RURAL DEVELOPMENT IN CENTRAL AND EASTERN EUROPE Csaba Forgács 1

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1 RURAL DEVELOPMENT IN CENTRAL AND EASTERN EUROPE Csaba Forgács 1 1. INTRODUCTION This paper gives an overview of the development of the rural policy issues in Central East European Countries (CEECs) focusing on the post-2000 years with special respect to the period. Section 2 gives a short history of rural development policy of the EU followed by its institutionalization by Agenda In Section 4 we discuss the SAPARD program for E-10 (+2) and the National Rural Development Plans under Temporary Rural Development Instrument (TRDI). Section 5 focuses on future directions. In the penultimate section we analyze the more recent questions of national rural development strategic plans of under working out in CEECs. This section is followed by conclusions. 2. BRIEF HISTORY OF RURAL DEVELOPMENT POLICY CAP was put into practice in 1962 but the issue of rural developments came into the picture years later. For some years neither was the question of rural development mentioned nor was its concept defined. The issue of rural development was not put on the table until Rural policy has not always had a clear direction nor has it followed a continuous trend and for some twenty years it was discussed only implicitly. The first real statement on rural future was released by the EC in 1988 (COM (88) 501). It mentions that rural areas in Europe are rather different regarding their historical background, future development possibilities and their use of traditional rural development policies 2. Explicit discussion of rural development took place between 1988 and 1999 and Agenda 2000 institutionalized rural development policy. 3 In the literature two important aspects of rural development are identified: the socalled agricultural aspect and the territorial aspect. During discussions over years it has never been clear whether rural policies were being developed because of the 1 Csaba Forgács, Corvinus University of Budapest 2 The future of the Countryside. Source: aboutsos/index2.2.php#ref1 3 Mª del Mar DELGADO & Eduardo RAMOS: Understanding the institutional evolution of the European Rural Policy: A methodological approach. European Association of Agricultural Economists (EAAE) X th Congress. Zaragoza. (28-31 August 2002) 27

2 specific problems of rural areas (as territorial policies) or because of the specific problems arising from the need to reform the CAP (as sector policies) 1. As a result of the intensive discussions on rural policies in the 90 s the Cork Declaration 2 (1996) identified 10 important points for future development: rural preference, integrated approach, diversification, sustainability, subsidiarity, simplification, programming, finance, management, evaluation and research. The declaration underlined the importance of raising public awareness of starting new rural development policies, making rural areas more attractive for people to live and work in, improved co-operation and playing an active role in promoting sustainable rural development in an international context. Figure 1 Buckwell report: CAP and CARPE (1996) The Buckwell report also discussed the future rural development policy of the EU. Common Agriculture and Rural Policy for Europe (CARPE), was developed based on CAP. CAP has its roots in the Treaty of Rome, Article 39, which established 1 Elena Saraceno: Rural Development policies and the Second Pillar of the Common Agricultural Policy. 87 th EAAE-Seminar. Assessing rural development of the CAP. Vienna Cork Declaration: April,

3 farmers as the guardians of the landscape and nature and as such they have to be supported. The report also emphasized the need to switch from quantity driven thinking to more qualitative approach. The report clearly states that agriculture as a sector should be more integrated into rural development. These suggestions pushed the CAP away from being a sector policy for agriculture to become part of a set of territorial policies for rural areas. 1 The report proposed a particular rural development policy and the necessary changes in budget allocation for the required support. 3. INSTITUTIONALIZING RURAL DEVELOPMENT POLICY AGENDA 2000 Agenda 2000 was a turning point by institutionalizing rural development which was now regarded as the second pillar of the CAP. Between 2000 and 2006 there were two measures supporting rural development: modulation, which allowed a budget transfer from Pillar 1 to Pillar 2 in the EU 15- countries, and some new measures related to rural development concerning the environment, plant health, Year Total of which markets of which rural dev Figure 2 CAP: expenditure (Bio Euro, 1999 prices) Source: Buckwell report: 1 Towards a Common Agricultural and Rural Policy for Europe (April, 2007) 29

4 One of the measures is related to the investments in agricultural holdings and making agriculture more competitive especially at global level. Also a substantial portion of the budget was to be allocated to human resources development. The EU 15, the EU 25 and the EU 27 all have had problems of high average age of farmers. Thus there is a need to support young farmers to enter farming, to help the old people quit farming and pass farms on to the young people and the improvement of human resources. More resources needed for training, vocational training and educating farmers. Another part of these measures related to less-favoured areas with strong environmental restrictions. People living in such areas also need support. Rationalization of processing and marketing focused on having products of high added value and a better marketing system to make these products better available for consumers than before. The ecological aspect and the social functions of the forests became understood and were emphasized. The budget of Agenda 2000 contained a small allocation to rural development however, it was a new element. 4. SAPARD AND NATIONAL RURAL DEVELOPMENT PLANS ( ) The period consists of two sub-periods: the three years before and the three years after the accession of the East-central European countries 4.1. SAPARD program for E-10 (+2) SAPARD is a Special Accession Program of Agriculture and Rural Development (established by Council Regulation 1268/1999 in June 1999) and is a part of the Agenda It was initiated by the European Community for the new member states. This program focused on the agricultural structural adjustment and rural development issues and wanted to help the 10 CEE countries to a smoother structural development and in the adaptation of the acquis communautaire. Unfortunately the second pillar of CAP has brought neither new resources, nor a new model in rural development policy. The latter manifested in the conflict of two opposing principles. The general rhetoric focused on decentralization, projecting fundamental change in rural development including sustainability, active participation of local action groups, bottom up approach etc. Meanwhile the adaptation of acquis communautaire required a basis of centralization supporting 30

5 the development of traditional agriculture and a central institutional structure while emphasizing the importance of competitiveness, intensification, transparency etc. 1 Under SAPARD about 1/3 (34.7%) of the budget was allocated for improving processing and marketing of agricultural and fishery products of CEECs to have more value added goods and make them available for the consumers on the markets. Another 1/3 (33.1%) was devoted to the development and improvement of rural infrastructure which is in poor shape in the East and Central European countries. An improved infrastructure helps farmers become more competitive on the markets thus it is important to see to the many tasks involved. Only 18 % of the budget focused on the investments in agricultural holdings and increasing competitiveness. Environmental considerations were quite strong getting 10.3% of the budget in different fields such as diversifying the economic activities in rural areas, renovating villages, improving water resource management or promoting the forestry. An evaluation of SAPARD program in 2000 showed that national programs gave priority to increasing competitiveness of large farms and the processing industry. Also the majority of SAPARD funds were oriented to agricultural production, processing and investments in large farms and infrastructure with a goal of preparing large farms for the market economy competition in the enlarged EU. Concerning rural development issues one has to say a few words about the LEADER programs. LEADER was launched in 1991, followed by LEADER 2 ( ) and LEADER+ ( ). For the programming period, LEADER will no longer be a separate program but will be integrated ( mainstreamed ) in all national/regional rural development programs. LEADER has brought a new method of development where people who are really affected in the countryside should be more involved in the whole project and development. The cooperation between the local people and the local agents had to improve. There were 7 key features laid down by the program. Setting up integrated territorial development strategies was very demanding especially for those agents who had never worked with such programs. The second was to use the bottom up approach so starting from the ground and asking all those who are really affected to be involved. Supporting this involvement an encouragement of cooperation between the local partners was given. Further tasks included using a decentralized management (local public private partnership), promoting cooperation and networking, facilitating innovation and executing integrated and 1 Nemes Gusztáv: Vidékfejlesztés és előcsatlakozási felkészülés Magyarországon. (April, 2007) 31

6 multi-sector actions. People in rural areas have to understand their own situation and they have to find their own way to make steps forward Implementation of SAPARD ( ) Looking at the implementation of SAPARD we give below a brief analysis of the countries of Estonia, Slovenia, Poland and Romania. Reading Estonia s approach 2 ( ) we see that their plan formulated all four measures of SAPARD as integral parts of the agricultural and rural development policy. These measures were: - Investments in agricultural holdings, - Improving the processing and marketing of agricultural and fishery products, - Development and diversification of economic activities and - Development and the improvement of rural infrastructure. The Estonian rural development program made large investments in agricultural holdings which was a general picture in all Central and Eastern European countries. These countries wanted to allocate more money to this area because they were afraid of the increasing competition after the EU Eastward enlargement. They also wanted to improve food processing. The capacity development and the efficiency of food processing and marketing were also among major goals. The need for diversification in the economic activities was recognized indicating that the more diverse economic activities are in rural areas the more stable is the rural economy. Finally, rural infrastructure was also a key area of development because of the weak heritage Estonia had after the collapse of the socialist system. Slovenia ( ) 3 practically followed the same lines as Estonia though giving more specific support to areas which had to be improved under the investments in agricultural holdings. Strong focus was given to meat and milk production. Slovenia thought these two areas be more important after the EU enlargement and wanted to become competitive in these industries. Concerning the investments in food processing and marketing the focus was again given to meat and milk production and the desire to improve the capacity and efficiency of the whole vertical line of these two sub-sectors. Investments in economic diversification in the rural areas improving tourism and the tourist services were present in many 1 Leader guide. (April, 2007) 2 (March 3, 2007)

7 countries. Many people thought that there was a good opportunity to use rural resources to launching new services. Among these, improved tourist services could result in more people coming to the region and enjoy what the area offers for them such as the landscape, horseback riding etc. Slovenia also focused on investments in infrastructure. Poland 1 had a total public expenditure for SAPARD of Euro 2,659 Billion in addition to the Euro 1,065 Billion planned to be invested from private resources. The latter was calculated under Priority 1. 56% of funds were used to processing and marketing and 26 % for investments in farms. The vast majority of public expenditure was planned to support processing and marketing (45.0%) while 20.9% went to investments on farms. Some 30 % of budget was targeted on priority 2. Within the later 16.8% was allocated for realization and 13.6% supported economic diversification. Agro-environmental, vocational training and technical assistance were marginal altogether amounting to 3.8% (Annex 1). Poland realized that the country could improve competitiveness by stabilizing farms and producing more value added food products backed by good marketing practice. Romania s SAPARD ( ) budget accounts for some 2,050 Million of which public expenditure amounts to 1,472 Billion (Annex 2). Concerning the latter the plan allocates 37.2% to priority one mainly to farm investments (14.1%), diversification (9.3%), and forestry (9.4%). As a single measure infrastructure development has the higher amount (Euro Million) from the budget (29.8%). Processing and marketing also have been targeted (15.9%). Vocational training and technical assistance was given 14.6%. Private contribution amounts to 523 Million concentrating on the measures of processing and marketing (44.8%) and farm investments (39.7%). Diversification also received support (13.4%) (Annex 3). Budget allocation gives priority to the following: (1) to meet EU standards in agricultural policy, food safety and consumer protection, animal health and welfare, plant health and environmental protection; (2) to implement environmental protection programs through the Nitrates Directive, Natura 2000 and the Environmental Impact Directive; (3) to achieve the sustainable development of agriculture and rural areas through modernization, investment in infrastructure, business development, economic diversification and the development of human resources. 2 Priority goes to improving processing technologies to increase production of value added products and, improving market performance of the farms as well as making farm investments to increase competitiveness of agricultural businesses

8 4.3. National Rural Development Plans ( ) Concerning rural development programs the Commission proposed for to build to the maximum extent on the experience gained and with the implementing bodies set up under SAPARD. In order to optimize the use of available sources the Community suggested flexible instrument building on SAPARD and adaptation to the needs of the new Member States. Each new Member State was asked to set up a temporary rural development instrument. The latter was financed by the EAGGF Guarantee Section and managed on the basis of specific transitional rules. Guidelines were set up for the switch from SAPARD to post-accession rural development instruments ( ) to help the administrative, financial and programming transition. 1 The Temporary Rural Development Instrument (TRDI) covered the following specific rural development measures: - semi-subsistence farms undergoing restructuring, - producer groups, - compliance with Community standards, - technical assistance and - complements to direct payments. In addition to these measures new Member States could also benefit from a Leadertype measure to be funded by the EAGGF Guidance section. All other nonaccompanying measures (17 measures) that already form a part of the acquis are also available for the new Member States. These include investment in agricultural holdings, setting up of young farmers, training, forestry other than afforestation of agricultural land, land improvement. Next we discuss the cases of Hungary ( ) and Slovakia ( ). For Hungary ( ) 2 the efficiency indicator of agricultural production is 33.4% of the EU average. Thus the National Rural Development Plan aims to improve efficiency of production through assisting a transition towards optimal utilization of land (agro-environment, less favoured areas and afforestation). We point out that HUF 190 Billion (equal to about 800 Million) was spent on rural development between 2004 and The environmental scheme was quite strong and received some HUF 44 Billion of this sum covering a substantial amount of land, approximately 1.5 million ha. Farms of all sizes including a number of big companies decided to join this program which demanded a 5-year commitment Hungary: Program-Complement (PC) to the Agriculture and Rural Development Operational Programme (ARDOP) ( ) (Version 24.) Budapest. September Source: MoARD. 34

9 Committing to 5 years turned out to be quite tough. One of the difficulties was that the organic products produced under the scheme sometimes could not be marketed even at a price of that of conventional products. As a result some big farms decided to quit this program when the contract is terminated. Along with the environmental considerations animal welfare was also financed and some funds were allocated to support the self-subsistence farms to become more competitive and to make progress in agricultural production. Slovakia ( ) 1 shows an interesting picture as the money spent on the sector operational program on agricultural production is less than the money devoted for rural developments. The second pillar of CAP is quite strong in this country. Funds spent on rural development programs were double that of the money spent on the first pillar. The priority of support of sustainable rural development covered five different areas including the adjustment and development in rural areas, forestry and fishery, training and technical assistance General issues in CEECs Looking at the rural development measures in the Central and Eastern European countries between 2004 and 2006 one can note the following: comparing the allocation of the budget used for agriculture and rural development in these countries some similarities as well as some differences appear. It is clear that the EAGGF and the FIFG mainly financed the agriculture, forestry and fishery and rural development. Rural development measures were financed from the EAGGF, the European Agriculture Guidance and Guarantee Fund guidance section with some exceptions. In the case of the Czech Republic and Hungary some investments were supported from the European Regional Development Fund. More generally one can say that there is no significant difference between the E-10 countries in the resource allocation frame of the two funds mentioned above. This is so because the goals, conditions, to some extent the heritage and problems of CEECs are similar and their activities focused on similar tasks in the selected regions. Generally similar actions were taken under same measures in the different countries with some exceptions. Slovenia spent more funds on the soft measures than on other fields as training, education, research and development and networking. In Hungary a strong focus was given to agro-environmental issues but one can not expect this policy to continue in the coming years because of the negative reactions from agriculture agents. 1 Slovakia Rural development programmes

10 The structure of the funds supporting rural developments was as follows: most was spent from the European Regional Development Fund with the European Social Fund in second place. EAGGF was the third biggest contributor with still a significant amount while FIFG had only a weak share. 100% 80% Distribution of supports from Structural Funds, CEE ( ) 60% FIFG 40% EAGGF 20% ESF 0% Czech Rep. Estonia Hungary Latvia Lithuania Poland Slovakia* Szlovénia ERDF Figure 3 Distribution of supports from Structural Funds, CEE ( ) Source: Iglói Gabriella: Az első Agrár- és Vidékfejlesztési Operatív Program működésének értékelése. Doktori (PhD) értekezés. Gödöllő Figure 3 is about the resource allocation of the structural funds in these countries. Figures of Slovakia have not been available. HOW TO PROCEED? ( ) How should rural development policy be improved in the CEECs in the budget period ? The Commission proposed to work out a new generation of rural development programs in 2002 and there have been discussions and workshops to generate new ideas to discuss the main points of future development. It was decided that a single fund would support rural development programs (COUNCIL REGULATION (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development, 36

11 EAFRD) 1. A decision by the COUNCIL was made on 20 th February 2006 on Community strategic guidelines for rural development (programming period 2007 to 2013) (2006/144/EC) 2. One of the main questions was how to centre a policy more on the territorial instead of the sector line and how these two have to be integrated serving the future of the European Union in the budget period. The Second European rural development meeting, held in Salzburg 3, set up some principles for future development. For example, people living in the countryside should be comfortable and all economic, social, cultural values of the countries have to be preserved. Competitive aspect of agriculture was also underlined. Rural development policy should apply in all areas in the enlarged EU and not only in some regions within the community. It should also serve the needs of a broader society in the rural areas than before. One of the points focused on the cooperation between private and the public institution named Public Private Partnership (PPP). It was emphasized that the whole system should be simpler and more understandable for all those affected. There was also a need to simplify the very complicated system in the European Union concerning the resource allocation, control and other activities. The new rural development policy is a one funding and programming instrument so everybody can become familiar with the rules. People don t have to look for different channels where the funds available for the same area. The program should focus more on the European Union priorities which was not always the case. Emphasis was given to control, evaluation and reporting and a more clear division of responsibilities between the member states and the European Union or the Commission. It underlined the need for strengthening the bottom up approach, to make the local action groups become more active and to force the people to set up a more lively cooperation in the local and regional areas and working together to change the way of life in the region. There are three objectives focused on as: (a) Increasing competitiveness of the farms and forestry sector through getting support for restructuring, modernization and quality production. In other words there is a need for restructuring the agriculture and modernizing the farms and focusing on the quality production rather than quantity (b) there is need to save and protect the environment and the countryside; (c) addressing the quality of the life in the rural areas which, in many cases, has serious problems. Many people have a very low standard of living and are struggling to overcome serious difficulties. The simplification of the whole system reflected in the fact that instead of the previous two sources of finance, "Planting seeds for rural futures" Rural policy perspectives for a wider Europe. Salzburg conference. (May 6, 2007) 37

12 three systems for financial management and controls and 5 types of programming there will be only one of each in the future. The three axes of rural development policy for were identified as (a) competitiveness, environmental and land management, (b) economic diversification and (c) the quality of life. The LEADER approach is used for all three axes. Concerning the budget of rural development between 2006 and 2013 there will be an increase of some 25% in real terms so within the EU budget more money will be allocated for rural development because of its more important role in the future. 5. RURAL DEVELOPMENT NATIONAL STRATEGIC PLANS of CEECs ( ) In this section we focus on Rural Development National Strategic Plans (RDNSP) for period 1. These plans have been worked out by the countries themselves following the guidelines given by the European Union. Discussions of draft versions of RDNSPs started with Brussels but they are still not finalized. National plans have to be based on the national strategic plan and good strategies have to be based on situation analysis. The plan should support prosperous people in sustainable countryside of the country. Based on their situation analyses countries have put together draft version of their plan for negotiation with the EU. Final acceptance of NRDSPs by EU will take place in the coming months. EU gives significant contribution to rural development programs for CEE. One third of EU total contribution to rural development goes to EU-8 new member states of which 48.8% allocated to convergence. Some half of EU support for CEE allocated to Poland while 14-15% to Hungary and 10-11% to Czech Republic. Funds provided are stable over time enabling countries to carry out a balanced development strategy. 2 National Rural Development Network (NRDN) will be set up in all countries concerned in order to facilitate and manage the execution of NRDSP of the country. We briefly consider selected NRDSPs of CEE. In Bulgaria by national definition (SAPARD Plan) rural population amounts to 41.6% with an unemployment rate of 19 % covering 81.3% of total territory of the 1 Most of NRDSPs were available, however, author could not access to that for Poland and Slovenia. 2 ed=0&language=en&guilanguage=en (October, 9, 2006) 38

13 country in Based on current situation analysis specific goals were formulated under all four axes to support balanced rural development in the plan period. Under Axis 1 it is to develop competition and innovation where focus is given on three sub areas as: (1) to restructure and modernize physical potential and, promote innovation; (2) to support adjustment of farming structures and support cooperation and (3) to promote knowledge and improve human potential. Axis 2 includes two directions as increasing sustainable management of agricultural land (Conservation of biodiversity and HNV farmland, improving water and soil quality and preventing soil degradation) and to promote sustainable forest and forest land management. Concerning quality of life the plan emphasizes promoting job diversification in rural areas in order to reduce the high unemployment level and, building local capacities. Axis 4 deals with improving local governance, capacity to implement LEADER and, to support implementation of local development strategies. The Czech Republic s NRDSP 2 is to spend Euro Million annual average for rural development programs (Annex 5). The plan underlines the importance of basic agricultural and food commodities prioritizing products with quality labelling, the proportion of production that can be sold on foreign markets and increase rural population revenues. The country plans to expand and diversify the economic activities in rural areas in order to lead business development, the creation of new jobs, economic growth and reducing the level of unemployment in the countryside and strengthening rural population cohesion and to stabilize its social structure. The plan emphasizes the need for job creation in the rural economy. Looking at figures the country is to spend annually as much as 120 Million (23.3%) on the axis 1. Budget for the axis 2 amounts to Euro 278 Million (53.3%) with a strong emphasis on biodiversity as conservation and development of forestry and agricultural systems of high nature value and traditional agricultural landscapes (42.9%) which reflects a very strong shift to the pillar 2. Axis 3 gives support to employment development (8.6%) and development conditions and quality of living in rural areas (8.4%). Share of LEADER accounts for 4.9%. Based on proceeding from the analysis of present situation of the country the competitiveness of Estonian agriculture is rather weak while the status of environment is relatively good. 3 One of the aims is to increase in share of the production of higher value added by product development and the assurance the stable quality. These have to be backed by technological development and closer Czech Republic: The National Strategic Rural Development Plan of Czech Republic for the period Ministry of Agriculture of Czech Republic. 3 Estonian Rural Development Strategy Ministry of Agriculture of the Republic of Estonia

14 cooperation with research establishments. 40 % of budget is devoted to Axis 1, but within that 90 % goes to restructuring and modernization of farms while the rest to innovation and extension service. Another 40 % of the budget will be used under Axis 2 with a strong focus on agro-environment investments (64 %) while 20 % will be used for supporting Natura and 10 % of the budget will be used in LFA regions. Quality of life in rural areas and diversification will get 20% of the budget, of which 60 % planned for diversification/economic development, while improving basic services, infrastructure and renovation will be targeted by 40%. 10% of LEADER axis will be attained depending on the development of local action groups and supports mainly (90%) establishing local strategies (Annex 6). By the end of current period Estonia would like to reach the level of competitiveness equal to 47% (from 32.9%) of that of EU 25 and labour productivity 66% of EU 25 (from current 32.2%). Hungary has worked out the New Hungary Rural Development Program. 1 Based on the latter altogether Euro 4,956 Billion public expenditure will support rural development in (Annex 7). Decisive part of it (47.8%) allocated to Axis 1 (15 measures). Within the latter a strong emphasis is put on modernization of agricultural holdings (63.9%) with an additional private expenditure of exceeding public contribution by 22%. Besides the latter development of infrastructure related to modernization of agriculture and forestry (9.1%) and increasing the value of agricultural and forestry products (8.3%) are key measures. Share of Axis 2 (12 measures) amounts to 32.8% dominated by agri-environmental payments (64.2%) and first afforestation of agricultural land (15.8%). The Program also projects significant public funding on diversification and quality of life (13.9%). Within Axis 3 (8 measures) supporting the establishment and development of micro-enterprises is on priority (45.4%) budget of which will be more than doubled by private expenditure and, basic services for supporting rural economy and population (16.0%). Axis 4 (5.5%) concentrates on local development strategies (75%) while cooperation will also be supported by 10%. No doubt significant injection is to be given to modernizing agricultural farms on one side and to increase the competitiveness of micro-enterprises on the other. Including private expenditure some Euro 8 Billion is planned to support rural development over period which creates a solid ground for improving rural economy and rural life. Private funding amounts to some Euro 3 Billion from which 80.1 % goes to Axis 1 and 15.4% to Axis 3. 1 New Hungary Rural Development Program ( ) (February 19, 2007): Source: (March 3, 2007) 40

15 Latvia s strategic plan 1 focuses on the development of capacities of rural people. This plan is more concentrating on the people living in the rural area to improve their capacity and to make it possible to generate more income by them. The plan is very much related to the standard of living, how to cover best the needs of people living in rural areas. It is also important how to use the resources in the rural area. The management aspect and activities have to be sustainable and keeping in mind that resources needed not only for today but for tomorrow as well and, making the rural area more nice and comfortable for the rural people. Lithuania in her NRDSP for listed detailed points of actions under axes 1-4. Concerning total public contribution under Axis 1 the country is to spend Euro Million using three priorities as: (1) improving the structure of farms and forest holdings; (2) improving the level of modernization, technology and innovation and (3) strengthening human capital. 44.1% of budget allocated for Axis 1 is the highest share. Activities under Axis 2 will be focused on promoting use of environmentally friendly farming practices, protection and, enhancing biodiversity, landscape, water and soil. Three priorities will help to reach these goals: (1) environment-friendly farming practices; (2) mitigation of climate change and (3) preservation of biodiversity and development of high nature value and traditional agrarian areas. Axes 2 provides 36.8% of budget to support for afforestation (agricultural, non-agricultural, abandoned farmland), for restoring damaged forestry, increasing ecological and recreational value of forests etc. Support in less-favoured areas and in NATURA 2000 territories has also been targeted. Axes 3 is to improve the quality of life in rural areas and support diversification taking into consideration the following key problems: (a) low income and lack of resources of income; (b) insufficient social and physical infrastructure; (c) lack of skills and local initiatives in rural areas and (d) need to preserve cultural heritage. The following priorities were fixed to meet needs: (1) creation of alternative jobs and income sources; (2) improvement of social and physical infrastructure, protection and enhancement of cultural heritage, (3) enhancing the human capital in rural areas. Concerning Axis 4, LEADER, one priority was declared as promotion of local initiatives, development of human capacities in order to develop and successfully implement local development strategies backed by 5.97% of the budget. Romania 3 has an indicative EAFRD budget of Euro 8,022 Million for supporting NRDSP Based on SAPARD experience mostly bigger farms have 1 Latvian National Development Plan Source: Ministry of Regional Development and Local Government of the Republic of Latvia, Lithuania: Rural Development Programme for Lithuania (Draft) December 29, Source: Agricultural Research Institute, Lithuania

16 submitted applications. Implementing Axis 1 it may happen that large farms will become again beneficiaries of most support schemes while government purpose is to facilitate the uptake of the program by small and medium size of farms. Under Axis 1 three strategic objectives were defined: (1) to improve skills of farmers and persons relating to forestry sector in order to have a better management assuring descent phasing out of subsistence farmers; (2) to improve competitiveness of commercial and semi-subsistence farmers and processing and forestry enterprises; (3) to restructure and modernize the processing and marketing sectors for agricultural and forestry products. Axis 1 has 45% of EAFRD supports. As far as the Axis 2 is concerned emphasis is given to support environmentally friendly farming practices within rural areas preserving biodiversity on water and soil protection and, on tackling climate change. 25% of budget share will support this Axis focusing on three strategic objectives as (1) to ensure sustainable use of agricultural land; (2) to preserve and improve the state of the natural habits and resources and (3) promoting sustainable management of the forest land. Strategic plan allocates significant money to improve quality of life in rural areas and rural economy diversification. Three strategic objectives are articulated here: (1) to maintain and develop economic activities aiming at increasing employment; (2) to increase the attractiveness of rural areas and (3) to develop skills and supporting the organization of the actors around project of territory. It is based on a bottom up development and focusing on participation action needs and training. 2.5% will be spent on LEADER centred on two strategic objectives: (1) to promote the endogenous potential of the territories and, (2) improving local governance where implementation of local development strategies require a great work of engineering and management. Concerning budget allocation the selected countries meet the EU minimum requirements especially concerning axis 1, 2, 3 and 4 (Figure 4). But in case of the Czech Republic and Slovakia significantly more money is to be spent on pillar 2. Issue of competitiveness is also very important one for Bulgaria, Hungary, Lithuania, Latvia and Romania. These countries think they have to allocate more money for improving agricultural production and increase competitiveness rather than focusing on other measures of rural development. Gross Agricultural Output (GAO) in CEECs has dropped significantly after radical reforms. Approaching developments in rural economies for based on national Rural Development Strategic Plans reflect two different strategies partly connected with colourful farm structure in the region 1. Figures in Annex 9 show 1 Csaba Forgacs: The Challenge of Integrating CEEC Agriculture into the EU. Presidential Address. X th Congress of European Association of Agricultural Economists. Zaragoza. August, Published in Studies in Agricultural Economics. Budapest. AKII No pp

17 that Hungary, Latvia, Lithuania and Romania want to strengthen rural economy by spending largest budget on improving competitiveness of agricultural farms rather than allocating most of the budget for pillar 2. This concept based on the idea that agricultural is one of the key sectors of rural economy and can offer more jobs for rural people to increase their income. This is a rural development model headed by agriculture and supports increasing competitiveness of agricultural farms. Among these countries Latvia, Lithuania and Romania have small farm dominated agriculture while in Hungary most of the land is also cultivated by small farms but most of GAO comes from large farms. Czech Republic and Slovakia, on the other end, have large farm agriculture and give less emphasis on Axis 1 but significantly more on environmental issues and rural life and diversification. This concept shows that large farms needs less support and have to be able to compete on markets by taking the advantage of economies of scale while, developments of rural economy based on more supported pillar 2 (53.8% and 48.5%) and 3 (17% and 20%) is preferred. Estonia has a concept between these two groups of countries. On the one side planned budget for pillar 2 and 3 amounts to 60%, which is very high, at the same time still 40% of financial resources will be allocated to Axis 1. Besides rural development measures in Axis 2 and 3 the country keeps in mind that supporting competitiveness of mostly small farms also helps making stronger the rural economy % Competitiveness Environment + land mgmnt Econ. Diverz.+ Quality of life Leader Technical assistance 0 EU prop. min.% Bulgaria Czech Republic Hungary Latvia Figure 4 Rural Development Fund allocation in selected CEECs ( ) 43

18 Romania has a different approach where 30 % of budget targets rural life and diversification underlying the fact that life in rural areas is very demanding and people living in these regions are very poor. One way to overcome difficulties is to strengthen competitiveness of agricultural farms on one side, and spending more money on increasing the level of quality of rural life and ability of rural economies on income generation on the other. Romania has the highest number of small farms in CEE focusing on increasing viability of farms under market conditions and tries to find different ways of income generations for rural regions. Summarizing: one can conclude that looking at strategies of seven selected CEECs two major types of concepts can be recognized. Some countries give more emphasis on improving competitiveness of agricultural farms while pillar 2 is the second channel of rural development. Other countries allocate more money for axis 2 and 3 by giving the majority of the budget to support rural economies. Romania follows her own way as besides giving highest support to Axis 1 still this is the only country among the seven decided to spend the highest share (30%) of budget on making the rural life better partly by investments helping speeding up income generation and, partly by diversification of rural economies. One has to keep in mind that budget allocated for competitiveness of agricultural farms does not say explicitly that these funds mostly will be used by either small or large farms. The latter depends on the conditions the national authorities set up for applicants to access to these funds. In case of Hungary, although higher share of land is used by small private farms, there has been some notes saying that relatively high share of budget under Axis 1 will go to large farms rather than small ones reflecting the goal to support those farms having a better chance to become competitive on EU level. CONCLUSIONS High percentage of territories within the EU is called rural areas and this figure is even higher in Eastern and Central Europe. So rural development issue is of great importance and plays a very important role in the rural areas in CEE. Although, rural development has an increasing importance, however, vision of Buckwell report on its future role has not been justified yet. There has been significant support for rural development in CCE countries since 2000 but more would be needed. Under SAPARD mostly large farms have got substantial part of funds, although, it was not on priority. Agenda 2000 further strengthened rural development by using modulation and new measures. For rural development policy and financing are more transparent and simplified helping the countries concerned to use up indicative budgets. 44

19 Rural development has a stabilized budget in CEECs in current budget period in which 50% goes to Poland, 14.4% to Hungary and 10.6% to Czech Republic. EU proposals for resource allocation have resulted in different national strategic rural development policies reflecting national specificities, however, competitiveness of agricultural production has strongest focus in most CEECs with the exception of Czech Republic and Slovakia where highest budget allocated to protecting environment. Two basic concepts of rural development can be defined by analyzing National Rural Development Strategic Plans of CEECs. First group of countries think that to improve competitiveness of agricultural farms helps more to strengthen rural economies in long run and allocate some 50 % or more of the budget to Axis 1. Second group of countries prefer to support environmental protection together with increasing quality of life. Romania follows a special way of development by allocating the highest budget to protecting rural life and diversification but also gives strong support to increasing competitiveness. No clear relationship can be recognized between the farm structure and budget allocation structure of the CEECs. Among countries spending more on improving competitiveness of farms one can find countries with small farm domination and large farm domination as well. Czech Republic and Slovakia having mostly large farms gives, in relative term, priority to environmental protection and land use issue. However, the question: will the support protecting to increase competitiveness go to small or large farms strongly depends on conditions set up for applicants by national authorities. CEECs try to use budget on rural development in a way more fit to national preferences taking into account own experience gained during transition so far. REFERENCES 1. Agenda 2000: 2. Ahner, D.: Rural development policy in an enlarged European Union. Proposals of the European Commission for the period Halle, November 5, Boscacci, F.: (Project Director): A typology of rural areas in Europe Indicators on strengths and weaknesses of rural territories and selection of areas (NUTS III) Milan, November Buckwell report: 45

20 5. Bulgaria: National Strategic Plan for Rural Development ( ) Source: DP_draft.pdf (March 3, 2007) 6. But, F: (Minister of Agriculture, Slovenia) Statement at the Meeting of the EP Committee on Agriculture and Rural Development. 18 February Cork Declaration: April, Commission finalises annual funding for Member States for HTML&aged=0&language=EN&guiLanguage=en (October, 9, 2006) 9. Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development, EAFRD). df 10. Council decision on 20 February 2006 on Community strategic guidelines for rural development (programming period 2007 to 2013) (2006/144/EC) df 11. Czech Republic: The National Strategic Rural Development Plan of Czech Republic for the period Ministry of Agriculture of Czech Republic. 12. Delgado, M.M. & Ramos, E.: Understanding the institutional evolution of the European Rural Policy: A methodological approach. European Association of Agricultural Economists (EAAE) X th Congress. Zaragoza. (28-31 August 2002) 13. Estonia: Estonian Rural Development Plan European Commission Government of the Republic of Estonia. Ministry of Agriculture Source: doc (March 3, 2007) 14. Estonia: National Rural Development Strategic Plan. Source: ic+plan+estonia&btng=google+keres%c3%a9s&meta= (March 3, 2007) 15. Estonia: Estonian Rural Development Strategy Ministry of Agriculture of the Republic of Estonia Fischler, F.: Leader and the European rural model. 17. Forgacs, C:: The Challenge of Integrating CEEC Agriculture into the EU. Presidential Address. X th Congress of European Association of Agricultural Economists. Zaragoza. August, Published in Studies in Agricultural Economics. Budapest. AKII No pp

21 18. The Future of the Countryside Hungary: New Hungary Rural development Program ( ) (February 19, 2007): Source: (March 3, Hungary: Programme-Complement (PC) to the Agriculture and Rural Development Operational Programme (ARDOP) ( ) (Version 24.) Budapest September Hungary: National Rural Development Plan for Hungary (Draft). Dec and January, Manuscript. 22. Hungary: Program-Complement (PC) to the Agriculture and Rural Development Operational Programme (ARDOP) ( ) (Version 24.) Budapest. September Source: MoARD. 23. Hungary Leader. January 14, 2007: 346_doc=731&m340_act= Iglói, G.: Az első Agrár- és Vidékfejlesztési Operatív Program működésének értékelése. Doktori (PhD) értekezés. (Evaluation of the First Agricultural and Rural Development Operative Program. PhD Thesis). Gödöllő Latvia: Latvian National Development Plan Source: Ministry of Regional Development and Local Government of the Republic of Latvia, Leader Guide. agriculture/rur/leaderplus/pdf/factsheet_en.pdf, (April, 2007) 27. Leader: ttp://ec.europa.eu/comm/archives/leader2/dossier_p/en/preface.htm. January 13, Leader: January 13, Leader: January 13, Lithuania: Rural Development Plan for Lithuania. Ministry of Agriculture. August 7, Lithuania: Rural Development Programme for Lithuania Draft December 29 th, Source. Agricultural Research Institute, Lithuania. 32. Nemes Gusztáv: Vidékfejlesztés és előcsatlakozási felkészülés Magyarországon. (April, 2007) 47