. • Review taxation requirements under WTO and assure that changes to the taxation system do not have a negative effect on agricultural production and processing structures now evolving. 2. Land Reform and Farm Comprehensive land reform Individual private farming is the Restructuring implemented, transferring most predominant farming structure, with arable and perennial crop land secure and transferable ownership to private owners. rights. • Agriculture was de-collectivized • Complete the automated cadastre system in 1991. Only about 15% of to provide the information base for land arable land is kept in state reserve, management and land markets; and to which is utilized by leasing and is facilitate market-driven land consolidation. now transferred into communal • Rules and regulations for assigning land ownership and can be sold through use categories and assessing land values for auctions to private farmers. land tax purposes need to be simplified and • Pastures and meadows are to reflect reality more accurately. largely communal owned, with • Strengthen the rural credit system and some being sold while most are land mortgage procedures. leased. • The land market is now beginning to develop. • A property registration system has been established and is operating satisfactorily. Automation of the system is underway. 25 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive Agro- Agro-processing and services for Competitive, privately owned agro- processing and Services for agriculture privatized. processing and input supply. Agriculture • Privatization of agro-processing • Establish feasible and reasonable quality and input supply was included in and safety standards for agricultural imports the privatization program and exports. implemented in 1995-98. • Promote joint ventures to tap foreign • Foreign participation in the agro- expertise, technology and capital, and to processing privatization is provide access to foreign markets. increasing. • Promote research and development of new • In 2004 agriculture output grew markets and products, especially those by 14.5% and grew stronger than which can be produced by medium-sized other sectors. Investments in agro- firms with low capital-intensive processing are increasing. technologies. • Continue to support client oriented agricultural and business advisory systems. 4. Rural Finance Inadequate financial services for Promote the development of viable private agriculture. financial institutions serving the • The commercial banking sector agricultural sector. is generally not interested and • Facilitate growth of Banks and non- knowledgeable in lending to banking institutions into rural areas and the agriculture, the Agricultural agricultural sector. Cooperative Bank of Armenia • Ensure a consistent and adequate legal (ACBA) is lending, and major framework for non-banking financial agro-processors are financing their institutions. contract growers. • There is a growing network of credit unions and micro-finance providers, but demand for credit significantly exceeds supply. • The establishment of an effective real estate cadastre has not yet led to a significantly increased use of agricultural land as collateral. 26 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional Framework Adjustment of institutional Efficient and effective public sector structure is slow and administration and support for private constrained by budgetary and commercial agriculture. difficulties. • Develop the strategic priorities further and • A Sustainable Agricultural elaborate action plans; adjust budget Development Strategy has been according to identified priorities. adopted in 2004. • Assure adequate budgeting of agricultural • Public activities in agricultural and business advisory systems. research and education are • Complete the reform of agricultural seriously hampered by budgetary education and research and rationalize the difficulties. An agricultural links between research, extension and extension system has been created, agricultural education. but limited mobility/field presence • Continue to implement measures aimed at of agents has been a constraint on strengthening WUAs, particularly relating service provision. to financial management, irrigation • Water code, WUA law and technique, O&M, and self-governance. associated regulations have been Formulate a comprehensive vision towards enacted. Almost all of the 54 WUAs and defend any possible “infant- WUAs (except three) signed water industry” type of support (most delivery contract with the Water importantly, exemption from the VAT and Supply Agency. Establishment of other taxes or maintaining promises of a first federation of WUAs is in support made by decree (decree No. 654 N preparation. The Water Supply on over-normative water needs). Agency is still an organization that lacks accountability and even a basic clear business plan. Restructuring of WSA is impossible when basic data about its activity are not available or comprehensible. The only semi- understandable measure is the planned reduction of a third of its personnel as planned for next months (presumably involves those workers deemed to be redundant as a result of the WUAs’ take-over). 27 ALBANIA 2004 Total Population 3.1 million Agriculture in GDP (2002) 25.4% Agricultural output in 2002 Rural Population 59% Food and agriculture in as percentage of 1989 level 143% Active labor force (2002) 42% Livestock production 2002 Total Area 2.87 mil. ha Food and agriculture as percentage of 1989 level 183% Agricultural Area 1.3 mil. ha in exports (2002) 10 % Share of livestock in agriculture Arable Land 25% in imports (2002) 17 % (2002) 45% Irrigated 28.3% Agricultural area in private Orchards 17% Currently an exporter of: Use (2002) 100% Natural Grassland 15% Vegetable, fruit, fish products and Share of family farms in total Forested 36% tobacco agricultural land (2002) 100% Share of private sector in total Agricultural output (2002) 100% ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-Economic Framework for Markets and prices are fully Distortion free marketing and Agriculture liberalized. Market structures incentive system and a more open remain weak, but are improving trade policy. A. Prices/Subsidies with improved wholesale and retail structure and infrastructure • Refrain from introducing investments. Trade policy open. agricultural price interventions. All agricultural producer and • Continue development of consumer prices deregulated. infrastructure with focus on • Government has retained small maintenance. subsidies for irrigation. • Improve means to target transfer • Markets are improving due to payments to rural poor. improvements in rural roads and • Continue to decrease barriers for market infrastructure. business development. • Growth in the fourth quarter of • Increase transparency and cost of 2004 was led by ag. Exports. doing business (permitting and • Public transfer system for low licensing etc.). income groups in rural areas has limited resources. B. Trade Policies • WTO member since September • Advance multilateral and bilateral 2000. trade agreements. • Recent import tariffs decrease: ad • Promote export production under valorem tariffs of 0-18%. preferential trade agreement. • Free trade agreement with • Review product range in agreements Macedonia, Kosovo, Bulgaria and and emphasize products of high Croatia. importance to the Albanian economy. • Member of Stability Pact for South • Start working on implementing Eastern Europe. quality standards and food safety so as • Preferential trade agreement with to participate in European markets. EU. - Stability and Association Agreement negotiations with EU ongoing. 28 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS C. Taxation • Land tax introduced in 2003, • Review impact of current taxation implemented to varying degrees in practice and adjust policy municipalities, established as one accordingly. revenue resource for local Government. 2. Land Reform and Farm Comprehensive re-distribution of Full ownership rights and a Restructuring all public agricultural land working land market for efficient completed, but some of this land land transfer. still lacks secure, unambiguous property rights. • Complete first time registration of • All agricultural land re-distributed. land and correct errors in registration • 80% of the agricultural land has process. been registered and titled. First • Complete transfer forest and pasture registration process of remaining land to commune/village control, land is ongoing. develop forest management plans and • Forest and pasture land under budget adequately. public ownership and transfer to • Put appropriate measure in place to communes for management ongoing. resolve claims of former land owners • Inadequate legal and administrative and registration disputes. procedures for resolving ownership • Implement recommendations of disputes. review laws related to property rights • Land market is developing, though to improve efficiency and reduce informal transactions prevail due to transaction costs. tedious, costly and time consuming • Implement business plan for registry registration procedures. office and improve automation • Restitution law has been passed. process. Government is in the process of • Assure handling of key concerns in designing plan for implementation. finalization of restitution law. • Undertaking land transactions continues to be a time consuming and expensive process. 29 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive Agro-Processing • 90% of agro-processors now Competitive, privately owned and Services for Agriculture privatized, recent government agroprocessing, input supply and commitment to accelerate and service subsectors operating with complete privatization of the minimal government protection. remaining (mostly larger) State- • Facilitate access to private Owned Enterprises. commercial credit for private sector • Limited foreign investment in agro- enterprises, and continue support for processing. improving management techniques. • Agro-processors hampered by • Establish systems for defining and outdated equipment, lack of credit monitoring product quality. and a weak understanding of • Support membership in UPOV. competitive markets. • Improve property security and • Product quality is improving, but macro conditions to attract foreign monitoring of quality standards investment. remains rudimentary. • Seed sector dominated by public agencies, but increased involvement of private seed traders and availability of higher quality seeds. • Growing dynamic system of private sector input dealers has evolved but they remain constrained by poor access to credit. 4. Rural Financing Lack of an appropriate financial Viable financial institutions serving system for agriculture. the agricultural sector efficiently. • Rural credit is slowly becoming • Complete legal and regulatory available outside micro-credit-type framework for loan enforcement schemes, however access remains including bankruptcy law. limited. • Expand micro-credit-type • There are 15 private commercial organizations where appropriate, but banks and their interest in agriculture in a sustainable way with no rapid is increasing. scaling -up. • Interest rates of credits have slowly • Strengthen implementation and been decreasing. enforcement and supervision capacity • Savings and credit associations and of the Bank of Albania. village credit funds operating in many areas, process ongoing. • Law on savings and credit associations passed in 2001. 30 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional Framework Public institutions not yet adjusted Efficient and effective public sector to the needs of small-scale private administration and support for farmers; lack resources and commercial private agriculture. trained personnel. • Capacity building in national and • MAF now has mainly regulatory local governments. functions, but has yet to re-organize • Clear definition of responsibilities and train personnel to implement within decentralization plan. these functions effectively. • Advocate participatory budgeting. • Agricultural extension services are • Continued reform of extension and weak. Reform of the agricultural research programs and institutions. research system started. • Continued efforts to improve the • Limited MAF capacity for policy capacity for policy analysis. analysis. • MOA to clarify tasks and • PRSP and MTEF conducted and responsibilities within alignment of tasks and budgets decentralization structure. improved. • Improved and more transparent • Decentralization and civil service budget allocation in MOA and reform in progress, but lack of increased accountability. capacity and will to clearly define roles and responsibilities. • Public debate on regional development plans. • Multi-sector regional development plans drafted for some areas. 31 CROATIA 2004 Total Population 4.38 m Agriculture in GDP (2003) 9.0% Agricultural Output in 2002 Rural Population 43 % Food and Agriculture in as percentage of 1990 level Active Labor Force (2003) 8.0% 102% Total Area 5.65 mil ha Food and Agriculture Livestock Production 2001 as Agricultural Area 3.15 mil ha in Exports (2003) 10.0% Percentage of 1990 level Arable Land 46% in Imports (2003) 9.5% 94% Orchards 4% Share of livestock in agriculture (est) Natural Grassland 50% Tobacco products, processed fruit and 40% Forested 35% vegetables, processed meat, wheat, and Agricultural Area in Private Use (2003) wine and spirits are the major export 83% products Share of Independent Family Farms in total agricultural Land (2003) 83% Share of private sector in total agricultural output (2003 est. ) 85% ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-Economic Significant but incomplete Distortions free marketing and Framework for Agriculture liberalization of markets prior to incentive system and a more open trade independence, limited further policy. A. Prices/Subsidies progress since independence. • Progressively reduce the aggregate • The policy environment for support to the agriculture sector by agricultural producers is heavily reducing the number of crops eligible for influenced by the expectation of area payments and phase out the system of Croatia’s future entry in the EU. support for livestock production. • The Law on State Subsidies in According the WTO rules the current Agriculture of 2002 introduced system is not "blue box" compliant. significant changes since it • Abandon the calculation of national crop distinguishes, based on productive quotas on the basis of self-sufficiency assets (land size, animal numbers), requirements. between commercial farms and non- • Improve the targeting and forecasting of commercial farms. It introduced the Government’s agriculture subsidies by minimum production capacity to be accelerating the development of a national eligible for agricultural subsidies. farm registry and the establishment of an • The production support scheme apply EU-compliant paying agency. only to commercial farms and it includes provision for a national maximum amount to be set annually for each production and maximum amount of yearly subsidy payment by farm. A total amount equivalent to EUR 200 million has reportedly been paid by the MAFWE in 2003, which is in line with the production incentives distributed in recent years. • The new income support scheme applies to non-commercial farms that own or use less than 3 ha of cultivated land. 32 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS B. Trade Policies • Following negotiation of a • Transpose all aspects of EU’s acquis Stabilization and Association communautaire into the national Agreement with the EU in 2002, legislation. Croatian accession to the EU was • Implement the WTO agreement, which confirmed in April 2004. establishes a more rational and transparent • Since independence food imports basis for trade and price policy. Under the have been growing more rapidly than agreement the country has committed domestic production and exports, with itself to reduce the level of protection on an increasing agriculture trade deficit agricultural products and to remove export in recent years, especially for high subsidies. value food items and agricultural raw • Explore agriculture export opportunities materials for processing. under the trade agreements with emphasis • Significant reductions in import on the interim trade agreement with the protection will be implemented from EU which offers tariff-free access for all 2003-2006 under the WTO agreement, Croatian agricultural exports to EU and trade agreements with the EU and countries, except for wine and baby beef. numerous other trading partners will • The evident growth in country’s tourism take effect during the same period. sector represents another opportunity for • A total of 32 bilateral and multilateral the domestic food industry with major agreements with major trading partners seasonal advantages as the peak tourist have been signed. season (June-August) corresponds to the peak period of fruit and vegetable production. C. Taxation • Land tax abolished in 1996. 2. Land Reform and Farm Small-scale private farms Private ownership of all land; secure, Restructuring predominated before independence, transferable property rights; and an slow progress with privatization and active land market. re-structuring of the remaining ex- • Enact laws on land consolidation and Social Sector Enterprises. enforce existing inheritance laws to • Small-scale private farms account for prevent further land fragmentation. 66% of agricultural land but are very • Lease state land subject to ownership small (average 2.9 ha) and highly claims; sell all other state owned land. fragmented. • Passage of amendments to Cadastre and • Ex-Social Sector Enterprise land Land Registration Laws to make them transferred to the State in 1991. New compatible; update and reconcile Cadastre Land Law that legally bounds the and Land Registry. Government to dispose this land came to force in 2001. • Conditions for an active land market not yet in place: property rights remain unclear due to the major inconsistencies between the land registry and the cadastre. 33 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive Agro- The Government intends to divest Competitive, privately owned Processing and Services for itself of its agricultural and food agroprocessing, input supply and Agriculture company portfolio before the end of service subsectors operating with 2005. Any company not privatized minimal government protection. by this date will be placed into • Privatize the remaining AgroKombinats. bankruptcy. Companies with previously failed • Only a small number (about 13) of privatization tenders will be broken up and the former socially owned agricultural sold with fewer and less diverse and food companies remain to be production activities. privatized. However, a half of these are • Reduce protection for agro-processors AgroKombinats which combine and encourage competition among agricultural production on a very large domestic suppliers and from external scale with processing activities. suppliers. • The bulk of the food processing • Food safety management and risk sector has been long privatized and assessment systems are effective and operates under competitive conditions. EU/WTO compliant. Agro-processing sector continues to receive very high levels of protection so raising consumer prices. • Food safety regulations and quality standards do not match EU standards and the Croatian food industry is generally unprepared for the competitive environment of the common EU market. 4. Rural Financing Slow emergence of a viable private Viable financial institutions serving the banking system, which is active in agricultural sector and rural areas the agriculture sector. efficiently. • Most rural credit comes from public • Support the development of collateral sector institutions, the Ministry of instruments suited to agriculture and Agriculture operates two rural credit support training of agricultural lending programs. The credit is distributed and officers. administrated by commercial banks, • Guide interim publicly funded rural however the decision to allocate credit schemes and transform them into available credit is not based on purely Rural Credit Guarantee Fund. 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. 34 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional Framework Gradual adjustment of institutional Efficient and effective public sector structure to a role suited to a administration and support for market-oriented economy. commercial private agriculture. • Bulk of MAF budget is still allocated • Initiate the timely adjustment of the to direct payment for production and agriculture sector to the food safety processing. requirements of the EU by introducing • Significant progress with the adequate regulations and enforcement development of a public extension capacity. system but the institutional framework • Reform existing system of incentives and and links with the private sector are the use of MAF budgetary resources. still weak. • Continued support for reform of • Established Agricultural Research extension program and its integration in Council as the basis for focusing the Chamber System. research and linking it with extension • Continued efforts to reform research has made significant progress. system. • A farmer-managed Agricultural • Continued efforts to increase the Chamber system for technical support institutional capacity for policy analysis. to agriculture have been legislated • Agricultural Chambers to be based on under the new Law on Agriculture. administrative units of sufficient size to The system will be established under a create the critical mass of funding and separate Law on Agricultural expertise to support a sustainable technical Chambers. service. 35 KYRGYZ REPUBLIC 2004 Total Population 5.1 mil Food and agriculture in GDP (2004) 33% Agricultural output in 2004 as Rural Population 65% (excludes agroprocessing) percentage of 1990 level 107.5% Total Area 20 mil ha Food and agriculture in Share of livestock in agriculture Agriculture area 10.8 mil ha active labor force (2004) 53% (2004) 43% Pasture 9.2 mil ha Food and agriculture Arable land 1.34 mil ha in exports (2004) 18% in imports (2004) 14% Exports include cotton, wool, leather, 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 Removal of remaining distortions in Framework for Agriculture are liberalized, and market structures trade regime and the incentive are gradually developing. system; development of fully A. Prices/Subsidies • Agricultural input and output prices are functioning, competitive markets for deregulated and budgetary subsidies agricultural inputs and outputs. abolished. Notable exceptions are • Eliminate administrative interference irrigation water and electricity for in markets and movement of goods, agricultural use, which remain such as multiple licensing subsidized. requirements. • Responsibility for operating and • Phase out government involvement in maintaining on-farm irrigation systems input marketing, notably of continues to be shifted to water user donor/government financed equipment associations (WUAs). A National Water and inputs. Code was adopted in 2004, redefining the • Remove tax and other policy role of water provider (DWR) and water obstacles to entry of agrobusiness users (WUAs), and implementation SMEs. regulations are being developed. • Complete the implementation regulations for the Water Code and the transfer of responsibility for setting water charges from Parliament to DWR and WUAs. B. Trade Policies • Trade regime is generally liberalized, • Align export certification with but many non-tariff trade barriers remain, international standards, utilizing the many of them unofficial. services of internationally recognized • Member of three international trade standards companies. organizations: WTO, Customs Union • Deepen existing trade frameworks (Russia, Belarus, Kazakhstan and the and secure harmonization in customs Kyrgyz Republic), and CIS Free Trade and legal procedures. Zone. 36 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS C. Taxation • Administration of the VAT on • Remove or lower tax barriers to entry agricultural producers has been of agribusiness SMEs, particularly problematic, and revenue collected has payroll and value-added taxes. fallen far short of expectations. • Replace the VAT on primary • Revision of the tax code is underway agricultural producers with an and includes proposed changes to the appropriately established and land tax. effectively applied land tax. • Replace the current land tax assessment system with a land valuation methodology. Put in place an appropriate valuation regulation and administrative procedures needed for implementing the Immovable Property Tax. Reduce the 5% tax on land transactions to less than 1%. • Improve transparency of the tax system, tax administration and collection. Rationalize tax rates to improve tax revenue, incentives and equity. 2. Land Reform and Farm Significant progress has been made in Completion of regulatory framework Restructuring land privatization and farm and administrative capacity to restructuring, but the process is not yet develop a fully functioning land complete. market and promote market-based • Most arable land has been privatized farm restructuring and agrarian and ownership certificates have been reform. issued. The boundaries of irrigated land • Complete systematic registration of have generally been marked, but much land outside settlements to facilitate un-irrigated land still needs to be operation of land market. demarcated. Restrictions on transactions • Educate the public about the property in agricultural land are being relaxed only rights and responsibilities granted by slowly so as to minimize negative social the land and agrarian reform program. effects of rapid changes in land Good progress is being made in this ownership. regard, but much remains to be done. • 25% of the arable land is placed in a • Clarify roles of different agencies and Land Redistribution Fund (LRF), institutions, including local assigned to local governments for governments, in land administration, redressing inequities and/or to be sold, especially as regards the Land auctioned or leased. Local governments Redistribution Fund; utilize private rely on leasing of LRF land for revenue; sector capacity where possible. under current law they show little interest • Rationalize the management in selling such land. responsibility for pasture land, with • Pasture land is poorly managed, with local user associations having primary responsibility divided among different responsibility. Continue the government levels. Close-in pastures are development of appropriate pasture use deteriorating. models, including long-term lease arrangements. 37 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS • Substantial parts of the irrigation and • Stimulate the creation and effective drainage infrastructure have been or are functioning of independent farmer being transferred to WUAs as they groups and cooperatives to increase become legally registered and have efficiency in the use of land and other achieved the required capabilities. inputs and in marketing. • Complete the transfer of irrigation infrastructure to the WUAs • Develop and implement an appropriate system of registering WUA-owned infrastructure with GosRegister. 3. Competitive Agro- The process of privatizing the agro- Promote the growth of a dynamic processing and Services for processing and input supply rural SME subsector and of private Agriculture enterprises is largely completed, but input supply and agroprocessing the privatized enterprises are not very industries. efficient. • Simplify registration procedures and • Input and output markets remain weak reduce the permits required to establish due to poorly developed infrastructure, agro-industrial joint ventures with institutions and information. foreign partners. • Input markets in the south are distorted • Improve the regulatory environment by subsidy policies in neighboring and economic incentives to promote Uzbekistan. foreign direct investment in agro- • Most previously state-owned agro- industry. processing enterprises have been • Promote the development and privatized. functioning of competitive input and • Product quality is poor; and the existing output markets, with a primary focus product quality grades and safety on institutions and information that standards (poorly enforced) are not foster the entry and growth of SMEs. comparable to international grades and • Establish product quality grades and standards. Lack of marketing experience, safety standards comparable to inability to assemble appropriate lot sizes international standards and promote of standard quality, and formal and their observation. informal barriers to regional trade limit ability to export. • Lack of critical agricultural inputs is a key constraint to increase agricultural productivity. 38 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Finance Poor access to credit remains a serious Establishment of sustainable constraint to rural development. financial institutions serving the • Despite recent improvement in the rural and agricultural sectors. performance of the banking sector, its • Diversify KAFC’s lending portfolio involvement in agricultural lending to expand long-term investment remains limited. lending, funding for non-farming • Kyrgyz Agricultural Finance activities, processing, agri-services, Corporation (KAFC), operating since etc., and let KAFC take deposits. 1997, is the main source of credit for • Promote the use of agricultural land agribusiness and farmers. and other forms of collateral; currently, • IFC is supporting rural lending through buildings and apartments constitute the support to FINCA. Several other donors main forms of collateral. support rural credit operations. • Improve business judiciary system; • A number of micro-finance operations strengthen bankruptcy procedures, are in place, but they reach only a limited including out-of-court settlements. clientele. A good micro-finance law is in • Develop new financial products, place, and the National Bank is including commodity-based warehouse developing its MF supervisory capacity financing mechanisms, leasing, etc., to and prudential norms and guidelines for alleviate collateral challenges and MF institutions. attract new players into rural lending. 5. Institutional Framework The institutions of a “planned” Accelerate the process of establishing economy are gradually being replaced efficient and effective institutions to by institutions that serve private serve commercial private agriculture agriculture based on market and the rural sector. principles. • Complete the reorganization of • The agricultural research and education MAWRPI to serve as the main agency systems have not yet been adapted to the to implement agricultural policy. emerging market conditions. Devolve all possible tasks to • The institutional capacity to undertake appropriate lower levels of government agricultural policy analysis is limited. or to the private sector. • The Department of Water Resources • Strengthen and re-orient, including (DWR) needs to be restructured to reflect through consolidation, the agricultural its new responsibilities as WUAs are research and education systems to taking over increased responsibilities for complement activities of private input managing irrigation systems. industries and thereby to serve more effectively the needs of private farmers • New-style farmer service cooperatives and farm enterprises. Develop the are gradually being established. ability for contracting research and services. • Privatize services such as animal health, crop protection, seed supply, etc. • Carry out a restructuring study and a subsequent restructuring of the DWR. 39 FYR MACEDONIA 2004 Total Population 2.0 mil Food and agriculture as Agricultural output in 2003 as Rural Population 45 % percentage of 2002 GDP 10% percentage of 1990 level 102% Agriculture and forestry in Livestock production in 2003 as Total Area 2.6 mil ha active labor (2003) 14% percentage of 1989 level (est.) 84% Agriculture area: 1.3 mil ha Food and agriculture Share of livestock in agriculture Forests 1.0 mil ha in exports (2003) 18% (2001 – est.) 40% % of ag. area in imports (2003) 15% Private agricultural area (2003) 80% Arable land 36.3% Traditionally net importer of Share of independent private Orchards/Vineyards 3.3% grain, sugar, vegetable oil farms in total arable area (2003) 80% Meadows 4.1% and livestock products. Share of private sector in total Pastures 56% Traditional exports are agricultural output (1999 – est.) 76% Irrigated 33,273 ha tobacco, wine and lamb. ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Concerted actions by the Government has Implement reform program agreed to Framework for improved the macro economic outlook and the adjustments of the macroeconomic Agriculture reached the agreement with the IMF on a framework reform program supported by a Stand by Arrangements (approved April 30, 2003). A. Prices/Subsidies • WTO membership was ratified by the • A program to reduce trade protection for Parliament in April 2003. All import and all commodities from an average of 15% export licenses and export subsidies must be to 8% by 2007. abolished and tariff quota must be allocated on a first come first serve basis or by auction. • Limit the activities of the State Office for • A new law is being drafted to limit the role of Commodity Reserves to the acquisition the State Office for Commodity Reserves to and management of modest strategic manage a small food security reserve and reserves. precludes any further support for wheat and tobacco production. B. Trade Policies • The Stabilization and Association Agreement • Implement the SAA agreement, the first (SAA) which was signed in April 9, 2001 step for EU accession. Admission is entered in force on April 1, 2004. The expected to be between 2010-2012. application for EU membership was presented. • Develop a program to bring Macedonia This will lead to the creation of a new climate laws closer to the EU. for development of trade and investments. • Adopt and enforce EU product standards • Free Trade Agreements with major trading and improve product quality. partners (EU, Yugoslavia, Croatia, Slovenia, • Incorporate the EU acquis communitaire Turkey, Bulgaria). The application for a full- and key EU food safety directives into fledged membership in the Central European Macedonian laws. Free Trade Agreement (CEFTA) is being drafted. • Low product quality and difficulty satisfying EU product standards remain major constraints to exports. C. Taxation • A VAT of 18% applies to some agricultural products, but most are taxed at 5%. • Farmers are exempt from income tax and there is no land tax. 40 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and Land is mostly under private ownership, Strengthen the institutional framework Farm but markets function poorly. for land transactions and complete • 80% of the arable land is under secure privatization of the agro-kombinats. Restructuring ownership by private farmers. • Improve the operations of the land • The new Land Use Law provides for security registration system to facilitate land sales, of tenure. update cadastral records and tradable titles and introduce a land lease registry. • Land markets are inefficient. There are high friction costs involved with the sale, rent or • Mandate compulsory registration of sale, lease of land. lease or mortgage of property. • Most private farms are small and fragmented. • Establish training course in property Land consolidation and expansion are needed evaluation. to increase farm size, obtain economies of • Expand the operations of farmers’ scale and improve efficiency. associations • Most of the farm privatization was done • Create a suitable exit policy for newly through management or employee buyouts, privatized farming units which experience resulting in dispersed ownership and weak liquidity problems, in order to accelerate corporate governance in many privatized post-privatization restructuring. enterprises. 3. Competitive Agro- Continued progress with privatization and a Encourage development of private processing and small but growing private sector engaged in sector input supplies. Services for agro-processing and farm input supply. • Enact legislation to facilitate wider Agriculture. • There is strong co mpetition among private private sector responsibility for the seed agricultural input suppliers and machinery and planting material industry. dealers. • Simplify pesticide registration • The private sector is also active in agro- procedures. processing, mostly in the form of small-scale • Foster entry of strategic investors in industries producing for the domestic market. processing, storage and marketing agri- Recently, some wineries have begun to export kombinats spin-offs and define strategy to Europe and neighboring countries. for regulating newly privatized • Most of the agro-processors have now been monopolies. privatized. Most privatized agro-processors are still in severe financial difficulty due to over-scaled, outdated plant, excess labor and weak management. • Foreign investment last year totaled $97.55 million (in 2003 it was $80.64 million). However, foreign investment in agro- processing remains weak. 41 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Finance Continued reform of the commercial Increase access to finance in rural banking sector but financial intermediation areas. Strengthen the legislative is limited and rural people have limited associated with collateral and loan access to bank credit. recovery. • Progress has been made in the commercial • Improve the procedures for issuing title banking sector, foreign banks have entered to deeds and develop a system of land and finance export-targeted production and new chattel mortgages as security for credit. credit lines have been established for micro- • Develop legislation and institutional businesses, however: structures to encourage the development • Financial intermediation is still constrained of farmer’s associations, credit unions and by continued distrust of the banking system savings cooperatives. and inadequate laws and procedures for • Strengthen donor credit programs and securing loans. use them to build sustainable institutions • No formal rural financial institutions. for rural finance. • Donor credit programs for rural people have • Increase the capitalization of successful had mixed success. micro-finance organizations and expand • Rural people prefer to keep debt levels low their operations in rural areas. and to self-finance new investments, with help from family and friends. • The main requirements for inve stment and working capital are for upstream operations (input distribution and machinery procurement and operation), and downstream marketing and processing activities. 42 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional The Ministry of Agriculture lacks a clear Strengthen the capacity of the Ministry Framework sense of its new roles in a market economy, of Agriculture to define and implement the capacity to fulfil many of these roles and its roles, and to guide sector a coherent framework for future development. development of the sector. • The capacity for trade and price policy • Strengthen the capacity for price and analysis in the Ministry need further trade policy analysis and develop realistic strengthening. and market oriented policies for the future. • An independent national extension system • Accelerate the development of demand - has been established but has yet to provide an driven agricultural extension services, and acceptable service. expand the capacity to self-finance these • A pilot program to introduce a competitive, services. demand-driven agricultural research system • Restructure the agricultural research has been completed. system to focus on technological • Curricula and program design in the innovation suited to the needs of a market agricultural university system are ill-suited to economy, funded by competitive grants. the requirements of a market economy. • Modernize curricula and programs in the • Successful privatization of the veterinary Agricultural Faculty, so that they are services, but animal breeding services remain relevant and responsive to the needs of a firmly located in the public sector. market economy. • The existing market information system does • Strengthen the capacity of the Veterinary not respond adequately to the needs of Department for regulation, inspection and producers and traders for timely information the monitoring and control of animal on local, regional and international markets. disease. • Producers, processors and traders lack an • Strengthen the existing market adequate mechanism for trade promotion and information service and the current market development. approach to trade promotion and market development for agricultural products. 43 SERBIA & MONTENEGRO 2004 Total Population 8.37 mil Primary agriculture, hunting and Gross Agricultural Output Rural Population 46% forestry in GDP (1999) 13.4% (GAO) in 2003 as percentage of Total Area 10.2 mil ha Agriculture and agro-industry 1989-91 level 100% Agriculture area: 5.7 mil ha in GDP (1999) 25% Share of independent private Arable land 79% Food and agriculture farms in Orchards 6% in active labor (1990) 24% total arable area (2000) 85 % Irrigated 0.6% Food and agriculture (Serbia only) Share of private sector in total Forested na in exports (2003) 6.4% agricultural output (2000) na in imports (2003) 11% Traditionally, net exporter of: cereals, livestock and meat products, raw and processed fruit and vegetables ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Past price and trade policies severely Efficient agricultural markets with Framework for distorted production incentives and minimal public intervention. Agriculture inhibited output. Recent price and trade policy reforms have significantly improved this incentive structure. A. Prices/Subsidies • In Serbia, there is a floor price for wheat • Phase out commodity and input subsidies implemented by the Directorate Commodity according to WTO requirements. Reserves (DCR). The corresponding budget • Review the role of public expenditure in line constituted 6.4% of the total agrarian supporting increased productivity and budget in 2004. growth in agriculture and rural areas. • In Serbia, the state provides subsidies for • Abolish the “buyer of last resort” role of milk, sunflower, soybean, tobacco, oil the Reform the Directorate for Commodity pumpkin and hops through agro-processors. Reserves. Limit its role to food security • In Serbia, while the abolishment of the sugar according to pre-established operational beet subsidy is a significant step, expenditures guidelines to ensure transparency. on the remaining subsidies divert budgetary resources from public sector activities that are necessary to increase sector productivity. • In Serbia, control of consumer prices is now limited to a maximum price for dark bread. • In Serbia, a fuel subsidy is provided to farmers at a total budgetary expenditure equivalent to 3.1% of the agrarian budget. • In Serbia, fertilizer production is subsidized through state purchases from a particular producer through the Directorate for Commodity Reserves which then provides fertilizers to farmers in exchange for produce at the end of the season. B. Trade Policy • In Serbia, trade policy is now based on an • Support the process of joining WTO by eight tier tariff structure (1%, 3%, 5%, 10%, placing agricultural trade policy within a 15%, 20%, 25%, 30%). Most agricultural broader agricultural development strategy commodities are protected by the two highest • Tariffs should be reduced further, and tariffs. Additional levies (“special charges”) of export quotas, export subsidies and up to 127% tariff equivalent apply to 196 “additional levies” should be abolished. agricultural commodities, which are reviewed The stability of the regime should be on an ad hoc basis. It seems that that the 44 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS Government intends to abolish the latter. maintained. • In Serbia, the agrarian budget of 2004 • Reforms should be driven by the included a budget line equivalent to 2% of the requirements for WTO membership rather budget for export subsidies for beef, feedstuffs, than EU policy. Alignment with EU trade milk and dairy products, canned and dried policy and the CAP should be viewed as a fruits and vegetables, fruit juices, refined and medium- to long-term goal, to be pursued non-refined oil, textured protein, and wine and once EU accession is imminent. brandy. Rates ranged between 5 – 20%. However, by end of year less than 1% of the allocated amount was actually paid out. • In Serbia, export quotas have been terminated, while export licenses may still apply to a few products such as hides and skins. There are no import quotas or licenses on agricultural commodities. • The Federal Republic of Yugoslavia’s application for WTO membership proceeded slowly due to differences between Serbia and Montenegro. Now a “twin track” approach has been adopted and Serbia and Montenegro have each submitted their own applications. 2. Land Reform and Farm Restructuring In Serbia, although 80% of farmland is in Establish clear, secure and readily private ownership, ownership rights to this transferable use and ownership rights, land are often difficult to establish. Some of and an active land market as the basis the socially-owned agro-kombinats (AK) (< for improving farm structure. 5000 ha) have been restructured and • Restore all land records and reconcile the partially privatized by sale to employees, cadastre and land register as the basis for but their full privatization remain an issue. establishing clear property rights. • Private farms average 3-5 ha, and are highly • Clarify (through cooperation between fragmented. Land sales are legal but the land RGZ and MAFWM) land ownership market is thin. Most rural land transfers are rights, including restitution claims. affected through inheritance or informal, short- term leases. • One requirement for development of land markets, particularly in the early stages, is • Land market development and consolidation that the cost of transactions not be of agricultural holdings is a challenge in both prohibitive. Therefore the Government Serbia and Montenegro due to incomplete should refrain from supporting legislation registration of property rights. aimed at imposing a transfer tax on land • In Serbia, 60% of rural land property rights transactions. have been established. The Serbian Geodetic • Clear ownership and accountability for Institute (RGZ) is under legal requirement to complete 100% by end of 2005. About 10- operation and maintenance of the 15% of land will be very difficult due to lack irrigation and drainage system should be of registration. defined and the current decreasing trend of cost-recovery of O&M expenditures • Socially-owned agro-kombinats and reversed. In order to achieve such cooperatives hold 15% of arable land. Some preliminary and intermediate objectives, agrocombinates will need to undergo organizational (break-up into smaller units), financial and technical support to policy labor (shedding off the redundant employees, strategy and decision making should be with social mitigation measures in place, of ensured, both at Directorate of Water and at interministerial level, and piloting of 45 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS course) and financial (i.e., partial debt write- participatory irrigation and drainage off) restructuring before the company or viable organizations should be started. Under the parts thereof can be offered for sale. IDR Project, piloting of WUAs will be • Drainage and flood control are important considered jointly with development of rural development issues in Serbia requiring small irrigation schemes in central Serbia substantial funding for rehabilitation. while implementation of flood control Irrigation seems to have the potential for activities should provide a better picture of increasing land productivity in high value the institutional bottlenecks currently added fruit and vegetable production in Central existing in Serbia in relation to this type of and Southern Serbia. The upcoming activity. IDA/IBRD loan for Irrigation and Drainage Rehabilitation will address urgent needs for rehabilitating drainage and flood control schemes in Vojvodina and pilot small scale irrigation schemes in Central and Southern Serbia. The long term development of the sub- sector needs to be supported by legal and institutional improvements. 3. Competitive The collapse of socially-owned agro- Competitive, privately owned Markets for farm kombinats and agro-processors has enterprises for agro-processing and output and farm inputs. decimated traditional marketing structures. input supply Private sector activity in these markets is • Abolish DCR’s “buyer of last report” also inhibited by the DCRs. function and its function in the input • In Serbia, agricultural markets are weak and market. inefficient due to weak supply and demand, the • Fully implement the program to privatize high reliance on barter trade, and the activities agricultural input supply, output of the DCR. marketing, and agro-processing enterprises • In Serbia most of the agro-processors have while supporting farmer marketing groups corporatised, but have been slow to re-establish and activities that support the integration due to their tenuous financial position and of small and medium sized farms into reliance on barter trade. SME credit lines markets benefiting agro-processors have increased in • Train agricultural advisors on recent years, but regional discrepancies remain. appropriate quality and safety standards for agricultural exports and promote the extension of this information to farmers and agro-processors. • Provide technical assistance for training in enterprise management and to promote the development of new products and markets. 46 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Finance In Serbia, privatization and rationalization • Support increase and diversification in of the banking system is now well advanced. credit provision to meet needs of various There is now non-negligible lending by segments on market conditions, through commercial banks to SMEs, including in farmer and loan officer training, legal and agro-processing. However, commercial institutional measures, and provision of banks’ interest in lending own funds to international refinancing. primary producers is very limited due to • Establish a technical assistance program limited liquidity in the credit market, high to strengthen the capacity for agricultural real and perceived risk in agriculture, and loan appraisal among commercial banks. high credit demand among urban • Seek IFI credit lines for additional borrowers. market-based rural credit operations. • One commercial bank that emphasizes • Establish an appropriate legal framework thorough assessment of repayment capacity for the operation of non-bank financial and risk by loan officers training has institutions, notably micro-credit experienced remarkably low default rates. organizations, local savings and credit • Government instituted a highly subsidized associations. short-term and medium-term agricultural credit • Review and adopt suitable international scheme, channeled through commercial banks, experience on out-of-court settlements for with the stated goal of providing “affordable collateral enforcement. Improve contract credit “ to poor farmers. Government also enforcement. instituted a rural development grant scheme. • Analyze the Government’s credit scheme • Credit culture is very week in rural areas. from the points of view of i) crowding out effect, ii) transparency of loan • There is a deep distrust in banks for deposits. applications; iii) equity; iii) repayment A newly drafted Law on Deposit Insurance rates. Fund which raised the level of insured deposits significantly might help. • Conduct public awareness campaign on deposit insurance. • Limited ability among farmers to • Strengthen agricultural extension system conceptualize business ideas and related credits to provide business / marketing advice to needs in the form of a business plan; farmers. • A Law on Leasing has been enacted and led • Institute Government certification of to significant leasing activity of vehicles and qualifying warehouses. machinery including in rural areas. A Law on Warehouse Receipts has been drafted and will help with the use of warehouse receipts as collateral. However, limited number of independent warehouses and lack of Government certification of qualifying warehouses are constraints for implementation. • Land is rarely available for use as collateral due to incomplete or inaccurate ownership registration. Also excessive delays occur in legal procedures for collateral and contract enforcement. • Interest rates on short and medium term credit are high for agriculture due to risk, high transactions cost and limited capital availability. 47 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional In Serbia, progress has been made in the • Review effectiveness of the farm registry Framework last year in transforming the institutional and needs for expansion in line with EU framework to one that will guide Serbian requirements keeping in mind the need for Agriculture to international competitiveness simplicity and evolving policy and a market economy. However, environment in the EU. weaknesses persist especially with regard to • Continue with ear tagging and Ministry staff capacity and agricultural registration of other livestock. advice and training. • Promote private provision of veterinary • MAFWM continues to suffer from shortage services, extension and standards testing of skilled technical and policy staff. MAFWM and quality control services. budget increased by significantly in 2004, • Develop an effective agricultural however staff reduction is required as part of advisory service with well trained and public administration reform. This is in itself informed staff to assist family commercial not entirely negative as it allows MAFWM to farms and agro-processors to meet their shed unqualified labor, however there is a needs for knowledge and information, incl. freeze on new hiring and low salary levels do production and value adding technologies; not attract qualified people. access to credit and markets; Government • EU is providing support to MAFWM for and EU policies, regulations, standards; restructuring and training, establishment of a and environmental, food quality and safety policy unit for rural development and of Rural requirements. Payments Agency. MAFWM may increase • In the short run, use a combination of staff in the policy unit while outsourcing state and user funding with the majority of regional inspection functions to the private funding coming from the state, but at the sector. same time create conditions and assist the • A farm registry was established in May 2004, unobstructed growth of private service and registration is voluntary but precondition for competition. accessing any government subsidy, credit or • Establish three to four regional Training grant. and Information Centers focusing on the • EU funded programs have helped establish a needs of the three major agro-ecological “Food Chain Laboratories Agency” and regions, to serve as knowledge resource installed equipment & training staff at all base, training of trainers on different laboratories in the network of the agency; topics, provide accreditation to service introduced EU-compatible ear-tagging & providers, inspectors and other staff, and registration of all cattle; reform & train the support extension providers. Veterinary, Sanitary & Phyto-sanitary • Include producers, agro- industry, food (previously Agricultural) inspection services; chain and export representatives in the and install temporary veterinary & phyto- committee that sets agricultural research sanitary border inspection posts at up to 10 priorities and selects research projects for border crossings. public support; develop a revised • The existing system of agricultural advisory operational manual for the competitive service is limited (mainly to agrokombinats) agricultural research grant program based and ad hoc and primarily focused on plant and on successful international experience. livestock production and that too is out of date The manual should also include in its information and usefulness to farmers monitoring, evaluation and use of research and agro-industry. In general, the knowledge results and impact assessment. Give of the staff and the quality of the service MAFWM greater responsibility for provided are inadequate for the increasing and funding and managing applied agricultural new needs that a modern farm advisory service research in cooperation with MSEP and has to meet. There is no institutional system or the Ministry of Education. support for updating or expanding the knowledge of current providers of farm 48 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional advisory service or their licensing to improve Framework their effectiveness. (continued) • Support for fundamental research is considerably higher than for applied on-farm research and there is little demand for the products of research results (except probably for seeds). Most agricultural research is conducted by a large number of research institutes and by the universities, and there is considerable overlap and duplication of efforts. The procedures for allocation of research grants, priority setting and selection of individual projects and their monitoring and evaluation need improvement urgently. 49 Moderate Reformers (countries with a ranking score of 6.0 or above, but below 7.0) Azerbaijan Bosnia Herzegovina Russia Kazakhstan Ukraine Moldova Georgia 50 AZERBAIJAN 2004 Total Population 8 mil Food and agriculture in Agricultural output in 2004 as 159% Rural Population 43 % GDP (2004) 12.3% percentage of 1995 level (in Food and agriculture in prices of 1995) Total Area 8.6 mil active labor force (2004) 40.1% 105% Agriculture area ha Agricultural output in 2004 as Arable land and 4.5 mil percentage of 2003 level 33% permanent crops (% of ha Food and agriculture Individual agricultural area in agr. area) in export (2004) 5.5% total agricultural area (20043) 98% Irrigable land (% of 39% in import (2004) 13% Share of private sector in total agr. area) agricultural output (2004) Permanent pasture (% of agr. area) 31% Forested (% of total area) 57% 12% ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic After several years of delay a rapid process A distortion-free, efficient and Framework for of agricultural reforms has been followed internationally competitive Agriculture since 1996. agricultural sector. A. Prices/Subsidies • Abolition of the state order system. • Agricultural sector policies within and Privatization macroeconomic policy framework aimed • Break-up of most state and collective farms and distribution of arable land to households. at limiting the upward movement of the exchange rate (Dutch disease) to maintain • Distribution of most livestock to households. agricultural sector competitiveness. • Removal of quantitative controls on external • Avoid direct government trade in agricultural products. interventions in the agricultural • Domestic price liberalization and the sector such as input and price privatization of most agro-industrial enterprises subsidies that create economic through direct, voucher and auction sales. distortions. Targeted government • State companies, dealing with poultry, food interventions should be limited to and bread have been liquidated. alleviate poverty of the most • Principles of Irrigation Service Fees vulnerable. have been established, fee structure has • Gradual increase in Irrigation been established, and very low fee Service Fee needed, accompanied by charging has started. a transparent calculation of budgets needed for operation and maintenance of irrigation infrastructure by SAIA, as well as by annual performance reviews of O&M staff. B. Trade Policies • The foreign trade regime and the associated • Improve trade regime consistent with payments systems has been largely liberalized, WTO mandate. This is an on-going WTO leading to the development of world-market accession process and included in PRSC II related domestic price structures for most agenda. commodities. • Include cotton sector in anti-monopoly • Preliminary work completed to prepare for activities of PRSC II Policy Framework WTO accession. Matrix10. 10 PRSC-I, II and -III do not specify the cotton sector explicitly in the Matrix. 51 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS • Cotton exports channeled through private • Appoint independent external inspectors companies since 1997. But ginneries to verify external trade quantities and privatized in non-transparent manner, resulting prices. in oligopsony, low prices and late payments to • Further pursue long-term aim of joining farmers. This lead to a dramatic reduction in the WTO. production and area planted to cotton. • Pursue reform of Customs Service, • Customs Service remains corrupt and perhaps under PRSC action plan. untransparent, restricting trade and reducing foreign direct investment. • Tariffs have been unified with average tariff rate at about 6.5%. A list of VAT exempt goods and services has also been substantially reduced. C. Taxation • In response to ongoing concerns about the • Government to develop a medium and effect of the tax rate on producer incentives, longer term fiscal strategy for the the Government approved on March 1999 a agricultural sector defining the planned five year tax holiday for all primary producers change in the net resource flow to the including both juridical entities (VAT, profit sector as oil revenues come on stream. tax exemptions) and physical entities (income • Related to above, explore potential use of tax). The only tax primary producers will the State Oil Fund of Azerbaijan Republic continue to pay is the land tax. Previous tax (SOFAR) to increase the competitiveness liabilities of collective farms and their debt to a of the agricultural sector through targeted social protection fund were written off. On investments. November 2003, tax exemption has been extended for 5 years • Land tax is based on the region, quality of land, and use (arable, fallow, perennial crops). 2. Land Reform and Government committed to transforming A working land market for efficient and Farm Restructuring agriculture into an efficient and dynamic fair asset transfer and a socially sector by encouraging the development of a acceptable land consolidation process, market-based, predominantly privately well-functioning unified cadastre and owned production system, with rapid registration system. progress in land distribution since 1997. • Significant progress in the privatization of • Strengthen the legal and institutional agricultural land. Privatization as envisioned in basis for the leasing of land. the Law is now 99 percent complete • Improve the design of the legal and • Effective Distribution began after Land institutional framework that provides for Reform Law was passed (July 1996) and financially sound mortgage operations. accelerated after January 1997. An area of • Establish efficient arrangements for the about 1.4 million ha is now privately owned, sustainable management of state and and corresponding titles have been distributed municipal lands i.e. pastures and forests. to 870,000 families. In addition, ownership of household plots has also been established • Develop an implementation mechanism through titling and some 390,000 (45% of for the law on the state registry of total) land certificates have been issued. immovable property. • Apart from a 5% “land reserve” all arable • Development of an improved cadastre land is being distributed to private farmers. All and registration system. A single other lands including pastures are allocated to organization responsible for the operation the state and the municipalities. An efficient of both the legal and technical aspects of system of future pasture management is yet to immovable property, would be the be established. preferred model. • Individual farm sizes are very small and • Establishment of an institutional 52 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS farmers often look for opportunities to framework and strategic plan for associate and establish farmer’s associations, nationwide implementation of a unified such as marketing associations. real estate registration and cadastre • Law on collateral and a revised land code system. which codifies rights to land were passed. • Further decentralization of the • The process of registering land titles and responsibilities for land information transactions is in place. In an effort to reduce system to the regional cadastral centers to transaction costs in land markets and to make ensure their self-financing potential. land transactions easier a number of regional land cadastral offices were established. The major benefit is that citizens have access to their land records locally and all land transactions are conducted and completed locally. • 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 activities continue to accelerate with some 18,000 transactions registered over the last three years. • A unified registration and cadastre system for all rural and urban land and buildings is being established on a pilot basis within the frame of the WB funded ADCP. • A law on state registry of immovable property was adopted. The Law adequately provides for the creation of a legal and an institutional framework for the establishment of a unified registration system for immovable property. However, cadastre aspects of registration process are not addressed in the law and the new system is based on a dual agency approach. 3. Competitive Small-scale processors in the bread, cotton, Re-establish an export led diversified Agroprocessing and poultry, and wine industries have been product base in agriculture. This will Services for privatized. Larger enterprises, for example require rapid productivity growth in the Agriculture canneries, remain unsold. Absence of agro-processing sector to regain efficient and well-organized agricultural markets and to offset the expected markets and processing industry is the key upward movement of the manat as oil impediment to agricultural growth. revenues increase. • Compared to other transition countries, there • Implement the regional socio-economic is almost no vertical coordination in supply development program for the agro- chains. This remains a major constraint on processing cluster (PRSC II action). market organization. • Complete privatization of agro-industry • Foreign investment in agro-processing is still to include productive capacities currently limited. Some has taken place in cotton retained in public sector (cattle breeding, ginning, and investment is emerging in oilseed seed multiplication). and fruit processing. Other foreign investors • Create a favorable economic and legal have pulled out or been dissuaded by business environment for attracting foreign environment. A study on the general investment in agro-processing, including 53 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS investment climate in Azerbaijan was improving customs and legal environment completed (FIAS). and decreasing corruption. • The Ag. Markets Study on increasing the • Create an enabling environment for efficiency of agricultural markets and private support services to accelerate processing, and restoring the competitiveness private sector investment in agro- of the sector, is nearing completion. processing and to improve marketing • Slower privatization progress in some sub- operations. sectors with large plants, such as canning. • Develop an action plan to implement the Govt. tried to sell, but was unable due to recommendations of the Ag. Markets factors including inappropriate size for new Study. market realities and over-estimated values. • Review cotton industry and assess the • Law on Privatization adopted in May 2000 need for application of anti-monopoly and second phase of Privatization Program measures under anti-monopoly cluster of under way. PRSC II). • Some progress has been made in recovering • Develop an implementation mechanism market share in FSU markets lost since 1992, for the law on collateral. and in entering new markets such as the EU • Adopt law on mortgage. (e.g., fruit processing). • Develop contract law that is dependable, • Quality remains a constraint, and standards, low cost, easy to implement, and judicially grades and packaging are insufficient, limiting fair; disseminate information to farmers access to high-value markets. and enterprises. • Basic legal framework for private sector agro - • Expand and scale up development of industries still inadequate, inhibiting access to market information systems and support bank credit. The recent law on collateral services for producers and the marketing should help, but no implementation mechanism chain. has been developed. • Encourage formation of producers’ • Poorly managed food aid and smuggled organizations and professional foodstuffs depress prices and decrease associations, help to increase their incentive to invest. capacity, and include them in policy • Law on mortgages is reviewed by Parliament. forums. • Contract law and its enforcement are • Improve basic rural infrastructure in inadequate to foster coordination between order to reduce transaction costs and farmers and processors. increase market participation. • Development of market information systems • Improve grades, standards and laboratory and support services for producers and the facilities, and foster use & production of marketing chain is underway (ADCP). improved packing materials. • There are still few professional associations • Improve management of food aid and of producers or processors, and they can have crack down on smuggling of ag. products. difficulty being recognized by Government. • Consider use of SOFAR to provide • Debt of private processing companies has financial incentives for private investment, been written off. for example in equipment leasing and milk • State-owned Agro-leasing company has been collection. established to lease or sell agricultural • Irrigation is a critical input into machinery purchased from the state budget. agricultural production and infrastructure Government to approve procedures for leasing has to be in a condition to distribute and and sale of ag. machinery. deliver water when needed. Develop plans • Irrigation and drainage infrastructure is in for the rehabilitation and modernization of deteriorated condition. economically viable infrastructure. Invest in that infrastructure. Have users pay • Basic infrastructure continues to deteriorate gradually more for the upkeep. in rural areas imposing high transaction costs on producers and processors. 54 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Financing The former rural credit system has Development of a rural financial system collapsed. The rural financial market is efficiently serving the agricultural represented by MFIs and emerging Credit sector through strengthening of the Unions. There is poor access to capital in rural credit union system and engaging rural areas. commercial banks as financial • Emerging privatized farms have neither the intermediaries in rural areas. experience nor the asset base for borrowing • Improved supervision and regulation of from financial institutions. the commercial banking sector and • Some signs of processors providing crop measures to ensure compliance by input credit, especially in the cotton sector. participating commercial banks in on- lending schemes for the agricultural • The commercial banking sector is itself going sector. through a rapid process of restructuring with the number of operating banks reducing • Strengthen technological capacity of sharply. Few banks lend to the agricultural commercial banks to do rural financing. sector, preferring the higher and less risky • Government to avoid a top-down returns in trade and oil industry financing. approach to directed development of the • Lack of enforcement mechanisms for Law on credit union sector and to allow gradual Collateral and underdeveloped judicial system development based on active grass-roots make impossible collateralization of loans. participation. • Grass-roots credit institutions are beginning • Strengthen capacity of National bank to to emerge in the form of credit unions and supervise micro finance institutions and informal borrowers’ groups with World Bank credit unions. support. • Improve the Law and prudential norms • Subsidized credit line to commercial banks on credit unions. and rural credit unions under the National Fund • Consolidation and expansion of rural for Entrepreneurship Support. financial cooperative system. • Provide an appropriate legal framework for micro finance institutions. • Reduce transaction costs and risks through: (i). Establishment of private-sector managed/owned credit bureaus; (ii). Strengthening contract enforcement and collateral system (particularly moveable assets); (iii). Reducing inconsistency of rural lending, with different lenders offering radically different interest rates. 5. Institutional Re-organization of MOA has been a Improved capacity of MOA and Framework continuing process. MOA lacks the adequate institutional set up to ensure resources to effectively carry out its essential public services in agricultural functions. sector. • Ministry of Agriculture has been further re- • Adopt medium-term agricultural organized by Presidential Decree of October strategy. 2004. • Develop plans for appropriate • State Irrigation Committee was abolished and approaches for sustainable management of its functions transferred to the new State irrigation systems. Amelioration and Irrigation Agency under the • Establish strong capacity in Ministry of Agriculture. MOA/Cabinet of Ministers/MED for • Veterinary department has been upgraded to policy-making; develop new statistical instruments to fulfill pertinent information 55 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS Institutional State Veterinary Services within the MoA. needs required for policy decisions. Framework • State agencies on Phytosanitary control and • Further reorganization of veterinary (continued) agricultural credits have been established under services balancing public and private the MoA. responsibilities for delivery of veterinary • Charter of re-organized MoA (including four services. new agencies) is being developed. • Strengthening the agricultural knowledge • State Program on Socio-economic and information dissemination system development of regions (2004-2008) was (AKIS) through further support of adopted. Regional Advisory Centers as private and semi-public providers of extension • Users have to take increased technical and services. financial authority over the management of lower-level irrigation systems Some grass roots • Implementation of national strategy for efforts to develop water user associations AKIS modernization. (WUA) are under way but the capacity of • Improve rural infrastructure, notably managing such systems is not sufficiently roads, water system, electricity, reliability, developed. and markets to reduce transaction costs, • The Law on Amelioration has been amended improve market participation and enhance to include a proper framework for the productivity in the agricultural sector. establishment and operation of WUAs. Irrigation Agency has established WUA support units to provide training and support. This program is supported by WB funded IDSMIP. • A review of the irrigation sub-sector was carried out to identify the current state of irrigation management in some of the larger command systems. • A Rural Strategy Unit has been established under the WB ADCP to assist Government to develop appropriate long-term policy responses to the impact of the anticipated oil revenues on the competitiveness of the rural sector. • A comprehensive Rural Strategy Document with Investment and Financing Plan has been developed by the Rural Strategy Unit. It sets out policies for the ag. sector grounded in strengthening the role of the private sector as the leading force, with the public sector providing an adequate business environment. • Most production and commercial functions in agriculture have been removed from government. However, this has not occurred in seed multiplication, livestock breeding. At the same time, private veterinary services in the form of veterinary field units are beginning to emerge with WB support. • 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 56 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS Institutional priorities and at the farm level. Framework • The country now has a more dynamic (continued) agricultural information and advisory services. Regional Advisory Centers are now operating in five regions ( covering 27 raions). Ultimately, the Government intends the advisory centers to be largely self-financing and therefore, the centers have begun taking steps to develop paid services. • 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. 57 BOSNIA AND HERZEGOVINA 2004 Total Population 3.8 mil. Food and agriculture in GDP Agricultural output in Rural Population 50 % (2001) 12 % 2001 as percentage of Food and agriculture in 1989-91 level 70 % Total Area 5.1 mil active labor (1990) 18 % Livestock production Agriculture area: 2.5 mil ha Food and agriculture in 2001 as percentage Arable land 63 % in exports (2001) 0.5 % of 1990 level (est) 60 % Orchards 4% in imports (2001) 25 % Share of livestock in Irrigated 0.3 % Increasing reliance on agriculture (est.) 50 % 46 % imports due to the slow Share of independent recovery and growth of private farms in total agricultural production arable area (2001) 95 % Share of private sector in total agricultural output (2001) 85 % ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Agricultural markets operate freely and Efficient agricultural markets which Framework for direct support for agriculture is low. Both operate with minimal public Agriculture Ministries of Agriculture are now increasing intervention. subsidies and budget support for production. A. Prices/ Subsidies • The PRSP now mandates government to use • Maintain fully liberalized prices. up to 3% of total public expenditure for • Minimize government intervention in agriculture subsidies. agricultural markets. • Actual Min of Agric budgets are 1.5%-2.5% • Focus limited budget resources on of total budget expenditure. Subsidization is support for a limited number of still low as a consequence and is dispersed commodity programs (e.g., dairy) and key across too many programs to be effective. public institutions and activities. • But subsidies are growing rapidly in both entities, from this low base. This includes producer subsidies, interest rate subsidies and investment incentives. • Floor prices are being introduced for a growing range of commodities in FBiH (wheat, milk, maize, tobacco). Wheat floor price in RS. • No controls on consumer prices for food or agricultural commodities. B. Trade Policy • State level trade policy applies to both • Strengthen the state level capacity for entities, based on four tariff bands (0%, 5%, agricultural policy analysis and 10% and 20%). Most agricultural products are formulation in order to accelerate the in the 5% and 10% tariff bands. Additional process of joining WTO. levies of 5%-20% also apply to many • Review the additional levies on agricultural products. agricultural imports to remove • Negotiations for WTO membership began in distortionary protection. 2004 but progress is slow due to the difficulty • Strengthen border control and the of agreeing on a common negotiating position, enforcement of trade regulations. and the weak capacity for policy review and analysis. • As part of the EU Stability Pact, many BiH agric products now have free access to EU 58 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS markets. The inability to meet EU quality and health requirements continues to limit exports. • EU agricultural products will have increasing access to BiH markets after 2006. • Bilateral Trade Agreements with the countries of former Yugoslavia now allow for free trade. 59 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS C. Taxation • The current tax burden on farmers is low. • Incorporate larger farms (socially-owned There are few official taxes and most farmers and private) into the business tax system. operate in the informal sector. Tax reforms during 2005 will increase farm level taxation. • A Universal VAT of 17% will be introduced in June 2005, with minimal exemptions and an income threshold of 20,000 KM. • Both entities will enforce payment of land taxes, once the new Land Law is enacted. This will provide a more effective basis for bringing unused arable land back into production. • Taxation of food processing is in line with general taxation of businesses. High social charges on dependent labor. 2. Land Reform and Private farmers own 95% of farmland but Complete the original land reform Farm Restructuring their ownership rights are still difficult to initiatives, including privatization and establish, and small fragmented farms land restitution; establish clear, secure remain a serious constraint to increased and readily transferable use and efficiency. A new land law is now being ownership rights, and an active land drafted as the basis for accelerating land market as the basis for improving farm restitution, allowing a more rational use of structure. state owned land, and resolving the problem of unused arable land. • Enact the new Land Law as the basis for • Private farms average 3-5 ha, and are highly resolving outstanding land ownership and fragmented. land use issues. • The post-privatization status of state land has • Complete the land restitution process and not been resolved and an estimated 300,000 ha resolve the status of agri-kombinat land, of high fertility agri-kombinat land lies idle by allowing its lease or sale. across both entities. • Restore all land records and reconcile the • Pastures and meadows remain state and cadastre and land register, as the basis for municipality owned. 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 markets and slows the resolution of ownership • Enact legislation in FBiH to reform land disputes. inheritance practices. • Land sales are legal but the land market is thin. Most rural land transfers are affected through informal, short-term leases. • Inheritance laws have been reformed to stop land fragmentation in RS, but no equivalent change has been made in FBiH. 60 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive Agro- Continued delays in privatizing socially Competitive, privately owned processing and owned agro-kombinats, agro-processors and enterprises for agro-processing, input Services for public services for agriculture. Lack of supply and agricultural services; and Agriculture. political will to complete this process. product standards consistent with the • Many socially-owned enterprises have yet to requirements on EU and international be privatized, and continue to operate at low markets. levels of efficiency. • Complete the program to corporatize and privatize agricultural input supply, output • Low levels of foreign participation in the marketing, and agro-processing privatization process due to the poor business enterprises. environment created by stalled reform. • Establish appropriate quality and safety • The veterinary system has now been standards for agricultural imports and privatized in both entities. exports. • Slow progress with EU approximation and • Provide technical assistance for training the introduction of HACCP and ISO 9000 in enterprise management. standards constrains export growth, especially to EU markets. • Promote the development of new products and markets. • Accelerate the process of EU approximation, for food standards and food safety; and the introduction of HACCP and ISO 9000 standards. 4. Rural Finance Improved access of agricultural enterprises Continue to improve the access of to available credit. agricultural enterprises to commercial • On-going bank sector reform and the entry of credit. foreign banks continue to improve the banking • Improve the capacity and incentives for system, and increase the availability of commercial banks and micro-credit reasonably priced credit. Commercial bank organizations to lend for agriculture interest rates are now 8%-10%, although there through a combination of technical is still a shortage of medium and long-term assistance, loan guarantee facilities and credit credit lines. • Commercial banks remain wary of • Strengthen the legislative and agricultural lending, due to past experience administrative basis for using land and with unprofitable AKs, and their limited moveable assets as collateral, and the basis expertise in agricultural loan appraisal. for loan recovery. • Micro-credit has become an increasingly • Broaden and strengthen the legal important source of rural credit. MCOs have framework for the operation of non-bank increased their total lending, and the agric financial institutions (micro-credit share of this lending has risen from 10%-20% agencies, local savings and credit to 40%-60%. The credit available through associations etc) and support their these channels remains well short of demand establishment and operation. however, even at interest rates of 1.0%-1.5% per month. • The Ministries of Agriculture in both entities are subsidizing interest rates from their budgets. 61 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional Institutions remain weak, under-resourced Establish an efficient, effective public Framework and resistant to reform; and public administration to provide appropriate leadership of the sector remains inadequate. support for commercial agriculture, and The fragmentation and poor co-ordination to serve as the basis for WTO of public institutions, both within and membership and EU Accession. between entities, are an increasing constraint to public service provision, and to membership of WTO and the EU. • Sector stagnation is a reflection of weak • Support state level initiatives to public leadership and inability to complete centralize and rationalize public critical reforms. institutions and the provision of public services, with particular emphasis on the • Poor co-ordination between State and Entity institutions associated with WTO governments further weakens public membership and EU Accession. leadership. The independence and financial resources of Canton governments severely • Complete the existing agenda for exacerbate these weaknesses in FBiH. institutional reform, and establish institutional structures which are • Both entities continue to support public consistent with public roles and institutions which duplicate pre-war facilities responsibilities in a market economy. and make poor use of the limited agricultural budget. • Promote the establishment of a private extension service, located in co-operatives, • A donor program to establish a public producer associations and agro-processors; agricultural extension service has made some and support the establishment of a fee- progress in RS, but has had minimal impact in paying, public extension service. FBiH due to weak Canton support. • Reform agricultural research and • Donor programs have improved the (public) education programs and institutions to institutional framework for animal health but make them needs-based and demand- the system remains very weak. driven, and increase public support for • An EU funded study of the public institutions these institutions. in agriculture has recommended a framework • Revise the legal basis for farmer for institutional reform, based on the associations to allow them to operate as establishment of a State level Ministry of business enterprises, with all tax Agriculture and a considerable increase in the advantages. human and financial resources for agricultural institutions. • Agricultural research and education programs are still under-resourced, and poorly supported. • The current law on farmer associations still limits the ability to operate as a business enterprise, and confers no tax advantages. 62 RUSSIA 2004 Total Population 144.2 Agriculture in GDP (2003) 5.4% Agricultural output in 2003 Rural Population 26.6% Agriculture in active labor 11.0% as percentage of 1990 level (2003) (in constant prices) 70.4% Total Area Food and agriculture 1.7% Share of livestock in 1709.8 mil ha in exports (2003) 21.8% 44. 9% Agriculture area: 220.8 (12.9%) agriculture (2003) in imports (2003) 3.7% Forest: Agriculture in fixed assets Lands earmarked for 870.9(50.9%) (2003) agriculture (2004): Surface waters, Net importer of livestock and in State and municipal 68.1% including 225.7 (13.2%) dairy products and sugar property 30.7% swamps 392.4 (23.0%) in citizens’ property 1.2% Other lands in juridical persons’ (55.8 property HP+4.5 Share of household plots Family and family private farms in farms) total agricultural output (2003). POLICY STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Overall and Macro- Previously, substantial liberalization at the Consolidation and maintenance of economic federal level, but a federal agricultural policy macroeconomic stability. Prevention Framework for was never clearly enunciated, and so policy has of excessive state regulation of Agriculture been to a large extent regionalized. Less liberal agrarian economy. Removal of policies prevail at the regional level. Attempts barriers to foreign trade (food introduce various measures of state regulations. imports) and domestic trade at the Federal intervention in grain market has been subnational level, reduction of reintroduced. Import quotas for meat were interventions at the provincial level, introduced in 2003. The Law “On Agriculture integration of national markets and in the RF” (Farm Bill) has been a matter of complete linkage with global markets. debates in the State Duma and in the RF Introduction of a market-oriented Law Government since 2003. It was expected to “On Agriculture in the RF” (Farm identify a set of policy interventions Bill) (mechanisms) and specify their implementation • Assist the Russian counterparts in for 3-5 years. A delay in this law approval is preparing this Law on Agriculture; caused by the principal difference of opinion of provide recommendations on the drafts the economic block ministries and the MOA on in the process of their discussions in the mechanisms to be used to support agriculture RF Government and in the State Duma. and amounts of this support. • Assist the MOA to make its • The restructuring of the GOR and organizational structure and functions administrative reform measures have not caused more efficient. an improvement in the RF MOA performance and its more efficient interactions with other • Enforce legal prohibition on ministries and sub-national authorities. A interference in inter-regional trade; introduction of the performance-based require competitive procurement by budgeting is expected to help the MOA to focus regional governments; WB should begin its activity on key issues of agriculture and rural policy dialogue at regional level (but development. constrained by regional creditworthiness). •Little price intervention at the federal level, 63 POLICY STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS though there is serious discussion of re- • Within sectoral budget consistent with imposition of some controls, under the rubric of macroeconomic stabilization, achieve A. Prices/Subsidies “regulation”. expenditure switching toward public • The MOA requests measures to eliminate goods and services, and away from price disparity (to fix the base ratio and then programs that distort incentives. compensate the sector for the faster growth of Provide the RF Government with agricultural input prices compared to farm-gate recommendations on more efficient prices). The economic block ministries do not support to agriculture from the recognize the problem and refuse from paying Federal and regional budgets on the compensations. Foreign observers indicate that basis of public expenditure review prices for fuel and energy used by Russian made by the WB in Russia. agriculture are below the world market prices. • The tendency towards reducing the • Substantial intervention by some provincial number of federal budget expenditures governments in the form of administrative that act as an obstacle to fair competition controls on prices or margins, barriers to inter- and hinder the domestic market regional trade. development should be preserved. • The share of consolidated budget expenditures under Section 08 (Agriculture and Fishery) in GDP has fallen from 0.75% in 2000 (7.1% of GAO) to 0.49% (5.7% of GAO) in 2003. • 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 writeoffs, commodity credits at regional level—and lack of focus on supporting private farms. B. Trade Policies • Attempts to introduce protectionism measures • Continue to push toward joining WTO. are growing. Russia imposed a sugar import Do not introduce quantitative controls tariff-rate quota regime. In 2003 quotas are inconsistent with rules of WTO. In introduced for beef, pork and poultry meat. context of WTO accession, pressure These quotas are used in 2005. 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 Regional policies create additional obstacles for domestic agricultural producers. WTO accession, as well as large disparities in • Refrain from requesting more food aid, incentives among regions. except for limited targeted aid • Large-scale food aid in 1999 (and on a smaller administered by humanitarian NGOs. scale in 2000 ) disrupted markets. 64 POLICY STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS Overall problems in agriculture similar to other • Evaluate agricultural provisions of C. Taxation sectors, but income easier to hide in this sector. proposed documents with regard to tax Current Tax Code limits tax exemptions and reform. Monitor enforcement of rights of subnational jurisdictions to impose ad restrictions on discriminatory ad hoc hoc taxes. It does not allow agricultural local taxes. producers to evade taxes, but provide them with • Evaluate the results of the unified tax fewer and less distorting taxes. Starting introduction. Work out February 1, 2002, a unified agricultural tax is Recommendations on the sector taxation. introduced. It is based on the results of the • Increase the role of land taxes for the cadastre evaluation of lands. A decision on rural development (currently agricultural implementation of a unified agricultural tax is land taxes make up Ru 2.1bn out of Ru made by each RF subject. This tax covers 33.1 bn of total land taxes). approximately ¼ of all taxes and dues paid by agricultural producers. Local Administrations • Speed up cadastral valuation of have right to reduce tax rate for selected agricultural lands to constitute a sound categories of agricultural producers. The MOA base for the taxation of these lands. 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. As of January 1, 2004, 563m. Ha were used by Removal of remaining obstacles to 2. Land Reform and development of a private land market. enterprises, organizations and individuals for Farm Restructuring agricultural production. It is 60m. Ha less than • Evaluate state farms remaining on list 2 years ago. Shrinkage of these lands continues of unprivatized. Reduce number in 2005. remaining in public sector. Complete • Distribution of land to enterprises and their drawing up of contracts between shareholders undertaken through a series of shareholders and users of land Presidential decrees since 1992. But most of (enterprises). Include registration of land these enterprises continue to operate as they did shares in system of land registration. under the old system, and require large • Pass regional land laws to enforce the subsidies. Land tenure is ambiguous, since Federal Law on Agricultural Land rights of enterprises and shareholders not fully Turnover. specified through contracts governing land use. Ability of these enterprises to restructure is also • Follow the approved procedures for impeded by debt overhang and the fact that they restructuring and/or liquidation of are the sole providers of some social services in insolvent farm enterprises, with hard their areas. budget constraints so that resulting enterprises have incentives and capacity • At the end of 90s new types of agribusinesses to engage in commercial activities. emerged (agrofirms and agroholdings) on the Develop debt work-out procedures that basis of purchases of control stock or creation of will split off legitimate social services branch establishments, or other forms of and place them with the public sector. investors’ involvement in farm business. 65 POLICY STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS • The Federal Law on Financial Rehabilitation • Speed up improvements in land of Agricultural Producers (2002) followed by registration as a priority to developing a the Governmental Resolution (January, 2003) fully functional land market. established a sound base for debt restructuring. • Private land ownership recognized and • Establish and disseminate procedures protected by the Law on Agricultural Land for land transactions, including mortgage, Turnover approved in July 2002. By the leasing as well as purchase and sale. beginning of 2005 only 1/3 of Russian regions adopted local laws to implement the Federal law on Agricultural Land Turnover. • Land markets are largely inactive due to legal • Establish a framework for the ambiguity regarding transactions and lack of dissemination of land market clarity on procedures, absence of mortgage information. market, and general unprofitability of • Reduce costs of accounting and agriculture. The issue of land shares is not registration of agricultural lands and time resolved. High costs of land parcels spent by rural population on these apportionment, accounting, and registration operations. hamper the development of land market. Only • Complete preparation of two World 10% of all land transactions (0.42m. out of Bank Projects, Cadastre and Registration. 4.36m. transactions) account for actual free market land sales. 3. Competitive Agro- Considerable progress in privatization, but Removal of legal and institutional processing and investment remains low, transactions costs constraints to market development. Services for are high, and much of the processing Agriculture. industry is not competitive with regard to price and quality. Starting 2000, processing industry and grain elevators became attractive to private banking and industrial capital. • Foreign participation in marketing and • Create farmer/processor market agroprocessing is lower than desirable. information systems. • Interventionist activities—especially of local • Enforce bankruptcy provisions in food and provincial governments—discourage processing. investment and new entry by continued subsidies to inefficient old enterprises. • Enforce prohibitions on restrictions of inter-regional trade. Tie federal • Development of information system and assistance on agricultural support marketing infrastructure in the food chain is programs to reduced procurement by inadequate. provincial governments. • Many producers still dependent on local • Improve collection and dissemination of “commodity credit” schemes that keep them market information. locked into Soviet-style input supply and marketing arrangements and non-cash trade. • Expand and upgrade public facilities for Monopolistic state of food processors keeps output marketing (farmers’ markets, farm-gate prices low, as a result for example wholesale markets, etc.). milk production becomes unprofitable for many Phase out local government procurement farmers. schemes, and stop the new scheme on federal level. Any procurement should be cash-based. 66 POLICY STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Financing Rosselkhozbank is the main bank servicing Development of multiple channels for agriculture sector. Before 2001, the rural finance. Government (through the MOA) administered programs of soft loans (rates about 25% of commercial rates) and equipment leasing to agriculture. Currently, the State subsidizes the interest rate on commercial bank loans to agriculture. • Effectiveness of banking system compromised • Phase out state owned Rossel’khoz by banking and macroeconomic crisis in 1998. Bank, and while it is operational, limit its • Banks refrain from lending to most of funding to low levels agricultural enterprises. • Improve the system of soft lending to • New federal leasing scheme will in principle agriculture. Continue shift to interest allow greater participation of private sector subsidies in place of direct government companies in the federal subsidy program, a credit. Introduce a program for gradual positive step. However, there is a danger that transformation to regular commercial leasing will remain dominated by lending. Rosagroleasing. • Identify and remedy deficiencies in the • Some credit cooperatives and credit unions are legal framework for collateralizing developing, but legislative framework still moveable property. Pass Warehouse needs improvement. Receipt Law. • The law on warehouse receipt is not approved. • Design and implement a program to facilitate expansion of leasing of agricultural equipment by the private sector, with a sunset clause for termination of public support for the activity. • Support activities to reduce the transactions costs that rural lenders and borrowers face, such as information and evaluation of risk. • Encourage development of credit coops and cooperative banks with appropriate legislation • Pass the Law on Rural Credit Cooperatives. 67 POLICY STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional Reform Institutional reforms are uneven, with Reduce local involvement in excessive local intervention. procurement and refocus research and • Ministry of Agriculture has been reorganized education. to meet requirements of a market economy, and • Ministry of Agriculture needs further focus on policy issues. Provision of State institutional re-structuring and services and management of state property in strengthening on the basis of its changing the sector have become a primary responsibility functions under the administrative of one Federal Service and two Federal reform. Agencies which are being organized under the • Improvement in market information MOA. The State Bread Inspectorate was systems is underway, and needs abolished in 2004. Now the Minister of strengthening. Agriculture is trying to revitalize its functions • Increased funding and reorganization of by shifting them to its subordinate Agencies and agricultural research is needed to focus Services. on increased competitiveness and • Access to information and advisory services international integration. insufficient to support competitive production • Local administrations should reduce and marketing. procurement for regional stocks and • Agricultural research is under funded and conduct remaining procurement on insufficiently linked with international partners. competitive basis. • Local administrations retain an excessive role • Agricultural education should be in market intervention. refocused to address rural labor mobility • Agricultural education has not been more generally, and should be managed revitalized. Currently, only agricultural under the Ministry of Education. universities are under the jurisdiction of the • Refrain from restoration of the State Ministry of Agriculture. Bread Inspectorate and revitalization of • Proposals to allow Producers’ Unions to some old functions of the RF MOA. perform governmental roles in licensing and controlling new market entry. 68 KAZAKHSTAN 2004 Total Population, Agricultural GDP 2004, billion Agricultural output in 2004 15.07 M KZT (estimate) 450 2004 as percentage of 114.3% Rural Population 43.0 % Agriculture and forestry, 2003 level. fishing and hunting in total Total Area 272.5 M ha GDP, 2004 8% Share of livestock in Agriculture area, Agriculture, hunting, fishing agriculture, 2004 44.1% 2004: 222.6 M ha and forestry in active Share of crop in labor force, 2004 6.5 % agriculture, 2004 55.9% Arable land 21.4 M ha Food and agriculture, export (o.w. actually absolute value mln USD 2004 830 Agricultural enterprises used) 17.5 M ha Share in total export 4.2 % (JSC, partnerships, etc.) Hayfields 2.3 M ha Food and agriculture, import out of all land users 55.4% Pasture 78.8 M ha absolute value mln USD 2004 930 engaged in agricultural Forest Fund 22.3 M ha Share in total import 7.3 % production, Lands peasant private farms 39.2% Average monthly wage, Reserved Land 126.3 M ha in economy 2004 KZT 29500 Household plots’ share in 86% in agricultural sector 2004 KZT 12600 livestock husbandry Traditionally net exporter of wheat and cotton products All agricultural produce is provided by private enterprises ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Agricultural markets are liberalized, but Competitive markets for outputs and Framework for increasing subsidies may cause distortions. inputs of agriculture with minimal Agriculture Government intervention. • Government price controls ended in 1994/95. • Maintain liberal pricing policies and A. Prices and Domestic prices largely follow world market increase transparency on local markets. Subsidies prices though they still reflect some distortions due to underdeveloped local markets. • Monitor and evaluate the outcome of the AgroFood Program to improve its • A comprehensive State AgroFood Program effectiveness and implementation. This 2003-2005 continued its implementation in should comprise an evaluation of impact 2004. The program identifies an amount in the of the state-owned enterprises created to order of 8% of state budget to support for the support agricultural marketing and rural sector. Thanks to this program, agricultural financing. There are some risks that these producers can purchase inputs such as fuel, state owned enterprises act as players in lubricants, seeds, fertilizers and other inputs the market and compete with the private with a 40% subsidy. The program also sector rather than supporting it, having the provides financial support for state owned advantage of state financial support. enter-prises (Food Contract Corporation, KazAgro-Marketing, etc.) to address • The Ministry of Agriculture should study underdevelopment of the private sector. the possibility of targeting support to those However implementation difficulties seem to agricultural activities suitable to specific 69 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS create a disincentive for small farms to access eco-regions. these subsidies, which may benefit less than large farms. • Rapid increase of oil export is causing an • The Ministry of Agriculture should make appreciation of the domestic currency and concrete efforts to disseminate information draining financial and human resources out of and demonstrate opportunities of the agricultural sector (Dutch disease). diversification from wheat. Diversification • The Rural Development State Program is from a primary product such as wheat contributing to increase public investments in could considerably increase agricultural rural areas, particularly in infrastructure, but export potential. their effects are not yet visible. • Supervisory bodies should enhance their • Market distortions such as illegal control of work to ensure competitive environment in city markets and bazaars by groups in power the market of fruits and vegetables. that often collude with local authorities leads to abnormal price inflation for fruit and vegetables. • In order to support agricultural producers and to maintain the state food reserves the Government annually exercises a state program of grain procurement. However fluctuations of international prices continue to create difficulties to producers. B. Trade Policies • Negotiation of WTO membership is • Proceed with the efforts to access world advancing with intense discussions on markets without increasing protection. agricultural subsidies and SPS requirements. • Introduce WTO conformed trading WTO accession process is negotiated in regime and complete membership parallel with Russia and expected to be procedures. completed by 2007. • Complete and fully implement mutual • Foreign trade is liberalized but constrained by removal of VAT for trade inside CIS. inadequate control of standards, insufficient • Continue to reduce interference by local transportation facilities, and customs and authorities in agricultural markets. police barriers. • No export tariffs on any agricultural commodities (except for temporary ones). • Small import tariffs are aimed to support domestic producers. Slight increase of import tariff for poultry is observed. C. Taxation • Effective January 1, 2004, VAT rate was • Consider further tax reduction as a unified at 15%. preferable way than subsidies to support • Individual private farms have to pay a the sector. consolidated “unified land tax” and are freed • Consider increasing water charges as an from other taxes normally paid by enterprises. incentive for water savings, while • Amendments to Tax Code further alleviate increasing public investments in tax burden for agricultural producers. Thus, developing and O&M of irrigation farmer payments for land plots and water schemes. resources use, and for environmental pollution were cancelled, some other taxes are modified. 70 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and Successive waves of land reform and Efficient farming based on transparent Farm Restructuring privatization initiatives have characterized ownership and land use rights. Kazakhstan’s reform efforts. Initial • The Government should closely monitor privatization of farms has been completed; the land code implementation, possibly however, the restructuring of the farming with international support, to increase the sector is still in progress. transparency f the process. • The 2003 Land Code allows private • Continue to facilitate the further ownership of agricultural land. The restructuring of farms. government is selling land for an estimated, and since January 1, 2005 owners of land use • Explore measures to reverse negative rights are not anymore allowed to sub-lease social impact of excessive concentration of their rights. However it seems that land. implementation of the Land Code is facing • Facilitate the financial consolidation of some difficulties and the amount of land sold newly emerging farms by introducing to private ownership remains fairly low. international accounting practices. • A recent survey found out that 60% of • Use bankruptcy procedures to accelerate households perceived the land reform as fair, a farm consolidation, use land as collateral share higher than expected by many observers. to stimulate rural crediting by commercial • Adoption of the new Land Code is believed banks. to (i) create incentive for proper investment in • Develop and implement pragmatic and maintenance of land resources and soil fertility, low cost measures to delineate the and (ii) enable the use of land as collateral that remaining notional land certificates for should invigorate economic activities in rural land parcels. area. However, numerous other steps will be needed before this will be realized in practice. • The farm restructuring and ownership changes to date are beginning to yield increases in farm productivity or improved profitability. However the process has been characterized by a limited transparency. • Total number of farms doubled in the past 6 years from 70,000 to almost 140,000. The increase is due to family farms, most of which are concentrated in southern regions. • A Water Code and a Forest Code were also approved in 2003. These legislative acts are aimed at compiling all scattered legislative acts at one document and enhance preservation of natural resources while increasing economic efficiency from its use. • The regulatory framework addressing the issue of ownership of subsoil resources including underground water have been recently revised. Although the new land and water codes and amendment to the subsoil use law and oil law all address ownership of underground water and wells, the issue is not yet fully clear and it is expected that implementation difficulties will arise. 71 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive Formal privatization of state enterprises Private-based and competitive Agroprocessing and completed, technological improvement and agroprocessing and input supply and Services for financial consolidation of these enterprises is facilitation of entry of new private Agriculture lagging behind. entrepreneurs. • The President of the Republic is continuing to • Improve the legal and policy focus on the competitiveness of the sector to environment for direct domestic and prepare it for WTO accession. Pursuant to that foreign investment in agroprocessing. several governmental programs are being • Target public service delivery to the implemented to support agricultural producers many new (small) emerging farmers. and agroprocessing industry, comprising a • Improve public-private partnership cluster approach to the cotton value chain. comprising an increased use of private • Increase attention to quality at the highest sector to deliver public services. Avoid the level, but still limited actions to create potential conflict of interests created by incentive to improve quality and state-owned enterprises. competitiveness: price information does not • Harmonize of national safety and quality cover quality, and price differentials are standards and increase the capacity of limited and insufficiently disseminated. public and private sector to monitor • A compulsory crop insurance has been standards (a recently negotiated World approved. Its results have to be tested. Bank project will contribute to this • Agro-processing enterprises remain under- objective). invested and technologically backward when • Intensify the effort to substantially compared to more developed countries. The reform and improve the public agricultural private sector started to bring some research and extension system. improvements. • Increase attention to quality by providing • A reform of the agricultural research and price information linked to quality and extension system has started, though it is still supporting price incentives to produce formal rather than substantial. A lot remains to higher quality agricultural products. be done to have the public system provide • Improve provision of public goods suc h tangible benefits to the sector. as market information, land titling and registration, disease control, seeds and grain quality analysis and grading. 4. Rural Financing Basic financial sector reforms in place, with Viable financial institutions efficiently rapid emergence of private financial serving the food and agricultural sector. intermediaries, however the development of • Continue to facilitate accessibility of a rural financial system is mostly benefiting credit resources, particularly for long term large producers. investments, for small borrowers engaged • Several actions to facilitate access to credit in agricultural production and processing. have been started. Some risk causing market • Provide technical assistance and distortions. consulting services to potential borrowers. 72 • Amount of rural lending are expected to • Implement the plan to support to micro - increase. In 2003 the agricultural sector has finance. received about US$800m) of credits from • Review the program of leasing of commercial banks. However most are directed agricultural machinery being carried our to large farms and to operational lending. by Kazagrofinance to determine its costs Small farm and long term credit to renew and sustainability. obsolete equipment is far below needs. • Privatize established state owned • Efforts now underway, with World Bank enterprises such as KazAgroFinance. support to create incentives for formal bank financing for small and medium farms for long term investments. • A new leasing law was passed, incorporating suggestion of IFC. • 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. • A program of machinery leasing being implemented by the state owned enterprise KazAgroFinance. The terms of such leasing arrangements vary, but all have some element of interest rate subsidies. KazAgroFinance is supported by subsidized loans from the state. 5. Institutional Framework Adjustment of the institutional framework Effective provision of public goods and to meet the requirements of a market- support services. oriented agricultural sector is still at an • Accelerate the reform of public early stage. administration in agriculture by improving • After the expansion of the role of the human resources management without Ministry of Agriculture in 2003, the increasing the number of staff. Government continues to adjust its structure. • Increase public-private partnerships, However this may be consequence of political comprising outsourcing from the private imperatives rather than search for efficiency. sector. Some critical activities fields like water management, forestry and fishery are subject to • Increase training and monitoring of the revision of their function. public sector performances. Establish a staff survey for the Ministry of Agriculture • Sector institutions suffer for limited as an instrument for managerial decisions. managerial capacity and entrenched bureaucratic mentality and remain only weakly attuned to end-users’ priorities. Many surveys reveal that the majority of users remain highly unconfident of public sector initiatives. An exception is the recent survey which found out that 60% of households perceived the land reform as fair, a share higher than expected by many observers. 73 UKRAINE 2004 Total Population 47.3 mil Food and agriculture in Agricultural output in 2004 as Rural Population 32 % GDP 2004 14% percentage of 1990 level 63% Food and agriculture in Livestock production in 2004 as Total Area 60 mil ha. active labor (2004) 25% percentage of 1986-1990 level 47% Agriculture area: 42 mil ha. Food and agriculture in Share of livestock in agriculture Arable land 77.9% exports (2004) 12% (2004) 39% Orchards 1.9% In imports (2004) 10% Share of individual in total Irrigated 5.0% Traditionally net exporter: agricultural land (2003) 37% Forested 15.6% grain, oil seeds, sugar, Share of individual in total dairy products, beef and agricultural output (2004) 65% 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 in agricultural markets. Agriculture selected markets and underdeveloped market structures. A. Prices/Subsidies. • Prior to 2003, the government abolished fixed • Abstain from implementing new producer prices for agricultural commodities distortionary price control measures. (in 1994); wrote off public debts accumulated • Liberalize agricultural markets by by the farming enterprises (in 2000); removed implementing competitive government budget credit that was provided mainly in the procurement methods which would assist form of input supplies (in 2001); in addition, the development of private intermediaries. implicit taxation on agricultural producers has been significantly reduced between 1998-2001. • Continue to remove implicit taxation on agricultural producers and processors by • Lack of competitive domestic markets and promoting competition and domestic underdeveloped infrastructure and trading market development. system still keep high margins between producer prices and border prices. • In 2004, the budget allocated UAH 421m (US$79m) to support livestock production. In addition, around UAH 500m (US$94m) were paid by processing enterprises as a subsidy to farms for the meat and milk sold by farms for processing (see Section C. Taxation). • In 2004, UAH 248m (US$47m) were paid to farms that grow spring crops. Another UAH 110m (US$21m) were paid as subsidies for the purchase of fertilizers. Also, UAH 36m (US$ 7m) was used to subsidize 30% of the cost of domestic agricultural machinery purchased by farmers in 2004. In addition, the government facilitated the supply of subsidized fuel to the farming sector. • Since 2000, the government maintains minimum prices for sugarbeet and sugar and quotas for the supply of sugar to the domestic market. In 2004, the min. price of sugarbeet was UAH 165/t (US$ 31/t) and sugar UAH 2,370/t (US$ 446/t). 74 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS B. Trade Policies • In 2004, the government reestablished direct • Maintain conditions for remonetizing purchases of agricultural commodities through commodity and payment relations. the State Reserve Company which bought 0.6 • Ensure that all state agricultural m tons of grain to increase state grain reserves. procurements are limited to budget • A system of pledge purchases of grain by the allocations and executed on a competitive national and local government was established basis through the agricultural commodity in 2000. In 2004, the government has spent exchanges, public tenders, and auctions. UAH 176m (US$33) for pledge purchases of • Maintain conditions under which there grain). are no restrictions on inter-regional • In response to low 2003 grain harvest, the movement of grain. government enforced a temporary export ban • Amend the system of pledge purchases on food quality wheat, informal restrictions on of grain by limiting it to budget funded inter-regional trade and price caps on grain, volumes and allowing private sector to and tightened controls on profit margins for implement the pledge purchases. bread at the local level. These measures were • Reduce import tariffs and remove export gradually released after a bumper grain crop taxes on live cattle, animal skins and was harvested in 2004. sunflower seeds. • Quotas on imports of some meat products • Refrain from intervening in agricultural were introduced in 1997 but never import and export markets, with the implemented in practice. exception of interventions acceptable • Average weighed agricultural and food sector under the WTO. import tariffs were at the level of 20% in 2004, • Pursue active trade policy to improve with many tariffs set in specific form market access for Ukrainian food and (Euro/ton) at equivalent ad valorem rates of agricultural products through the WTO, 50% or even higher. and by seeking duty-free access for these products to the markets of the states of the FSU. C. Taxation • Agricultural imports are in most cases taxed • Promote a fair and non-discriminatory on the basis of reference prices. system of taxation. • Export duties on live cattle and animal skins • Remove the existing tax breaks applied were introduced in 1997; 23% export duty on to the agriculture sector. sunflower seeds became effective in 1999 and is still in place. • 25% profit tax for food industry and for intermediary activities was maintained in 2004. • The primary agriculture continues to pay single land tax that is calculated based on land area in use with certain adjustments for land quality. This tax that was to expire on December 31, 2003 has been extended for CY 2004. In 2004, the criteria for business entities in agriculture to qualify for the single tax remained unchanged: a farm had to receive at least 75% of revenues from primary agriculture and on-farm processing. • As of January 1, 2000, farms have been receiving back the VAT paid on all off-farm sales of agricultural commodities. In 2004, farms received UAH 1.5 bn (US$ 280m) through the repayment of VAT. Farms are 75 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS allowed to use these funds only for the purchase of inputs. • In 2001-2004, 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. 2. Land Reform and Land reform and farm restructuring Secure transferable land use rights Farm Restructuring accelerated in 2000-2002, but the process is conducive to promoting long-term still at an early stage. investment, access to financial markets, • Virtually all large-scale collective agricultural and enhanced land mobility. enterprises have been re-registered as private, • Encourage land reform by informing private-lease enterprises or cooperatives in farm members on the legal basis for 2000-2001 following a December 1999 Decree division and privatization of large farms, of the President. which would promote development of • The process of issuing land share certificates viable farm management units. Develop a has been completed. However, only about comprehensive program for farm 10% of all collective farm members have left restructuring and land reform that the large collective agricultural enterprise. promotes genuine farm restructuring through liquidation of existing large-scale • 70% of farmers who received land share farms. certificates rented them out to farms where the certificates have been issued. • Continue systematic titling of agricultural land. • Ongoing process of privatization: the land provided for private and household farmers • Develop procedures for implementation prior to 2002 and the land plots withdrawn by of the Land Code. individual farmers from former collectives • Approve and implement legislation on reached 14.1m ha or about 37% of total registration of titles for immovable agricultural land by end 2003. property, including land. • Replacement of land share certificates with • Develop mortgage procedures for land, land titles with physical allocation of land other real estate, and moveable assets. The continued to be slow in 2004. According to mortgage law would allow lessees to official statistics, 4.5m or about 69% of mortgage their leasehold interest. farmers who received land share certificates exchanged them for land titles as of January 1, 2005. 76 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS • Moratorium on sales of agricultural land that was to expire on January 1, 2005 has been extended by another two years – to January 1, 2007. The limit of 100 ha on the area of land which can be owned by one individual remains in place until 2010. • The Parliament suspended all transactions with land share certificates in early 2001, except for lease or inheritance. • Land registration does not meet the needs of a functioning land market. • In July 2004, the Parliament passed a law which sets up a legal framework for the unification of the registration of land and immovable property under one agency. However, the unified title registration system has not been introduced as key by-laws and regulations are still to be approved by the Cabinet. • A Mortgage Law approved in June 2003, set up the legal framework for mortgage transactions but left detailed regulation of agricultural land mortgage transactions to a separate law which still needs to be drafted and approved. 3. Competitive Agro- Privatization and demonopolization have Restructure state agricultural institutions processing and been largely completed; in many instances, to focus on the role of market facilitator, Services for this process has resulted in restructuring and bolster agricultural market Agriculture and increased efficiency of the food information. processing sector. • Facilitate the emergence of new and • State owned agroprocessing and input supply privatized restructured firms, and the system has been largely privatized through a growth of efficiency in both input and mass privatization scheme. This has included output markets and in agroprocessing. the majority of grain storage and processing • Complete corporatization and facilities. privatization of grain procurement and • 96 grain storage and processing facilities storage enterprises that are currently part remain in state owned holding company Khlib of Khlib Ukrainy. Sell Government’s Ukrainy (Bread of Ukraine) and in State remaining “golden share” in a number of Reserve Company. grain elevators, which still allows some • Basic anti-monopoly regulations developed government control. during in 1993-1994; Anti-Monopoly • Create a policy and legal environment Committee (AMC) is active in preventing supportive of direct foreign investment. collusion and local monopolies. • By end 2004, the total FDI to agriculture processing and food industry totaled US$ 1,124m which accounted for about 14% of total FDI in the economy. 77 ISSUE STATUS OF REFORMS OBJECTIVES PROPOSED ACTIONS 4. Rural Financing Lack of an appropriate financial system for Viable financial institutions efficiently food and agriculture. serving 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 • The banking sector is still weak and its in rural lending. financing to the productive sector is limited. • Increase the ability of rural assets to The size and presence non-bank lenders are carry debt. negligible. High interest rates (average of 17% • Create more conducive environment for in 2004) and the insufficient collateral limit lending to agriculture. lending to agriculture. Although there has been an improvement in short term lending by • Develop a viable distribution network for commercial banks (est. UAH 7.7 billion in various segments of rural financial 2004), there is little medium and almost no markets. long term lending. • Phase-out the interest rate subsidy • The government allocated UAH 144m (US$ program and replace it with instruments 27m) to subsidize 10% of interest rate charged which maintain more transparent by commercial banks lending to primary instruments that maintain level-playing agriculture and 7% of interest charged to field for lending to the sector. processing and service enterprises in 2004. 5. Institutional Adjustment of the institutional framework Efficient and effective public sector Framework is at a rather early stage. administration and support services. • Government administration in agriculture • Prepare and implement a program of sector at the central and local level still carries reorganization of public administration in many features of Soviet type structure. agriculture, both at the national and local • Research/education system has not been level. adjusted to emerging new conditions. • Review and streamline agricultural • Public activities (government research- education and research system. education) in agriculture are seriously • Support the emergence of private farm hampered by budgetary difficulties. advisory services. • Western type of agricultural extension system has started to develop. Advisory services were piloted by donors in half of regions. • Law on agricultural extension system was passed by the Parliament in June 2004. 78 MOLDOVA 2004 Total Population 4.2 mil Agriculture in GDP (2003) 19% Agricultural output in Rural Population 59 % Agriculture in active labor 2003 as percentage of (2003) 43% 1989-1990 level 55% Total Area 3.4 mil ha Food and agriculture Livestock production in Agriculture area in exports (2003) 59% 2003 as percentage of (2004): 2.5 mil ha in imports (2003) 12% 1989-1990 level 27% Traditionally net exporter of Share of livestock in Arable land 73% wine, processed and agriculture. (2003) 12% Orchards and 8.5% unprocessed fruits and Agricultural area in private vineyards vegetables, and pork. use (2004) 73% Irrigated 7% Share of private sector in Forested 13% total agricultural output (2003) 75% ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic • General price and market liberalization, with • Minimal Government intervention in Framework for exception for sun-flower seeds and wheat. agricultural markets. Agriculture A. Prices/ Subsidies • In 2004, Government spent a total of about • Maintain the liberal course of market and US$4.7m on direct subsidies and transfers to price policies. farmers, equivalent to 32% of total • Maintain a no intervention policy for expenditures on agriculture. agricultural markets. • In 2004, MAFI spent US$2.5m for direct • Improve the efficiency of use of scarce subsidies and transfers to farmers via the public funds for the sector by investing in Agricultural Sector Support Fund. US$1.8m appropriate public goods and services that of this was discussed and agreed upon with are more effective in spurring sustainable IDA for use as credit incentives, and was growth than subsidies. similar to a program in 2003. However, • Increase the transparency and reduce the another US$0.8m was spent on the creation of distortionary impacts of any remaining agricultural machinery stations. This was not subsidies. agreed upon with IDA, and was implemented in a manner that was non-transparent, and • Ensure that public services and threatened to undermine the successful 2KR investments do not discriminate against Program and repayment discipline. It is also certain ownership structures or sizes of only for large agricultural enterprises (especially small farmers). enterprises/cooperatives. Government has requested a doubling of these subsidies in 2005, to US$5m, with US$1.5m for machinery stations. • In 2004, another US$2.2m was spent on direct subsidies and transfers to farmers, but outside of MAFI’s budget. This included subsidies for land preparation, promoting use of new land, and enhancing soil fertility. 79 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS A. Prices/ • Other indirect subsidies to agro-enterprises Subsidies were provided at the direction of Government (continued) in the form of forgiveness or freezing of debt in 2004. This includes US$9m of cancelled arrears to 30 enterprises, and US$10m of frozen debt for 9 tobacco enterprises. This is not reflected in MAFI’s budget. • For 2005, Government has requested US$0.8 m to subsidize the plantation of vineyards and orchards. Only those who plant more than 5 ha will receive compensation, thereby leaving out most small farmers, and subsidizing large, often foreign investors who don’t need these incentives. • Introduce market methods in procuring • Domestic trade is largely liberalized, but a grain for government purposes and for B. Trade Policies competitive market structure is yet to fully marketing of grain and input deliveries emerge. based on inter-governmental agreements. • Government procurement is restricted to • Reform the Universal Commodity grain, purchased for state reserves. In 2002, Exchange to make it voluntary, and the Government agreed with IDA that the increase availability of price and other Grain Reserve will not exceed 5000 metric trade information. tons a year. However, due a poor harvest of wheat in 2003, and a subsequent lack of • Maintain low import tariffs and abstain sufficient wheat on the domestic markets, the from quantitative export restrictions; Government has moved to increasing drastically reduce non-tariff barriers. significantly its wheat reserves. This process, • Develop a strategic policy, including: and subsequent interventions on the bread and • Ensure timely and accurate VAT flour markets, have been non-transparent, reimbursements for exports; distortional and detrimental to private suppliers and producers. • Eliminate ad-hoc export barriers on selected commodities • Export of agricultural products was liberalized in 1997; but many non-tariff intra- and foreign trade barriers exist. Licensing requirements were eased in 2001 and 2002, however some regulatory control continued to have been exercised in 2004 in the form of reference prices and administrative impediments. This is particularly true for cereals and sunflower seeds. In 2004, Government passed a resolution declaring that all exports of wheat and wheat flour must be done through the Universal Commodity Exchange. Up to 12 different documents are required to export, and shipments are allowed only by rail. As a result, exports have decreased substantially. 80 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS C. Taxation • Land tax is maintained as the primary form of • Fully implement the non-discriminatory taxing agriculture. system of agriculture taxation. • In 2003 Government reverted to limited, in- • Improve tax collection rates. kind tax collection of some local taxes. • Gradually increase VAT to the proposed • Registered private farms almost fully fulfill 20%. their tax obligations. • Create incentives for proper registration • The introduction of 20% VAT for agriculture of private farms, to increase further the to harmonize VAT levels across sectors has rural tax base. been postponed. • The Government is nursing plans to introduce a unified tax for agriculture, to replace all existing taxes with one. To this end, a pilot is under implementation in the Orhei region, however, the results and feedback from farmers are variable, and at this time it is not clear if these plans will be implemented. 2. Land Reform and • Process of farm restructuring and Farm Restructuring • Farming structure based on secure privatization has accelerated since mid 1998. transferable land use rights. Liquidation of former state and collective farms and privatization of agricultural land • Increase efficiency of farming by plots is essentially complete in Moldova, with reducing fragmentation of farms through more than 1.7m hectares of land distributed to voluntary, market-based mechanisms. over 1.3m owners from 1998 through the • In the short term, implement pilots to present. demonstrate and adapt international best • The current Land Code (adopted in 1991) has practice in land consolidation to local been performing reasonably well, although it conditions. has resulted in fragmentation. February 1995 • Over time, encourage the development of Amendment of Land Code allowing only active and efficient land sales and leasing group exits from large farm was eliminated by markets to facilitate land consolidation and the Constitutional Court in early 1996. the use of land by efficient farmers, and • Revised and improved exit and registration the ability to use land as collateral. procedures were adopted for the establishment of private farms. • Legislation on bankruptcy procedures was adopted to expedite the process of land privatization. • A uniform cadastre system has been established. 81 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and • Procedures for administering transactions Farm Restructuring of agricultural land were introduced and the (continued) transfer fee was reduced to 2% of the sales value. But anecdotal evidence suggests that other transaction costs might be constraining the sales market. • While there have been some transitional problems in leasing markets, including unfair practice and abuse of market power by some larger land users, the market seems to be stabilizing and abuses decreasing. Alternative dispute resolution mechanisms are arising. • In 2002, the Parliament adopted a set of amendments to the Land Code of 1991, aimed at streamlining voluntary land consolidation. The Law on Agricultural Land Lease provides a reasonable foundation for the leasing market. Unlike similar laws in Europe, it emphasizes the protection of small lessors rather than the more powerful and often monopsonistic corporate lessees. • In many localities today a form of informal land consolidation is taking place through the leasing market. Over 50% of the agricultural land in the country is presently leased. • Despite the progress that has been made, Government remains concerned about land fragmentation. In response, over the objection of the Bank, Government intends to adopt a new Land Code, as well as a Law on Land Organization, to facilitate consolidation. Early drafts of these documents are highly intrusive on private ownership rights, and are focused exclusively on administrative-led consolidation of land. These developments are cause for concern, and must be monitored carefully. Meanwhile, Government has agreed to accept technical assistance from the Bank on the design of voluntary, market-based land consolidation pilots. 82 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive • Continued progress in privatization and de- • Private competitive processing and input Agroprocessing and monopolization of remaining state owned agro- supply industries. Services for processing enterprises has been slow. • Market discipline (hard budget Agriculture • Agroprocessing and input supply industries constraint) needs to be imposed on have been privatized as part of the overall existing enterprises to provide incentives privatization process. However, as a result of to restructure or liquidate. the mass privatization through vouchers, • Provide incentives for development of ownership at these companies is extremely processor-driven vertically coordinated segmented, and the Privatization Investment supply chains by reducing transaction Funds have failed to bring about effective costs. enterprise restructuring as a result of problems • Promote the participation of foreign with ownership, management and control. investors in privatization auctions. • Producers of agricultural raw materials • Work with private sector to reform received 50% of ownership of agroprocessing. restrictions on ag. imports so that they • The initial privatization of agro-processing meet Government’s policy objectives, but was completed by the end of 1995. The do not discourage investment. majority of enterprises, however, are • Develop and implement effective unconsolidated and lack transparent ownership. anti-monopoly legislation. • With the notable exception of the wine sector, • Strictly enforce bankruptcy legislation in many agroprocessing sector enterprises are still order to consolidate the newly established operating the old fashioned way (without any private sector. significant restructuring) and are in effect bankrupt. • Re-evaluate the effectiveness of the Privatization Investment Funds. • Continued debt write-offs reduce incentive of enterprises to restructure and become competitive. • Frequently changing restrictions on import of raw agricultural materials creates an environment of uncertainty and discourages especially foreign investment in processing. • Anti-monopoly regulations are not fully in place. • With the notable exception of the wine sector, there is still limited new entry of the private sector into the processing sector. • Limited foreign participation/investment in the privatized agro-processing enterprises (except wine). 83 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Financing • Lack of an appropriate financial system for • Viable financial institutions efficiently food and agriculture. serving the food and agriculture sector. • Financing in agriculture is not adjusted to the • Development of a rural credit system needs of a market-based, privatized agricultural based on rural credit cooperatives for sector. smallholders. • High interest rates, lack of collateral, lack of • Improve the overall business clients with sound business practices seriously environment to encourage processors or limit lending to agriculture. suppliers' credit schemes to finance • Underdeveloped judicial system significantly farming inputs. hinders the process of collateral acquisition by • Develop a system of warehouse receipts, banks. including necessary legal framework. • A market oriented Law on Pledge was • Simplify legal systems to protect lenders adopted and enacted but the technical and borrower’s rights in case of defaults. infrastructure for the implementation of the • Government to implement a matching Law still doesn’t exist. grant scheme acceptable to IDA/IMF. • In 2003, the World Bank Rural Investment • Introduction of an efficient system for and Services Project (Phase I of an APC), movable pledge registration. aimed at providing, among other, long term • Introduction of an efficient system for credit resources for rural development, and credit information. technical assistance to the banking system to improve rural and agricultural lending skills, disbursed in full its credit line. In order to achieve continuity, IDA has initiated the preparation of the second phase of the RISP in the amount of US15.4m in IDA funds. 5. Institutional Framework • Adjustment of the institutional framework is • Efficient and effective public sector at a rather early stage. Unfortunately, the administration and support services. Government seems keen on establishing more • Prepare and implement a program of re - and more regulatory bodies to run the sector. organization of public administration in For example, the Government has created a agriculture. department on Wine and Viticulture, on • Reorganize the Ministry of Agriculture Tobacco, on Horticulture, etc. All such and Food Industry. institutions add to the bureaucracy in the sector, and the benefits that they generate for producers are minimal. • First attempts of creating a western type • Reform the agricultural education and agricultural extension system are being made research system to meet the demands of under the Rural Investment and Services the changing agricultural sector. Project. So far, the system has been • Increase the sustainability of functioning well, achieving national coverage, Government-sponsored farm advisory with hundreds of thousands of farmers services. benefiting from consultations and advice. • Support the emergence of private farm However, there are questions of sustainability advisory services for landowners. due to a lack of cost recovery and current inability of Government to fund these services • Support the emergence of private farm under the budget. organizations. 84 GEORGIA 2004 Total Population 4.6mil Food and agriculture in GDP Agricultural output in 2003 Rural Population 47.8% (2003) (estimated) 19.2% as percentage 1996 levels 128% Food and agriculture in active Livestock production in 2003 Total Area 7.6 mil ha labor (2003) 55% as percentage of 1996 levels 134% Agriculture area: 3 mil ha. Food and agriculture as percent Agricultural area in of total individual private ownership Arable land 26% in exports (2003) 9% (2003) 26% Orchards 9% in imports (2003) 19% Agricultural area leased by Irrigated 45% Traditionally net exporter of private individuals from Forested 40% wine, processed and fresh fruits, Government. 25% vegetables and tea Agricultural Land controlled by Government 49% ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic Liberal agricultural markets mainly free of Competitive and functioning agriculture Framework for Government intervention. markets, without Government Agriculture intervention. A. Prices/Subsidies • In general, the producer prices have been • Prices of agriculture inputs and outputs liberalized and minimal government determined by markets. intervention on agricultural markets, except • Phase out remaining producer subsidies political pressure for low price of bread. on irrigation water and energy. • Control of energy prices is being gradually • Water charges be worked out. readjusted to reach cost recovery levels. • Food aid be distributed through market • Subsidization of water charges is the last channels. remaining producer subsidy. • Refrain from intervening in agricultural • Regulation of food aid distribution has been import and export markets with the substantially improved to reduce distortions. exception of interventions acceptable • 12% uniform tariff on imports. 5% on under the WTO. selected capital goods, raw materials, and • Maintain low and uniform tariffs and no medicines. quantitative restrictions or taxes on B. Trade Policies • Tax on exports was eliminated in late 1994. exports. • Liberal export policy with no licensing for • Improve physical and commercial most agricultural products. infrastructure for export trade rather than • Most agricultural products are traded on introducing special incentive programs. essentially private, informal markets. • VAT was abolished for small primary • Georgia became a member of WTO in June producers and replacing it with a single 2000. Georgia has six FTAs (Armenia, land tax. Azerbaijan Kazakhstan, Russia, Turkmenistan and Ukraine). 85 • The 2001 Presidential Decree established • Develop a new standard system, move time table to move from two-tier systems. In away from mandatory to voluntary 2002 the number of mandatory standards international technical regulation. reduced to 78. • Border inspection and control be • Illegal rent seeking and bureaucracy seriousl y streamlined. constrains domestic markets. C. Taxation • VAT and income tax collection rates from • Simplification of the tax laws and primary agriculture producers is extremely improvement of the enforcement low. The Government is considering dropping mechanisms based on clear legal both VAT and income tax for primary procedures should be introduced to reduce agricultural producers and replacing it with a harassment and rent extraction by single land tax. government officials. • There are numerous conflicting taxes and registration fees that create opportunities for rent seeking by government authorities. 2. Land Reform and Progressive, but rather spontaneous, Private farming as the major Farm Restructuring unstructured and unfinished land reform. component of the farming system with • The 1992 land privatization program secure transferable land use rights. provided 57% of arable land and land under • Complete the initial privatization of land perennials to private individuals, but remains as envisaged by the Presidential decree of unfinished. December 1992. • Law giving ownership rights to the • Establish title registry offices. beneficiaries of the 1992 land reform was passed by the parliament in early 1996. • Gradually transfer remaining state lands to private ownership through auctions. • Land titling and registration legal framework is in place, but require implementation for the • Transfer non-land productive assets from functioning of the land market to develop. state/collective users to private users and operators. • Law on providing lease rights to state owned agricultural land was enacted in mid 1996. • Develop mortgage procedures for land, other real estate, and moveable assets. • In addition to the land in private ownership, an additional 27% of all arable land and land • Move from rental of large farms to under perennials is leased by private entities. private ownership. • Of the total area of agricultural land, 26% is • Increase or remove the 1.25 ha limit on in private ownership, 25% is leased by the land ownership. Government and 49% (mostly pastures) is still under direct government control. The land privatization process is therefore incomplete. 86 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 3. Competitive Agro- Spontaneous and slow privatization Competitive, privately owned processing and program. processing, input supply and service Services for sub-sectors. Agriculture • Complete privatization of remaining • The early phase of privatization was rather spontaneous and often inequitable. Most assets agro-processing and input supply were transferred to existing management. companies controlled by the Ministry of Agriculture, preferably through strategic • This process of privatization has not lead to sales to private investors with new capital inflows of new capital and management and expertise. expertise required to turn these companies around. These enterprise assets are being • Remove constraints to secondary sale of gradually being bought out by entrepreneurs enterprises privatized enterprises, such as that have capital and management skills to punitive capital gains taxes or restrictions develop them, resulting in mild growth in the on resale. sector by the late 1990s. • Facilitate the emergence of new and • Foreign participation in the process of restructured private firms in processing, privatization remains low. input supply and services by reducing registration requirements. • Consistent energy supply is a major problem for agro-processing companies operating in • Encourage the establishment of producer rural areas. associations that can improve product quality and facilitate entry into new markets. • Enforce bankruptcy and liquidation on firms that are bankrupt, particularly those in arrears on taxes, loans or privatization payments to the Government. 87 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Finance Existing financial system is small, is focused Viable financial institutions efficiently on short term trade financing and does not serving the agricultural sector. serve the agricultural sector. • Continue to improve Bank supervision • Both primary agriculture and agro-processing and certification programs. have a serious liquidity crisis due both to tight • Continue the support to credit unions in supply of medium term credit. capacity building for self-sustaining • A major coordinated effort is underway, operation. supported by the World Bank, IMF and • Develop legal frameworks for non-bank bilateral donors to strengthen the banking financial institutions. system's infrastructure. This is progressing • Improve the environment for foreign well. direct investment as an alternative to • Rural Credit Unions and other non-bank medium term bank credit. financial institutions have been formed to start addressing the problem of credit to small scale rural farmers. 5. Institutional Institutional structure needed by privatized Efficient and effective public sector Framework agriculture is not in place. administration and support services. • At the regional level the administrative • Prepare and implement a program to structure of the socialist era has been preserved alter the structure and scope of with little change. government organization for management • Research/education system has not been of agriculture. adjusted to emerging new conditions. • Re-orient Government attention toward • Public activities (government research- private agriculture. education) in agriculture are seriously • Re-orient Government role from direct hampered by budgetary difficulties. intervention to establishing the general • Western type agricultural extension system rules and facilitating conditions for the does not exist, but pilot projects have been smooth operation of the markets and implemented and are expected to expand in the independent business organizations. future. • Support the emergence of private farm • Efforts to restructure the Ministry of advisory services. Agriculture have begun. • Restructure the agricultural education and research system. 88 Slow Reformers (countries with a ranking score below 6.0) Tajikistan Uzbekistan Belarus Turkmenistan 89 TAJIKISTAN 2004 Total Population (2004) 6.6 mil. Food and agriculture in GDP 24% Agricultural output in Rural Population 74.0 % 2003 68% 2003 as percentage of Total Area (ha) 14.3 mil. Active labor in Food and 1993 level 112% Agriculture area 4.6 mil. Agriculture (2003) Arable land 16.0 % Food and agriculture 27% Livestock production in Orchards area 2.2 % in exports (2003) 2003 as percentage of Pastures 80.8 % in imports (2003) 7% 1993 level 57% Irrigated area of AL 79.0 % GDP 2004 10.6 (E) Traditionally a major exporter of Livestock production GNP per capita (2004) $ 370 cotton and in addition processed as a percentage of GDP Exchange rate TJ and unprocessed fruits, (2003) 9% SOMONI to US$ 2005 3.02=1.00 vegetables, nuts, silk, and wine, and a net importer of: grain, Arable area in private sugar and vegetable oil. Now use in 2004 there is a shift in cropping pattern (independent peasant and meets its grain needs mostly family and 72% through domestic production. Cooperative/associatio ns (Dehkan farms) ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic • The macroeconomic environment has Creation of an enabling environment for Framework for improved—inflation went down from 39% at private sector development and Agriculture the end of 2001 to less than 6% at the end of implementation of competitive and fair 2004, and international reserves as a agricultural markets. Enhance private proportion of imports have increased to over sector role in rural development. two months of imports. During 2001-2004, • Continuation of macro-economic real GDP growth averaged 10% per year. The adjustment operations and capacity debt burden has been eased significantly, building to implement market oriented owing to the Russian debt swap and Pakistani agricultural policies; such as liberalization debt write-off in 2004. The public sector of all prices and phasing out producer external debt fell from 85% in 2002 to 40 subsidies. percent in 2004. Most important of all, the poverty rate declined from 82%in 1999 to • Improve incentives for water savings, 64% in 2003. Inequality has increased and cost recovery in Irrigation and in marginally. Operations and Maintenance of the infrastructure and transferring of the • The government’s overall development management and water distribution to approach for the sector is to reverse the water user’s associations decline in production, and to promote an efficient production under private sector. Prices of wheat, fruits, vegetables and livestock products and inputs have been fully liberalized. Farm input and out put market has been liberalized. 90 • Although the Government is engaged in the • Intensification of the activities for A. Prices/Subsidies privatization of the agricultural sector through privatization of the remaining state and the privatization of state and collective farms collective farms in a transparent and more and enterprises, this privatization has by and equitable manner and estoppels of large- large occurred only on paper due to scale transfer of land to cotton firms on outstanding farm debt issues. long term leases. • Although the cotton market is stated to have • Cotton Debt resolution and allocation of been liberalized and all the ginneries in the land to farmers and provision of full country privatized, the government continues freedom to farmers to select crop structure to interfere in the cotton production and of their choice and encourage investment marketing through administrative coercion, in cotton sector and improve incentive future contracts to cartels, fuel allocation, structure and reduce role of the state in water allocation and licensing for export. credit allocation to farms for cotton • Grain and cotton prices have reached almost production. international prices and the trend continues • Promote viable agro-processing industry, during 2004. But farm gate price for the and competitive agricultural markets in the cotton continues to be extremely low (less private sector. Provide secure trade routes than 30%). from farm to markets and eliminate inter • Water Use charges for irrigation was raised rayon border restrictions. by 200% during June 2004, but collection continues to be poor, Power for Irrigation water continues to be subsidized. Bread prices fully liberalized, universal bread subsidy has been replaced with targeted food subsidies to the vulnerable groups. • Privatization of cotton ginneries has been B. Trade Policies • Abolish domestic reserve requirements. completed. There are now 38 cotton ginneries in Tajikistan of which three are not • Monitor progress of cotton stock operational. Privatization of another set of exchange and expand linkage to regional 340 SMEs has been completed. and world markets and promote conditions for active free standing forward trading • There has been some progress in liberalizing activities for cotton. free trade for cotton, however, subtle control • Remove remaining export licensing and of the government in export of cotton through quotas. licensing and in providing directed credit for production or the guarantee for future contract • Remove convoluted licensing procedures for cotton. Open up the market for cotton production through state controlled banking through “Cotton exchange” or an continue to exist. association of cotton traders and • Licensing requirements for the import of processors and producers. agricultural inputs and export of all agricultural exports however has been • Adopt a transparent trade policy. eliminated. 91 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS C. Taxation • Land registration fee has been reduced from • Simplify the taxation system; organize $80 to less than $7, and compulsory wider information campaign to educate the registration of persons engaged in farm people about the tax and land fee policy production activity as juridical persons have and the taxation system. been eliminated, thus promoting the • Strengthen the Government capacity in privatization of the farming sector, but there formulation and implementation of exists indirect fee whish has grown up to appropriate import and export tax policies $120 to 160/certificate. and publicize it. • Taxes on the agricultural sector: e.g. VAT, • Rationalize cotton sales tax policy; production tax, land tax, irrigation tax, Monitor the government policies of the transport tax; road tax, safety-net tax, health reduction of all export taxes and duties for tax, and water tax, and are now being agricultural products. rationalized and simplified. • Eliminate restrictions and Government • Registration requirement for all those policing of inter-raion movement of farm engaged in marketing of agricultural products inputs and out. continue to exist and are convoluted. • Develop a customs reform program • Cotton exports taxed at 25% of FOB price. which includes: (i) revision of the • Regulations governing customs Customs code; (ii) revision of Customs administration need improvement and some procedures and regulations and strengthen inefficient and lengthy customs procedures the internal audit function; (iii) a plan for leave room for discretion and corruption. the modernization of Customs over a next • Convoluted procedure for calculating VAT two year period. Iv) Adopt revision of the and the Tax system for individual or small Customs code; (v) reform Customs scale traders, cooperatives and corporate procedures and regulations and strengthen entities in agriculture providing farm support the internal audit function; and (vi) start services continue to manifest. modernization of Customs working system making it more transparent. 2. Land Reform and Progress is being made under farm land privatization and farm restructuring Development of transparent, Farm Restructuring participatory approaches for equitable • Government has passed a Land Code. distribution of land use rights of the Although land is the exclusive property of the lands of large state and collective farms, state, the law permits for long term (30 to 90 establishment of a system for systematic years) land lease tenure that is transferable or registration of right to land use, bequeathed. Primary land users have tenure creation of transparent, fair and of unlimited duration or life-long inheritable competitive land lease markets. tenure. Secondary land users are lessees of land plots. Four types of land tenure: (a) • Improve the legal framework for land Land tenure of unlimited duration, available reform by (a) allowing security of land to state-run and co-operative agricultural tenure with rights to exit, and formalizing enterprises, and other enterprises and clear rights to own and sell land; (b) associations. (b) Life-long inheritable tenure, constituting a participatory and transparent available to physical persons or groups of mechanism for determination of land and citizens to establish dehkan farms or to take non-land assets for individuals and their up other “traditional farming activity.”; (c) allocation; (c) developing mechanisms to Land Use (term based), available to secondary use land lease rights/ other assets users for general use only and (d) Land lease, (including mobile) as collateral. available to secondary users for a term of 20 • Modernize the land tenure registration years (if from a private primary holder) or 10 systems and titling services in the years (if from the land reserve funds) for a immediate to short term to develop a price not to exceed the land tax rates. functioning land lease market. Enhance • So far, according to the SLC out of 850 public access to land use right records. collective and state farms prior to the reforms • Reform the legal framework for 544 have already been reorganized in to individuals, cooperatives and corporate 92 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS dehkan farms, but majority of them have not entities in agriculture to provide for changed their mode of operation. Some transparency, autonomy and framework collective and state farms will not be for easy restructuring of farms and reorganized (1 per raion set aside for seed / agencies and enterprises providing farm livestock production & research). support services. • The SLC claims that around 1.47m ha of • Develop a variety of private farming agriculture land have been distributed to approaches and provide legal and 488,485 shareholders of which 267,487 appropriate institutional support services hectares are arable (179,091 ha. Irrigated). for their creation and sustainability. • Privatization of majority of ex-state and • Rehabilitate critical irrigation and collective farms are stalled as these farms are drainage infrastructure and reduce reliance stated to be in debt and in precarious financial on high energy consuming pumped condition as the farms had borrowed under systems, except where there can be scope future contract not only for cultivating cotton for introduction of high value crops and no with the state guarantee but also some non alternatives exist for other commercial transparent borrowings. crops; and develop gravity based irrigation • Degree of commitment to land privatization systems with protective irrigation and farm restructuring varies across the approach and introduce better rain fed country depending on the local leadership for farming systems. privatization and commitment of Hukumat (raion administration) for privatization. • Secure land tenure registration and titling services and supporting mechanisms is progressing well but still long way to go. • Privatization of Majority of ex-state and collective farms that are cultivating cotton under future contract with state guarantee are in debt and in precarious financial condition. 3. Competitive Agro- New privatization law passed by Incentive for private ownership, processing and parliament in November 2003 and the new formulation and implementation of Services for procedures are expected to improve the transparent legal and privatization Agriculture legal framework and privatization of agro- processing sector procedures for the development of a fair, competitive agro-processing and • Implementation of the privatization program input supply markets. continues to be on track. In addition, the transparency of the privatization process is • Develop and implement a plan for likely to receive greater attention, especially complete privatization of all agro- now that the country is moving to privatize processing and input service enterprises, large enterprises. undertake case by case privatization, with participation of both domestic and foreign • Government continues to retain partial to investors. majority ownership in most agro-enterprises. • Create enabling policy environment to • Foreign participation in marketing and agro- attract private foreign investment; improve processing is minimal. legal system for contract enforcement and • Potential of state and collective farms market transparency becoming major shareholders of food • Develop and implement anti-monopoly processing enterprises. legislation. Implement monitoring and • Low quality outmoded products, poor regulatory mechanisms of the privatization demand for the products High level of process to prevent oligopsony comprising indebtedness, and low capacity utilization are both domestic and foreign cotton ginnery major impediments. owners. • Convoluted licensing procedures, absence of • Promote research and development of 93 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS incentive and harassment of tax authorities of new products, packaging and marketing to newly emerging and venturing entrepreneurs. meet outside markets A functioning broad based rural financial Creation of viable market oriented system is still evolving. financial institutions to serve the 4. Rural Financing agricultural sector. • The banking sector continues to be very weak Share of top four banks amounts to > • Strengthen regulatory and enforcement 85% of the total assets in the banking system. mechanisms in National Bank of The 2002 abolition of taxes on foreign bank Tajikistan to enable the creation and transfers and the elimination of the top development of rural savings and credit authorities” prerogative to attach bank institutions. deposits,11 have contributed to the • End the difference between loan and attractiveness and growth of the financial credit in determining the taxation and banking sector. Between 2002 and 2004, transactions. remittances through the banking sector went • Promote self-sustaining, collateral based from US$65m to US$313m. rural savings and credit institutions and • State agricultural bank provide incentive for creation of member (AGROPROMBANK) has been reorganized owned rural savings and credit in to two: (i) a commercial bank associations. Support the establishment of (Agroinvestbank) and (ii) the Agrobank (with a variety of rural credit delivery the old outstanding dues). But both systems mechanisms including the micro-credit continue with high involvement of the institutions. Government including the “so-called” future • Eliminate State Guarantee that contracts operations (in reality an exploitative encourages non-payments. Enhance scheme having nothing to do with a real competition among banks by facilitating futures market), directed credit in cotton in entry and exit and imposing minimal collaboration with external bank funding. capitalization requirements for the banks. • Although a Bank restructuring agreement • Improve corporate governance, was drawn between the four major banks and management and terms of ownership, the National Bank of Tajikistan very little eliminate Directors and managers who are progress has been made towards outstanding primarily from Soviet nomenclature who loan collection and overhead reduction. High lack experience in a market driven, profit interest rates and the lack of dependable oriented banking system. collateral seriously limit commercial lending. • Develop and implement mechanisms to • Most of the state-run agro-processing promote private input/output marketing agencies /marketing enterprises are in serious and trading services. Develop human liquidity crisis. resources in the banking sector. • Financing through Agroprombank has • Enact amendments. Further develop the almost come to grinding halt. existing regulatory framework for credit • Micro credit schemes are being associations and rural credit associations. implemented in selective regions through Issue easy-to-understand guidelines for NGO’s, CARE-international, AKF, Save the establishment and regulations of non-bank Children, and Mercy Corps. financial institutions. From the newly created Micro-finance Bank Redefinition of the roles of public and of Tajikistan, existing interest bearing private sector institutions to support revolving funds operated locally with donor competitive, market oriented support, or newly created member owned agriculture sector. revolving funds building on the Non Bank • Reorganize and improve quality of Financing Organization (NBFO) model 11 To preclude the tax authorities from freezing accounts without obtaining a prior court order, the Tax Code was amended accordingly during 2001-02. 94 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS developed under the World Bank financed public agricultural administration to the Farm Privatization Support Project. The needs of a market economy. regulatory framework of these NBFOs still • Take up and complete the reform of needs to be clarified with respect to the agricultural education and research to prudential requirements. provide strong scientific backstopping to the emerging market based private sector Reforms to restructure government agriculture development. institutions are progress but very slow. • Establish public information system to 5. Institutional Reform • Public sector Input supply agencies seize to provide better understanding of rights of function as they face serious budget crunch, individuals and voluntary groups and are being replaced by the private sector regarding the process of determination and agencies but very slowly mainly due to the allocation of shares at the grass roots level. suppressing and stifling unclear national tax system and thus a serious void created seriously affecting the farming sector. • Ministry of Agriculture MOA continues to operate in the Government structure oriented to fixing of production targets (cotton ands grain). Thanks to serious budget crunch, MOA staff strength has been reduced drastically. 95 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS • Agricultural Research, Extension and • Develop a strategy and establish an Education systems have not yet developed to institutional mechanism for serve the emerging private farmers and implementation of a multi-stage system of privatized farms continue to adopt old management for the rational basis for land farming technology, Research scientists of use rights distribution by defining the Academy of Agricultural Sciences are not roles, functions and authority of the State exposed to Global Scientific Advancement Land Committee, Raion administration, and access to information on modern Ministry of Justice, and the Agrarian production technology is limited. Reform Commissions at Jamoat, Raions, • Institutional Information system and Oblasts and State level. research support required to promote a market-based agriculture is not in place. 96 UZBEKISTAN 2004 Total Population 26.1 mil Food and agriculture Agricultural output in 2004 as Rural Population 63% in GDP 2004 26,8% percentage of 2003 level 110.1% Food and agriculture Crop production 126.4% Total Area 44.4 mil. ha in active labor force Livestock production 106.6% (2004) 35.9% Share of livestock in agriculture Agriculture area: 25.8 mil. ha Food and agriculture (2004) 49.8% Arable land 3.7 mil. ha in export (2004) 39.9% Agricultural area in private use Orchards, 0.3 mil. ha in import (2004) 12.9% (2004) 57.3% vineyards 21.4 mil. ha Second largest Share of household plots and Pasture & Forest 4.2 mil. ha exporter of cotton private farms in total agricultural Irrigated lint. output (2004) 80.1% ISSUES STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic In theory the Government is committed to Reduction of distortions to increase the Framework for restructure the agricultural sector towards agricultural sector efficiency. Agriculture market economy, but actual reforms are proceeding with an extremely low pace. A. Production controls • The state order system has been replaced by • Replace the current system of setting a state procurement system. In theory production targets for grain and cotton obligatory sales to the state should not exceed with a policy of recommendations on crop 50% of actual production of cotton and grain. rotation aimed at the improvement of soil This does not apply in practice to cotton, quality. which is the most distorted sub-sector. • Production and domestic market of most other crops and livestock products has been liberalized. B. Prices/Subsidies • Cotton heavy taxing levels remains, with • Reduce tax both taxes and subsidies, strong implicit taxes, even after accounting particularly on cotton, should be reduced for the strong subsidies. to reduce distortions. Net transfer from • Tax levels of other agricultural products are cotton should also gradually reduce. similar to those of other sectors. Higher land tax and improved water pricing would be an alternative source of • Subsidies remains in water supply, state revenue which create an incentive to subsidized interest rates, and highly increase production and efficiency. discretionary debt write-offs. • Reduce implicit taxes hidden in low cotton state procurement prices. C. Trade Policies • Both international and domestic trade • Reduce formal trade restriction (export restrictions are in practice applied and reduce licenses, etc.) sector’s efficiency. • Gradually reduce informal trade • Traditional international markets for cotton restrictions. Reduce border controls and maintained, but limited trading outside FSU facilitate exports. countries for non-cotton products. • Accelerate the emergence of private • Export of cotton fiber by non-state entities is sector processors and traders by no longer proscribed but in practice it is still privatizing state owned agribusinesses and highly controlled. encouraging new entrants. 97 ISSUES STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and Government committed to state farm Implement an equitable and Farm Restructuring restructuring and privatization. transparent process of reform of • The pace of reform of cooperative farms cooperative farms (shirkats) (shirkats) has increased significantly in 2004. • Execute the next stage of transformation However this reform fall short of a full of the remaining shirkat (cooperative) privatization. Land use rights of new farms in a transparent and equitable individual farmers can be revoked if the manner by allowing members the right to production targets for strategic crops (cotton opt for a significant expansion of their and wheat) are not achieved. Nonetheless household plot and by carefully these land use rights are positively affecting scrutinizing the rationale for expanding farmers’ behavior, increasing their the number of private farmers in the profitability even though not necessarily their context of local demographic production. characteristics. • The reform process will cause increase of • Closely monitor the reform process and rural unemployment. allow the possibility for a fair process of • The reform process lacks transparency and review with checks and possibility of equity. Some cases of mismanagement of the appealing decisions. reform process are reported to have caused • Evaluate different options for safety nets conflicts. to cushion the effects of increased unemployment. This could comprise the option of using household plots as a safety net. • Build the foundations for a farming system based on private ownership or long -term leases with irrevocable rights to inherit, pledge and sub-lease 3. Competitive Agro- Limited progress in the plans to transfer Efficient, privately owned agrobusiness Processing and Services for processing enterprises to private control, firms subject to market forces. Easy Agriculture improve efficiency of utilization and access of new foreign and domestic conserve water supplies, and liberalize the operators. input sub-sector. • Little progress in privatization of the cotton • Implement long discussed plans to ginning and oilseeds processing sub-sectors, privatize cotton ginneries. but the remaining areas of agro-industry are being privatized at an accelerated rate. • Develop a multi-year plan to introduce Extremely low ginning outturn (around 33% higher irrigation water tariffs to increase in average) is a clear evidence of the low cost recovery of the O&M costs of efficiency of cotton processing. irrigation and drainage. • The water law has been revised and more • Introduce measures for disaggregating than 200 water users associations achieved a monopoly input suppliers and start their legal status. gradual privatization. • Despite deregulation, inputs distribution remain effectively under monopoly control. 98 ISSUES STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 4. Rural Finance Government effort to reorganize financial Improve efficiency of the financial services on commercial lines are not sector to serve agriculture. producing concrete results. • Decouple provision of state subsidized • Plans to pass management of operational credit from requirement to sell products to credit to cotton producers from ginners to the state. commercial banks. But subsidies will remain. • Encourage credit associations and rural • Some private banks (e.g., Hamkorbank) are micro-finance. increasing their actives in rural areas. • Apply positive real interest rates for all credit funds and allow credit advanced under state procurement transactions to be accessed for purchases outside the state input supply system. • Facilitate access to cash. 5. Institutional Framework The ministry of agriculture and water Improve efficiency of public sector resources is mostly dedicated to implement administration. policies designed by others rather then • Focus public services on policy develop new policies on the basis of formulation, demand driven research, evaluation of existing ones. information dissemination, monitoring and • Agriculture and water resources were evaluation. reorganized under the single Ministry of • Develop a permanent system of data Agriculture and Water Resources (MAWR). collection and analysis to improve • The reform of cooperative farms (shirkat) evaluation of existing policies. will create difficulties to collect data. New • Improve business environment, individual farmers will not have incentives to comprising access to cash, to facilitate the regularly provide information as shirkats have process of privatization. been doing. 99 BELARUS 2004 Total Population 9.85 m Agriculture and Forestry in Agricultural output in 2003 as Rural Population 28.5 % GDP 8.3% percentage of 1990 level 78.2% Agriculture and Forestry in Livestock production in 2003 as Total Area 20.76 m ha active labor 11.9% percentage of 1990 level 58.8% Agriculture area: 9.1 m ha Food and agriculture Share of livestock in agriculture 42.5% Arable land 61.1% in exports 8.6% Share of private land in total Orchards 1.3% in imports 12.3% agricultural land^ 17% Pastures/meadow 36.2% Share of private farms in total Traditionally net exporter of agricultural land 1.6% Forested 43.2% livestock products, Share of private sector in total potatoes, and flax. agricultural output ^ 46.6% Note: All data are as of the end-2003, 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 Competitive and functioning Framework for Agriculture Government control. agricultural markets without Government intervention. • Some progress was made in agri-food sector • To liberalize all food prices and abolish A. Prices/Subsidies reform in early 1990s. The pace of reforms processor, wholesaler and retailing stalled in 1996 and then has shown some margins. improvements again after 2000. Macro- • Initiate the program of farm restructuring economic stabilization, open trade regime and and accelerate privatization of agro- liberalization of foreign exchange markets possessing enterprises. have substantially contributed to the improved • Reduce agriculture subsidies and terms of trade for agricultural producers. modernize the support to agriculture and Despite these recent reforms, land, labor and rural areas. capital productivity in agriculture remains low and the state continues to dominate agri-food • Private upstream sector. sector. • Starting with 2002, the share of state purchases was substantially reduced (from more than 50% in 1998 to 11.6% in 2002), but remains exceptionally high for certain products. Thus, in 2003, the share of state orders was 100% for flax fiber, 95% for sugar beet, 77% for rapeseed. 100 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS • Producer prices for major plant growing A. Prices/Subsidies products, have been largely liberalized since (continued) 2002, however price and retail margins continue to be fixed by the state for a certain number of “socially important|” commodities. Input price subsidies have been reduced, but some very serious price distortions remain. • On a per hectare basis, Belarus has the highest level of agricultural subsidies (in excess of US$100 per hectare). Following WTO accession negotiations, the level of market distorting subsidies has been limited to about US$504m annually. In this connection, the Government’s recent program on “The revival and development of rural areas”, displaces the emphasis from the state support to production to development of rural infrastructure, investment in human resources and technical modernization. B. Trade Policies • Minimum export price are applied to selected • Eliminate minimum export price food products (pork, beef, dry milk, hides and requirements. skins, linen). •Stimulate the development of private • Tariff measures – export and import duties wholesale markets. are low in general (about 10% on average) as • Privatize trading enterprises. defined by the Government resolution (from June 28, 2002 with further amendments) and Belarus enjoys an open trade regime with Russia. • The share of the private sector in retail trade is continuously increasing and now dominates retail turnover. However, the state continues to maintain the leading share in the wholesaling of agricultural products. • In early 2005, Belarus has successfully completed the negotiated on WTO membership. • In 2005, following a change in VAT legislation in Russia, Belarus has adapted its taxation system; effectively extending its extensive regulation of trading margins to the vast majority of private retail and whole sale traders. 101 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS C. Taxation •Previously high levels of implicit taxation of • Guarantee the consistency of agricultural agricultural producers has been gradually profit tax with the rest of businesses like eliminated since 2001-2002, however when food industry. coupled with maximum retail prices and • Fair and non-discriminatory system of trading margins that remained unchanged are taxation. now taxing agro-processors. •Overall tax on agricultural wages is 30.5%, less compared to other sectors (36%). • Land cadastre for Belarus was completed in 2000. By the Law of Republic of Belarus from January 4, 2003 “On amendments and additions to the Law on payments for land”, tax rates on agricultural land are defined depending on the grade according to the land cadastre and are to be adjusted annually in line with inflation. 2. Land Reform and Farm Land reform and farm restructuring are A farming system based mainly on Restructuring still at a very early stage. private ownership of land and a • Most of agricultural land remains in state working land market for efficient and ownership. fair asset transfer. • As of February 1, 2004, 1767 agricultural • Implement a consistent policy for enterprises have been transformed. Out of total restructuring and privatization of large number of transformed enterprises, 12% were collective and remaining state owned joined to other enterprises, 1.2% were taken farms. into lease by private farms and the rest were • Develop and implement a consistent transformed into other legal entities (see policy to privatize the land of large farms. above). This transformation of kolkhozes and sovkhozes is taking place without substantially changing their mode of operation, however • Support emerging private farming and with an important exception of the transfer of guarantee fair conditions for those who social infrastructure to the local governments wish to start individual farming. and reduction in the number of farm • Develop mortgage procedures for land, management personnel. Further reforms are other real estate, and moveable assets. planned under “The Program for revival and The mortgage law should allow lessees to development of rural areas” which foresees mortgage their leasehold interest. several experiments with flexible land lease arrangements and provision of greater financial incentives for managers and farm workers. • The number of private farms is small and is decreasing since 1995: whilst in 1995 the number of farms was 3029 it had been reduced to 2503 by the beginning of 2004. Only 1% of arable land belongs to farms. 102 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 2. Land Reform and Farm • Housing and household land - 11.4% of total Restructuring agricultural land - was given for full private (continued) ownership. • At the same time, Belarus has a very modern land and immovable property cadastre system and the new version of the Land Code is expected to be approved in 2005. The new Land Code will allow for stronger land use rights as well as introduce a novel concept of the private property for agricultural land. 3. Competitive Agro Little progress, as major privatization Competitive, privately owned processing and Services for program has yet to come. processing, input supply and service Agriculture • Majority of enterprises in the agriculture subsectors. input and food marketing sub sectors are still • Implement an overall program of owned and operated by the state-owned privatization without delay in agro companies or by the local municipality. processing and input supply. • The privatization of agro processing and • Demonopolize state corporations input supply industries is at a standstill. As of (associations) and privatize them end-2003, only about one third of total number individually by plant or unit. of republican properties of these sectors had • Adopt anti-monopoly legislation. been transformed (corporatized). • Facilitate foreign investment by • On communal level, by end-2003 about 90% implementing foreign investment laws. of agri-processing enterprises had been transformed (mostly, corporatized and some – privatized), over 60% of input supply enterprises had been transformed (practically exclusively by corporatization). • There is minimal foreign participation in the process of privatization, precluding an important source of funding for much needed technical renovation and modernization of production. 4. Rural Financing The existing financial system subsidizes the Viable financial institutions efficiently agricultural sector. serving the agricultural sector. • Both primary agriculture and agro-processing • Prepare an action plan to revitalize have serious liquidity crises and rely on financial services. Government credit and soft credit from the • Implement pilot projects to establish banking system. village credit unions. • Agricultural and agro-processing enterprises • Restructure Belagroprombank. receive direct budget financing from central • Phase-out subsidized credits to and local budgets as well as from targeted fund agricultural producers. for support of agricultural producers, food and agricultural science. • Switch the emphasis of financial support of agriculture from “red” and “yellow” • The effective private agricultural banking measures to “green measures”. system is absent. 103 TURKMENISTAN 2004 Total Population 6.3 mil Food and agriculture in GDP (2004) 20% Agricultural output in 2002 as Rural Population 55 % Food and agriculture in active labor percentage of 1989-91 levels 91% force (2004) 55% Share of livestock in agriculture Total Area 49.1 mil ha. (2002) 63% Agriculture area: 40.2 mil ha. Food and agriculture 4% Arable land in private use (2002 Arable land 4% in export (2002) 8% - household plots and private Pasture and in import (2002) farms) 8% Meadows 96% Forested 4% Exporter of cotton fiber, textiles, Share of private farms and and karakul skins, smaller net household plots in total importer of food agricultural output (2002) 80% Agricultural area under family lease (2002) 86% ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 1. Macro-economic High levels of government intervention in Phase out Government control of Framework for Agriculture agriculture, including: state orders for 50% agricultural markets and emphasize of grains and 100% for cotton; high implicit market production and support services taxation through low producer prices; and for private (“daihan”) farmers. subsidies for agricultural inputs. • Adopt a program of macroeconomic • Measured inflation is relatively low (about stabilization and unify the current multiple A. Prices/Subsidies 10% annually), but suppressed inflation may exchange rates. imply a higher actual rate. • Adopt program to raise producer prices • Foreign exchange controls continue and the for cotton and wheat to border price levels manat is over valued at the official exchange and reduce state orders by 75% over the rate. medium term. • Since 2002 crop year the mandatory state • Phase out input subsides and stimulate purchases of grains (wheat and rice) have been procurement and distribution of inputs by reduced to 50% of the planned production, private sector operators. with the leaseholders being allowed to trade • Develop a multi-year plan to introduce the output domestically freely. Cotton which higher irrigation water tariffs towards cost is still subject to 100% procurement by the recovery levels of the O & M costs of state, although starting from the crop of 2002 irrigation and drainage over the medium the producers are allowed to retain the seeds and long-term. and other by-products of raw cotton processing. The prices paid by the state for these commodities however remain much lower than their corresponding border values. • Material inputs for cotton and wheat production are subsidized by 50%. • No significant payments for irrigation water. B. Trade Policies • Imports and exports registered through state • Eliminate registration requirement for commodity exchange, which amounts to imports and exports. defacto licensing requirement. • Allow export of cotton by private • Government controls all cotton exports. intermediaries eliminate price controls on • Minimum export prices for hides and skins. outputs. 104 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS C. Taxation • Implicit taxation high through state order • Phase out implicit taxation through state system and export controls, but little explicit orders and export controls. taxation. • Gradually increase land tax as state • Private owners pay a land tax, but collection orders reduced. sporadic. • Use land tax to pay for rural social services eliminating mandatory payments to farm associations now providing social services. 2. Land Reform and Farm Land Reform is Making Progress Accelerate the Pace of Land Reform Restructuring • A new Land Code came into affect in 2004 and Private Farmer Support. allowing for private property of up to 3 • Develop a program of Hectares to a land lessee that has shown a privatization/transformation of peasant satisfactory performance over 10 year period. associations into private “daihan” farmers. • Roughly 85% of land in peasant associations • Adopt complementary reforms so that allocated to households via leaseholds (10 to private owners can function in market 15 years duration). No current plans for farm environment. privatization. • Make the conversion process transparent • About 8% of land in individual private farms by clarifying the requirements which new with the majority of them holding property farmers must meet to have the leased land lands over the land. converted to ownership. • Leaseholds convertible to ownership upon successful performance for two years. • Since independence the arable land holdings of the households have been increased by 50%. 3. Competitive State Control of All Inputs Services and Adopt and Implement Program of Agroprocessing and Agroprocessing –businesses. Privatization and Demonopolization. Services for Agriculture • Most processing and services handled by • Encourage privatization and state enterprises organized into large demonopolization of existing agribusiness associations. companies and associations. • Little privatization. • Remove barriers to new entry in • Cost recovery for selected inputs such as processing and services. animal health services has been introduced. 4. Rural Financing High Dependence on Subsidized and Reduce Subsidized Credit and Directed Credit through Government Introduce Commercial Banking Controlled Banks. Practices. • High dependence on subsidized credit. • Reduce subsidy element of directed • Daikhan Bank is the designated credit agency credit and stimulate the development of for farm leaseholders. It has little risky debt commercial rural financial services. from the past, but is not yet engaged in genuine • Conduct financial audit and develop intermediation. corporate plan for Daikhan Bank. 105 ISSUE STATUS OF REFORMS OBJECTIVES/PROPOSED ACTIONS 5. Institutional Framework Non-transparent Budgeting and Inadequate Consolidate Government Budget and Resource Allocations to Public Institutions. Increase Expenditures for Public • Extra budgetary Agricultural Development Goods. Fund manages sectoral financial flows in non- • Consolidate costs and revenues from transparent fashion. sector into general budget and abolish • Frequent institutional reorganization and high Agricultural Development Fund. turnover of administrative staff in response to • Remove authority of local administration declining sectoral performance. to interfere in decisions regarding • Frequent local government interference in production and marketing. production decisions. • As resources permit, develop agricultural • Research and extension much reduced research and extension to serve needs of agents in a market economy. 106 C. STATISTICAL ANNEX Caucasus Armenia, Azerbaijan, Georgia Central Asia Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan Euro CIS Belarus, Moldova, Russia, Ukraine New EU Members (8) Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic, Slovenia EU Accession (2) Bulgaria, Romania Other Central Europe Albania, Bosnia, Croatia, Macedonia, Yugoslavia Turkey Turkey The source for all tables in the Statistical Annex: FAOstat [http://faostat.fao.org] 107 Table 1: Cereals Table 1a: Area of Cereals Cultivation [million ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 142.26 135.67 124.60 109.51 114.20 119.42 107.83 114.51 Total CEE + CIS 128.53 121.54 110.66 95.44 100.24 105.64 94.03 100.52 Total CEE 27.60 28.79 27.05 27.98 26.82 26.87 25.02 27.35 Total CIS 100.93 92.75 83.61 67.46 73.42 78.78 69.00 73.17 New EU Members (8) 15.87 16.07 15.88 16.27 15.89 15.34 14.96 15.82 EU Accession (2) 8.00 8.86 7.63 7.85 7.43 8.03 6.71 7.57 Other CEE 3.72 3.86 3.54 3.86 3.50 3.50 3.35 3.96 Euro CIS 75.34 69.39 63.67 51.55 56.63 60.16 50.25 55.78 Caucasus 1.04 1.02 1.06 1.15 1.14 1.36 1.31 1.32 Central Asia 24.55 22.33 18.88 14.76 15.66 17.26 17.44 16.07 Turkey 13.73 14.13 13.94 14.07 13.95 13.78 13.81 14.00 World 709.22 695.55 704.21 680.60 674.19 662.67 672.79 681.24 Table 1b: Yields of Cereals [tons per ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 2.03 1.88 1.83 2.00 1.92 2.35 2.06 2.54 Total CEE + CIS 2.02 1.88 1.79 1.95 1.86 2.36 2.03 2.56 Total CEE 2.71 2.98 2.99 3.23 2.65 3.31 2.85 3.87 Total CIS 1.83 1.53 1.41 1.41 1.57 2.04 1.74 2.07 New EU Members (8) 2.81 2.99 3.23 3.39 2.88 3.47 3.00 3.91 EU Accession (2) 2.36 2.78 2.31 2.65 2.02 2.63 2.50 3.82 Other CEE 3.09 3.41 3.37 3.75 2.92 4.12 2.87 3.81 Euro CIS 1.97 1.72 1.55 1.54 1.67 2.18 1.83 2.26 Caucasus 2.04 1.69 1.85 1.62 1.88 2.36 2.32 2.39 Central Asia 1.40 0.95 0.91 0.94 1.20 1.52 1.44 1.40 Turkey 2.12 1.91 2.11 2.36 2.31 2.24 2.23 2.43 World 2.78 2.81 2.94 3.06 3.06 3.06 3.09 3.31 Table 1c: Total Production of Cereals [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 289.03 255.08 227.85 219.00 218.80 280.12 221.93 291.29 Total CEE + CIS 259.87 228.06 198.51 185.81 186.55 249.30 191.13 257.33 Total CEE 74.92 85.85 80.86 90.47 71.05 88.82 71.25 105.85 Total CIS 184.95 142.21 117.65 95.34 115.51 160.49 119.88 151.48 New EU Members (8) 44.54 48.08 51.31 55.17 45.83 53.27 44.87 61.85 EU Accession (2) 18.88 24.63 17.60 20.83 15.00 21.12 16.77 28.92 Other CEE 11.51 13.15 11.95 14.47 10.22 14.43 9.61 15.08 Euro CIS 148.38 119.18 98.50 79.59 94.60 131.09 91.76 125.88 Caucasus 2.13 1.73 1.96 1.86 2.14 3.21 3.05 3.16 Central Asia 34.44 21.31 17.19 13.90 18.76 26.18 25.08 22.43 Turkey 29.16 27.01 29.34 33.19 32.25 30.82 30.80 33.97 World 1,973.32 1,956.68 2,072.11 2,083.96 2,059.76 2,028.94 2,079.28 2,252.02 108 Table 2: Wheat Table 2a: Area of Wheat Cultivation [million ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 64.62 61.67 62.22 58.58 60.12 66.81 55.93 62.09 Total CEE + CIS 55.15 51.87 52.87 49.18 50.72 57.51 46.53 52.69 Total CEE 8.60 10.38 9.29 10.30 9.80 10.10 8.32 10.22 Total CIS 46.55 41.49 43.58 38.88 40.91 47.42 38.21 42.47 New EU Members (8) 4.87 5.16 5.47 5.77 5.67 5.37 4.98 5.64 EU Accession (2) 2.57 3.73 2.74 3.14 2.91 3.52 2.25 3.17 Other CEE 1.16 1.49 1.08 1.40 1.23 1.21 1.09 1.41 Euro CIS 30.97 27.07 29.09 26.22 27.33 32.05 22.99 28.36 Caucasus 0.61 0.61 0.62 0.77 0.69 0.89 0.83 0.84 Central Asia 14.98 13.81 13.87 11.89 12.89 14.48 14.38 13.27 Turkey 9.47 9.80 9.35 9.40 9.40 9.30 9.40 9.40 World 222.43 215.16 226.86 220.12 215.39 213.77 208.53 217.56 Table 2b: Yields of Wheat [tons per ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 2.10 1.81 1.75 1.92 1.91 2.24 1.84 2.34 Total CEE + CIS 2.11 1.81 1.71 1.86 1.85 2.27 1.81 2.36 Total CEE 3.22 3.31 2.95 3.42 3.14 3.30 2.82 3.87 Total CIS 1.90 1.44 1.45 1.44 1.54 2.05 1.59 2.00 New EU Members (8) 3.57 3.76 3.56 3.77 3.44 3.86 3.27 4.25 EU Accession (2) 2.59 2.65 1.81 2.67 2.48 2.43 1.99 3.48 Other CEE 3.14 3.41 2.73 3.62 3.32 3.35 2.43 3.20 Euro CIS 2.16 1.73 1.71 1.67 1.70 2.29 1.68 2.27 Caucasus 2.10 1.62 1.71 1.58 2.07 2.46 2.35 2.65 Central Asia 1.37 0.86 0.88 0.94 1.18 1.49 1.41 1.36 Turkey 2.04 1.79 1.98 2.24 2.23 2.10 2.02 2.23 World 2.54 2.45 2.58 2.70 2.72 2.68 2.67 2.87 Table 2c: Total Production of Wheat [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 135.66 111.59 109.03 112.27 114.76 149.86 103.18 145.32 Total CEE + CIS 116.35 94.07 90.51 91.25 93.76 130.36 84.18 124.32 Total CEE 27.66 34.34 27.36 35.22 30.79 33.31 23.43 39.51 Total CIS 88.68 59.73 63.15 56.04 62.97 97.05 60.75 84.82 New EU Members (8) 17.37 19.38 19.46 21.77 19.51 20.70 16.30 23.97 EU Accession (2) 6.65 9.89 4.95 8.39 7.22 8.54 4.48 11.03 Other CEE 3.65 5.07 2.95 5.06 4.06 4.07 2.64 4.50 Euro CIS 66.93 46.87 49.85 43.69 46.35 73.30 38.55 64.50 Caucasus 1.28 0.98 1.07 1.21 1.42 2.18 1.96 2.24 Central Asia 20.48 11.88 12.24 11.14 15.20 21.57 20.25 18.08 Turkey 19.32 17.51 18.52 21.01 21.01 19.50 19.00 21.00 World 565.13 527.09 585.14 593.36 585.33 573.97 557.50 624.09 109 Table 3: Coarse Grains Table 3a: Area of Coarse Grains Cultivation [million ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 76.93 73.41 61.80 50.43 53.51 52.19 51.40 51.94 Total CEE + CIS 72.72 69.12 57.27 45.82 49.02 47.78 47.06 47.42 Total CEE 18.97 18.40 17.75 17.66 17.00 16.76 16.69 17.12 Total CIS 53.75 50.72 39.53 28.16 32.01 31.02 30.37 30.30 New EU Members (8) 11.00 10.91 10.41 10.50 10.21 9.97 9.98 10.18 EU Accession (2) 5.41 5.12 4.88 4.71 4.52 4.51 4.46 4.39 Other CEE 2.55 2.37 2.46 2.45 2.27 2.29 2.26 2.55 Euro CIS 44.08 42.11 34.40 25.17 29.10 27.96 27.09 27.24 Caucasus 0.43 0.42 0.43 0.38 0.45 0.47 0.48 0.48 Central Asia 9.24 8.19 4.69 2.61 2.47 2.59 2.80 2.58 Turkey 4.21 4.29 4.53 4.61 4.50 4.42 4.34 4.52 World 339.51 333.22 327.16 308.79 304.68 301.33 312.02 310.42 Table 3b: Yields of Coarse Grains [tons per ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 1.96 1.93 1.90 2.09 1.91 2.47 2.28 2.77 Total CEE + CIS 1.95 1.92 1.86 2.04 1.87 2.47 2.25 2.77 Total CEE 2.49 2.80 3.01 3.13 2.36 3.31 2.86 3.87 Total CIS 1.75 1.60 1.35 1.36 1.60 2.01 1.91 2.15 New EU Members (8) 2.47 2.63 3.06 3.18 2.58 3.27 2.86 3.72 EU Accession (2) 2.25 2.87 2.59 2.64 1.72 2.79 2.75 4.07 Other CEE 3.06 3.41 3.65 3.83 2.70 4.53 3.08 4.14 Euro CIS 1.83 1.70 1.40 1.41 1.64 2.05 1.94 2.23 Caucasus 1.96 1.79 2.04 1.68 1.56 2.16 2.26 1.90 Central Asia 1.39 1.04 0.90 0.81 1.24 1.58 1.48 1.37 Turkey 2.28 2.17 2.33 2.58 2.42 2.48 2.63 2.78 World 2.59 2.67 2.81 2.95 2.87 2.93 3.00 3.28 Table 3c: Total Production of Coarse Grains [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 151.10 141.75 117.25 105.24 102.44 128.76 117.10 144.05 Total CEE + CIS 141.48 132.45 106.70 93.38 91.55 117.80 105.68 131.49 Total CEE 47.15 51.48 53.44 55.21 40.21 55.47 47.78 66.30 Total CIS 94.33 80.98 53.27 38.17 51.34 62.32 57.90 65.18 New EU Members (8) 27.16 28.69 31.84 33.39 26.31 32.56 28.55 37.87 EU Accession (2) 12.18 14.72 12.63 12.43 7.76 12.56 12.27 17.87 Other CEE 7.82 8.07 8.97 9.39 6.14 10.35 6.95 10.56 Euro CIS 80.61 71.70 48.18 35.42 47.58 57.23 52.68 60.73 Caucasus 0.85 0.75 0.89 0.64 0.70 1.01 1.07 0.91 Central Asia 12.87 8.53 4.20 2.11 3.07 4.08 4.15 3.54 Turkey 9.62 9.30 10.55 11.86 10.89 10.96 11.43 12.57 World 879.93 890.93 917.93 911.10 875.44 883.90 935.53 1,019.43 110 Table 4: Maize Table 4a: Area of Maize Cultivation [million ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 10.75 9.32 9.70 9.65 10.43 10.02 11.33 11.30 Total CEE + CIS 10.23 8.84 9.15 9.10 9.87 9.52 10.76 10.60 Total CEE 7.61 6.96 7.14 6.90 6.99 6.87 7.10 7.36 Total CIS 2.62 1.88 2.01 2.20 2.88 2.65 3.65 3.24 New EU Members (8) 1.51 1.49 1.33 1.30 1.59 1.78 1.68 1.89 EU Accession (2) 3.96 3.48 3.75 3.56 3.52 3.20 3.53 3.38 Other CEE 2.15 1.99 2.05 2.04 1.89 1.89 1.89 2.10 Euro CIS 2.19 1.46 1.65 1.81 2.45 2.19 3.20 2.80 Caucasus 0.10 0.14 0.16 0.22 0.22 0.23 0.23 0.22 Central Asia 0.33 0.28 0.20 0.17 0.20 0.23 0.22 0.22 Turkey 0.52 0.49 0.55 0.55 0.56 0.50 0.58 0.70 World 137.03 138.33 139.89 139.04 138.44 138.42 143.39 145.14 Table 4b: Yields of Maize [tons per ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 2.83 3.21 3.44 3.50 2.67 3.94 3.50 4.58 Total CEE + CIS 2.76 3.17 3.43 3.46 2.59 3.93 3.43 4.60 Total CEE 2.78 3.42 3.70 3.78 2.56 4.20 3.48 4.95 Total CIS 2.70 2.25 2.50 2.45 2.65 3.22 3.33 3.80 New EU Members (8) 3.72 3.95 5.67 6.00 4.37 5.52 4.58 6.53 EU Accession (2) 2.17 3.09 2.84 2.79 1.62 3.03 3.04 4.34 Other CEE 3.24 3.62 3.99 4.09 2.80 4.94 3.32 4.52 Euro CIS 2.56 2.10 2.40 2.41 2.62 3.18 3.26 3.78 Caucasus 2.48 2.52 3.28 2.09 1.86 2.37 2.74 2.48 Central Asia 3.72 2.92 2.69 3.25 3.74 4.45 4.85 5.34 Turkey 4.24 3.81 3.64 4.18 4.14 4.20 4.87 4.29 World 3.89 4.11 4.21 4.43 4.28 4.35 4.46 4.86 Table 4c: Total Production of Maize [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 30.44 29.90 33.42 33.75 27.84 39.48 39.66 51.77 Total CEE + CIS 28.21 28.05 31.42 31.45 25.54 37.38 36.86 48.77 Total CEE 21.14 23.81 26.40 26.07 17.93 28.85 24.71 36.46 Total CIS 7.08 4.23 5.02 5.38 7.61 8.53 12.15 12.32 New EU Members (8) 5.60 5.89 7.55 7.81 6.93 9.82 7.70 12.35 EU Accession (2) 8.57 10.73 10.65 9.93 5.70 9.69 10.74 14.63 Other CEE 6.97 7.20 8.20 8.33 5.30 9.34 6.28 9.48 Euro CIS 5.62 3.06 3.97 4.37 6.44 6.97 10.44 10.59 Caucasus 0.25 0.36 0.51 0.45 0.41 0.54 0.62 0.55 Central Asia 1.21 0.81 0.55 0.56 0.77 1.02 1.09 1.18 Turkey 2.23 1.85 2.00 2.30 2.30 2.10 2.80 3.00 World 533.57 569.22 589.15 615.51 592.48 601.99 640.06 705.29 111 Table 5: Oil Crops Table 5a: Area of Oil Crops Cultivation [million ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 14.88 14.24 15.86 16.15 17.27 16.65 20.27 19.12 Total CEE + CIS 12.92 12.35 13.84 14.06 15.36 14.64 18.30 17.08 Total CEE 3.05 2.81 3.33 3.70 3.67 3.76 4.37 4.41 Total CIS 9.86 9.54 10.51 10.36 11.69 10.87 13.93 12.67 New EU Members (8) 1.26 1.25 1.34 1.58 1.59 1.78 1.85 2.07 EU Accession (2) 1.35 1.20 1.56 1.72 1.62 1.57 2.02 1.80 Other CEE 0.44 0.36 0.43 0.40 0.46 0.41 0.50 0.54 Euro CIS 6.48 6.27 7.38 7.25 8.65 7.82 10.48 9.50 Caucasus 0.25 0.24 0.25 0.21 0.12 0.11 0.13 0.14 Central Asia 3.13 3.03 2.88 2.89 2.91 2.95 3.32 3.03 Turkey 1.97 1.89 2.02 2.09 1.91 2.01 1.97 2.04 World 188.23 199.37 203.42 216.96 222.15 219.48 234.21 246.83 Table 5b: Yields of Oil Crops [tons per ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 0.38 0.36 0.36 0.38 0.40 0.43 0.40 0.45 Total CEE + CIS 0.38 0.35 0.34 0.36 0.38 0.42 0.40 0.45 Total CEE 0.56 0.59 0.56 0.57 0.52 0.61 0.57 0.74 Total CIS 0.33 0.28 0.27 0.29 0.34 0.35 0.35 0.34 New EU Members (8) 0.68 0.69 0.70 0.75 0.73 0.74 0.66 0.89 EU Accession (2) 0.45 0.49 0.45 0.42 0.32 0.46 0.50 0.61 Other CEE 0.52 0.52 0.56 0.54 0.51 0.60 0.54 0.59 Euro CIS 0.39 0.31 0.31 0.34 0.39 0.41 0.40 0.38 Caucasus 0.14 0.13 0.10 0.10 0.10 0.20 0.22 0.22 Central Asia 0.22 0.22 0.17 0.18 0.18 0.20 0.19 0.23 Turkey 0.38 0.43 0.48 0.48 0.51 0.50 0.41 0.47 World 0.42 0.44 0.46 0.47 0.50 0.52 0.52 0.53 Table 5c: Total Production of Oil Crops [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 5.72 5.12 5.66 6.11 6.83 7.13 8.15 8.57 Total CEE + CIS 4.96 4.30 4.70 5.12 5.86 6.12 7.35 7.62 Total CEE 1.70 1.64 1.87 2.13 1.92 2.30 2.49 3.25 Total CIS 3.27 2.66 2.83 2.99 3.94 3.83 4.87 4.36 New EU Members (8) 0.86 0.87 0.93 1.19 1.16 1.32 1.22 1.84 EU Accession (2) 0.60 0.59 0.70 0.72 0.52 0.73 1.00 1.10 Other CEE 0.23 0.19 0.24 0.22 0.23 0.24 0.27 0.32 Euro CIS 2.53 1.95 2.31 2.45 3.40 3.23 4.22 3.64 Caucasus 0.03 0.03 0.03 0.02 0.01 0.02 0.03 0.03 Central Asia 0.70 0.68 0.49 0.52 0.53 0.58 0.62 0.69 Turkey 0.76 0.82 0.96 0.99 0.98 1.01 0.80 0.96 World 78.75 88.24 93.43 102.62 110.40 114.09 122.01 130.19 112 Table 6: Rape and Sunflower Seed Table 6a: Area of Rape and Sunflower Seed Cultivation [million ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 8.33 8.56 10.25 10.52 11.88 11.30 14.17 13.11 Total CEE + CIS 7.72 7.98 9.68 9.94 11.34 10.75 13.70 12.59 Total CEE 2.48 2.42 2.94 3.14 3.13 3.28 3.72 3.69 Total CIS 5.24 5.55 6.74 6.79 8.20 7.47 9.98 8.90 New EU Members (8) 1.12 1.12 1.25 1.41 1.46 1.62 1.63 1.78 EU Accession (2) 1.09 1.08 1.42 1.52 1.47 1.46 1.84 1.62 Other CEE 0.27 0.22 0.27 0.21 0.20 0.20 0.26 0.29 Euro CIS 4.89 5.20 6.38 6.50 7.89 7.04 9.43 8.43 Caucasus 0.01 0.02 0.04 0.05 0.02 0.05 0.06 0.05 Central Asia 0.33 0.33 0.32 0.24 0.30 0.38 0.49 0.41 Turkey 0.61 0.59 0.58 0.59 0.54 0.55 0.47 0.52 World 38.31 41.26 42.10 46.46 46.84 41.95 46.47 47.62 Table 6b: Yields of Rape and Sunflower Seed [tons per ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 1.30 1.07 1.04 1.11 1.14 1.24 1.18 1.30 Total CEE + CIS 1.28 1.06 1.02 1.09 1.13 1.23 1.16 1.30 Total CEE 1.60 1.60 1.50 1.57 1.46 1.63 1.53 2.06 Total CIS 1.13 0.82 0.81 0.86 1.00 1.05 1.02 0.99 New EU Members (8) 1.90 1.90 1.84 2.07 2.00 2.02 1.80 2.53 EU Accession (2) 1.25 1.27 1.15 1.07 0.84 1.16 1.26 1.56 Other CEE 1.74 1.70 1.78 1.79 2.09 1.91 1.84 1.95 Euro CIS 1.17 0.85 0.85 0.88 1.02 1.07 1.04 1.00 Caucasus 0.56 0.40 0.13 0.49 0.41 0.70 0.76 0.80 Central Asia 0.48 0.40 0.28 0.52 0.52 0.69 0.73 0.88 Turkey 1.56 1.26 1.36 1.47 1.48 1.55 1.70 1.25 World 1.27 1.25 1.31 1.31 1.41 1.40 1.38 1.47 Table 6c: Total Production of Rape and Sunflower Seed [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 10.82 9.19 10.68 11.67 13.56 14.03 16.73 17.04 Total CEE + CIS 9.87 8.45 9.90 10.81 12.76 13.18 15.93 16.39 Total CEE 3.96 3.88 4.41 4.94 4.58 5.36 5.71 7.58 Total CIS 5.92 4.57 5.49 5.87 8.18 7.82 10.23 8.81 New EU Members (8) 2.12 2.13 2.30 2.92 2.91 3.28 2.92 4.48 EU Accession (2) 1.37 1.37 1.63 1.63 1.24 1.69 2.31 2.53 Other CEE 0.47 0.38 0.48 0.38 0.43 0.39 0.47 0.56 Euro CIS 5.75 4.43 5.39 5.72 8.01 7.53 9.82 8.41 Caucasus 0.01 0.01 0.00 0.02 0.01 0.03 0.04 0.04 Central Asia 0.16 0.13 0.09 0.12 0.16 0.26 0.36 0.36 Turkey 0.95 0.74 0.78 0.86 0.80 0.85 0.80 0.65 World 48.66 51.49 55.14 60.76 65.90 58.53 64.35 69.86 113 Table 7: Sugar Beets Table 7a: Area of Sugar Beet Cultivation [million ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 4.60 4.10 3.93 3.14 2.75 2.66 2.65 2.76 Total CEE + CIS 4.20 3.69 3.51 2.63 2.34 2.29 2.33 2.43 Total CEE 1.05 0.90 1.00 0.86 0.65 0.64 0.63 0.64 Total CIS 3.15 2.78 2.51 1.78 1.69 1.65 1.71 1.79 New EU Members (8) 0.71 0.67 0.76 0.65 0.53 0.51 0.50 0.51 EU Accession (2) 0.20 0.14 0.14 0.12 0.05 0.04 0.04 0.04 Other CEE 0.14 0.09 0.09 0.09 0.07 0.08 0.09 0.10 Euro CIS 3.06 2.71 2.45 1.72 1.61 1.58 1.63 1.72 Caucasus 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 Central Asia 0.09 0.07 0.05 0.05 0.08 0.06 0.08 0.07 Turkey 0.40 0.41 0.42 0.50 0.41 0.37 0.31 0.33 World 8.47 7.98 7.65 6.78 5.99 6.04 5.74 5.84 Table 7b: Yields of Sugar Beets [tons per ha] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 22.10 20.71 23.80 26.56 26.34 29.09 27.46 27.48 Total CEE + CIS 20.58 19.51 22.52 23.19 22.92 26.60 25.75 25.47 Total CEE 26.42 29.53 36.20 36.24 35.07 42.60 36.86 38.80 Total CIS 18.64 16.26 17.04 16.90 18.23 20.41 21.66 20.69 New EU Members (8) 28.82 30.16 39.15 38.84 38.57 44.34 40.13 40.90 EU Accession (2) 16.21 24.51 20.33 20.47 13.63 22.99 20.18 13.50 Other CEE 28.61 32.51 36.64 38.29 23.89 42.19 26.48 37.78 Euro CIS 18.78 16.48 17.19 16.94 18.46 20.50 21.73 20.64 Caucasus 15.00 5.34 5.59 14.47 18.70 44.40 36.32 31.41 Central Asia 14.13 8.42 11.10 15.55 13.47 17.20 19.54 21.18 Turkey 38.17 31.42 34.42 44.17 45.90 44.36 40.20 42.32 World 33.33 31.98 34.77 38.82 41.08 42.49 40.58 40.70 Table 7c: Total Production of Sugar Beets [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 101.55 84.92 93.55 83.32 72.47 77.31 72.74 75.95 Total CEE + CIS 86.42 71.97 79.01 61.03 53.65 60.79 60.12 61.98 Total CEE 27.67 26.69 36.33 31.02 22.86 27.16 23.15 24.92 Total CIS 58.75 45.28 42.68 30.02 30.79 33.62 36.97 37.06 New EU Members (8) 20.58 20.32 29.92 25.27 20.52 22.79 19.88 20.69 EU Accession (2) 3.20 3.38 2.94 2.42 0.69 1.01 0.77 0.51 Other CEE 3.89 2.98 3.48 3.33 1.65 3.36 2.49 3.73 Euro CIS 57.42 44.69 42.10 29.20 29.67 32.39 35.35 35.51 Caucasus 0.02 0.03 0.05 0.04 0.07 0.12 0.13 0.11 Central Asia 1.31 0.57 0.53 0.77 1.05 1.12 1.49 1.44 Turkey 15.13 12.94 14.54 22.28 18.82 16.52 12.62 13.97 World 282.24 255.07 265.86 263.15 246.22 256.44 232.84 237.86 114 Table 8: Milk Table 8a: Number of Milk Cows [million head] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 58.30 55.52 50.46 44.61 42.09 39.46 39.95 39.34 Total CEE + CIS 52.23 49.43 44.50 39.13 36.81 35.07 34.35 33.84 Total CEE 12.68 11.05 10.34 9.84 9.20 8.76 8.70 8.87 Total CIS 39.54 38.39 34.15 29.29 27.60 26.31 25.65 24.97 New EU Members (8) 8.00 6.78 6.21 5.64 5.13 4.83 4.78 4.79 EU Accession (2) 2.27 1.89 1.92 2.07 2.12 2.05 2.10 2.25 Other CEE 2.41 2.38 2.21 2.13 1.95 1.88 1.81 1.83 Euro CIS 31.03 29.99 26.39 22.03 20.18 18.60 17.78 17.11 Caucasus 1.53 1.47 1.58 1.70 1.85 1.98 2.04 2.05 Central Asia 6.98 6.93 6.18 5.56 5.57 5.72 5.83 5.81 Turkey 6.07 6.08 5.97 5.49 5.28 4.39 5.60 5.50 World 226.06 225.80 224.16 223.71 226.87 231.93 235.09 235.75 Table 8b: Cow Milk Production [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 128.83 119.71 108.53 104.75 101.05 104.06 105.84 105.74 Total CEE + CIS 120.11 110.59 99.07 95.92 92.32 96.57 96.33 96.34 Total CEE 34.71 31.78 31.84 32.89 31.39 31.82 31.72 33.24 Total CIS 85.40 78.80 67.23 63.03 60.93 64.75 64.61 63.10 New EU Members (8) 26.04 22.73 21.95 22.80 21.70 21.83 21.60 22.05 EU Accession (2) 5.05 5.49 5.85 5.84 5.71 5.94 6.04 7.07 Other CEE 3.62 3.56 4.04 4.25 3.98 4.05 4.07 4.12 Euro CIS 72.98 66.29 56.76 52.31 49.44 52.41 51.59 50.66 Caucasus 1.60 1.60 1.77 1.97 2.06 2.30 2.39 2.34 Central Asia 10.81 10.90 8.70 8.75 9.43 10.04 10.63 10.10 Turkey 8.72 9.13 9.47 8.83 8.73 7.49 9.51 9.40 World 460.68 461.32 466.94 475.63 490.36 507.99 516.56 515.84 115 Table 9: Ruminant Meat Table 9a: Total Number of Cattle [million head] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 147.37 133.71 114.41 96.45 88.08 84.74 83.87 75.67 Total CEE + CIS 135.40 121.80 102.62 85.26 77.02 74.19 74.06 65.87 Total CEE 28.55 23.56 21.45 20.20 18.26 16.99 16.97 17.49 Total CIS 106.84 98.24 81.18 65.07 58.76 57.20 57.09 48.39 New EU Members (8) 18.76 14.85 13.45 12.59 11.19 10.32 10.21 9.99 EU Accession (2) 5.67 4.71 4.13 3.85 3.73 3.51 3.57 3.86 Other CEE 4.13 4.00 3.87 3.76 3.34 3.16 3.19 3.64 Euro CIS 85.98 77.29 63.03 49.63 43.41 41.02 40.05 36.79 Caucasus 3.31 2.76 2.86 3.04 3.27 3.49 3.62 3.72 Central Asia 17.55 18.19 15.28 12.39 12.09 12.69 13.42 7.88 Turkey 11.97 11.91 11.79 11.19 11.05 10.55 9.80 9.80 World 1,304.17 1,315.36 1,318.00 1,308.13 1,312.06 1,323.26 1,331.55 1,334.50 Table 9b: Total Number of Sheep and Goats [million heads] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 222.89 197.95 152.21 122.36 115.51 111.85 113.19 106.50 Total CEE + CIS 171.69 150.28 109.30 83.75 77.48 77.85 81.23 74.80 Total CEE 36.85 30.55 27.30 23.94 22.22 19.56 20.06 20.66 Total CIS 134.84 119.73 82.00 59.81 55.27 58.30 61.17 54.14 New EU Members (8) 5.07 3.13 2.48 2.22 2.18 2.26 2.31 2.49 EU Accession (2) 22.09 16.71 15.30 13.36 12.27 10.02 10.43 11.00 Other CEE 9.69 10.70 9.52 8.36 7.76 7.27 7.32 7.17 Euro CIS 64.78 52.34 33.78 22.53 17.82 18.39 19.13 19.82 Caucasus 7.79 6.23 5.97 6.40 6.96 7.81 8.29 8.67 Central Asia 62.27 61.15 42.25 30.88 30.50 32.10 33.75 25.65 Turkey 51.20 47.67 42.90 38.61 38.03 33.99 31.95 31.70 World 1,762.39 1,743.96 1,751.54 1,742.05 1,776.38 1,779.13 1,790.02 1,818.87 Table 9c: Total Production of Ruminant Meat [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 10.96 9.84 8.12 7.21 6.53 6.32 6.47 6.52 Total CEE + CIS 10.28 9.14 7.44 6.47 5.80 5.66 5.87 5.91 Total CEE 2.36 1.84 1.65 1.52 1.40 1.22 1.32 1.31 Total CIS 7.92 7.30 5.79 4.95 4.40 4.44 4.55 4.60 New EU Members (8) 1.46 1.02 0.89 0.86 0.74 0.61 0.66 0.64 EU Accession (2) 0.54 0.47 0.38 0.32 0.34 0.31 0.35 0.37 Other CEE 0.36 0.35 0.38 0.35 0.33 0.30 0.30 0.30 Euro CIS 6.23 5.48 4.26 3.54 3.04 3.06 3.12 3.25 Caucasus 0.16 0.15 0.17 0.17 0.19 0.19 0.20 0.20 Central Asia 1.53 1.67 1.36 1.24 1.17 1.18 1.22 1.15 Turkey 0.67 0.70 0.67 0.74 0.73 0.66 0.60 0.60 World 65.48 66.33 67.64 68.99 71.28 72.73 73.62 73.98 116 Table 10: Pork Table 10a: Total Number of Pigs [million head] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 124.61 103.28 91.45 79.79 77.56 71.77 75.15 70.60 Total CEE + CIS 124.60 103.27 91.45 79.78 77.56 71.77 75.15 70.59 Total CEE 59.65 50.37 48.27 46.97 43.25 41.64 42.74 41.64 Total CIS 64.94 52.91 43.18 32.82 34.31 30.13 32.40 28.95 New EU Members (8) 39.97 33.41 31.95 32.44 29.88 30.90 31.11 30.23 EU Accession (2) 14.10 11.33 10.10 8.58 7.36 5.24 6.02 6.18 Other CEE 5.59 5.62 6.22 5.96 6.00 5.50 5.61 5.24 Euro CIS 59.68 49.20 40.68 31.31 32.59 28.24 30.38 27.09 Caucasus 1.09 0.49 0.46 0.41 0.50 0.56 0.58 0.58 Central Asia 4.17 3.21 2.03 1.10 1.22 1.33 1.45 1.28 Turkey 0.01 0.01 0.01 0.01 0.00 0.00 0.00 0.00 World 869.41 881.83 858.96 868.46 902.76 938.38 950.95 951.77 Table 10b: Total Production of Pork [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 10.55 8.48 8.38 7.83 7.66 7.75 8.08 7.99 Total CEE + CIS 10.55 8.48 8.38 7.83 7.66 7.75 8.07 7.99 Total CEE 5.77 4.89 5.35 5.11 4.85 4.95 5.16 5.00 Total CIS 4.78 3.59 3.03 2.73 2.82 2.80 2.92 2.99 New EU Members (8) 3.98 3.24 3.71 3.53 3.32 3.47 3.66 3.49 EU Accession (2) 1.10 0.98 0.88 0.87 0.75 0.72 0.78 0.78 Other CEE 0.69 0.67 0.76 0.71 0.78 0.76 0.72 0.72 Euro CIS 4.40 3.33 2.83 2.55 2.60 2.52 2.64 2.73 Caucasus 0.08 0.06 0.05 0.05 0.05 0.05 0.05 0.05 Central Asia 0.30 0.20 0.15 0.13 0.17 0.23 0.22 0.21 Turkey 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 World 74.07 79.19 79.32 88.42 90.18 95.39 98.58 100.39 117 Table 11: Poultry Table 11a: Number of Poultry [billion head] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 1.64 1.40 1.12 1.07 1.11 1.11 1.16 1.18 Total CEE + CIS 1.50 1.22 0.98 0.89 0.87 0.89 0.91 0.92 Total CEE 0.38 0.30 0.31 0.29 0.27 0.30 0.30 0.31 Total CIS 1.12 0.92 0.67 0.60 0.60 0.59 0.61 0.62 New EU Members (8) 0.19 0.15 0.15 0.15 0.13 0.15 0.14 0.16 EU Accession (2) 0.14 0.10 0.11 0.09 0.09 0.10 0.11 0.10 Other CEE 0.05 0.04 0.05 0.05 0.05 0.05 0.05 0.05 Euro CIS 0.96 0.80 0.61 0.54 0.53 0.52 0.53 0.53 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 0.05 0.05 0.05 Turkey 0.15 0.18 0.14 0.18 0.25 0.22 0.25 0.26 World 12.62 13.77 14.97 14.51 16.06 17.56 17.69 17.75 Table 11b: Production of Poultry Meat [million tons] 1992 1994 1996 1998 2000 2002 2003 2004 Total ECA (CEE+CIS+Turkey) 4.33 3.59 3.25 3.50 3.79 4.53 4.80 4.98 Total CEE + CIS 3.89 3.10 2.82 2.99 3.13 3.82 3.92 4.03 Total CEE 1.54 1.50 1.74 1.93 2.00 2.37 2.33 2.41 Total CIS 2.35 1.60 1.08 1.06 1.13 1.45 1.59 1.62 New EU Members (8) 0.99 1.00 1.18 1.40 1.50 1.76 1.73 1.80 EU Accession (2) 0.38 0.34 0.39 0.37 0.36 0.46 0.45 0.47 Other CEE 0.17 0.15 0.17 0.16 0.14 0.15 0.14 0.15 Euro CIS 2.09 1.45 0.99 0.98 1.04 1.34 1.48 1.51 Caucasus 0.05 0.03 0.03 0.03 0.03 0.04 0.04 0.05 Central Asia 0.21 0.12 0.06 0.05 0.06 0.06 0.07 0.06 Turkey 0.44 0.49 0.44 0.51 0.66 0.71 0.89 0.95 World 45.40 50.87 56.42 62.45 69.21 74.61 76.39 78.23 118